PH lagging behind peers in financial inclusion

ACCESS to formal banking services remains difficult for a large portion of the local population, holding back the government’s poverty-reduction efforts, a new report this week showed.
The Philippines ranked behind its regional neighbors in a new Asian Development Bank (ADB) study that ranked countries based on the ease at which populations could access formal banks, referred to as financial inclusion.
In a new working paper, the ADB said giving more people easy access to financing—allowing them to save, invest and borrow money from government-regulated banks—had strong links to raising incomes and reducing income inequality in emerging markets.
With its financial inclusion index (FII) score of 19.63 points, the country ranked 120th in a list of 176 countries in terms of financial inclusion. The country’s score was below the median FII of 24, the ADB report titled “Financial Inclusion, Poverty, and Income Inequality in Developing Asia” showed.
In the region, the Philippines lagged behind Singapore (ranked 25th), Malaysia (41st), Myanmar (101st), and Indonesia (102nd), among others.
FII scores were based on several indicators, namely, automated teller machines (ATM) per 100,000 adults, commercial bank branches per 100,000 adults, borrowers from commercial banks per 1,000 adults, depositors with commercial banks per 1,000 adults, and domestic credit to gross domestic product (GDP) ratio.
All indicators are sourced from the World Bank’s World Development Indicators, and each indicator for each economy pertains to the average value from 2004 to 2012.
The Bangko Sentral ng Pilipinas (BSP), the local financial system’s chief regulator, has adopted inclusiveness as its main advocacy.
Among other measures, the BSP allows local banks to open “microfinance” lenders that cater to clients that have little or no collateral. The regulator also plays a central role in the establishment of credit surety funds—which guarantee loans for small businesses—in towns around the country.
Earlier this month, the BSP also approved regulator perks for banks that put up branches in towns that currently have no other banks.
According to the ADB, several factors come into play that influence the level of inclusiveness of financial sectors in different countries. Low income levels in some countries mean poor people have little or no money to save at all.