BSP reforms keep PH rank high in financial inclusion

MANILA, Philippines—The Philippines remains to be among global leaders in efforts to improve financial inclusion, according to the Global Microscope 2020 of the Economist Intelligence Unit (EIU), the research arm of The Economist Group.

This was revealed on Friday (Dec. 18) by the Bangko Sentral ng Pilipinas (BSP) which said that the country ranks second in Asia, next to India, and eighth worldwide, tied with Brazil, in the EIU study, which assessed financial inclusion in 55 countries.

The EIU study rated countries across five aspects—government and policy; stability and integrity; products and outlets; consumer protection; and infrastructure.

Together with Thailand and Russia, the Philippines posted the highest improvement in Asia and Eastern Europe, in view of the government’s push to promote digital channels as part of its response to the COVID-19 pandemic.

The Philippines improved substantially and got a perfect score of 100 points in the aspect of products and outlets, which covers central bank’s regulations on electronic money, simplified accounts like the Basic Deposit Account, and financial outlets such as cash agents.

Focusing on the role of financial inclusion in COVID-19 response, the EIU study recognized the initiatives of the Philippines in easing the disastrous economic impact of the pandemic.

The report cited the regulatory relief measures of the BSP to ease liquidity constraints in the financial system, restore business confidence and sustain the flow of credit during the ongoing public health crisis.

These included the temporary relaxation of compliance with reporting requirements, easier access to rediscounting facilities and waivers on licensing fees and charges for financial institutions setting up their electronic payment and financial services.

It also cited the initiative of financial service providers to suspend fees for electronic fund transfers during the community quarantine period.

In addition, the EIU report highlighted measures to promote financing for small businesses like:

• Allowing banks to include loans for micro, small and medium enterprises as alternative compliance with reserve requirements
• Reducing the credit risk weight of small business loans that are current in status to 50 percent from 75 percent
• Reducing the minimum liquidity ratio for stand-alone thrift banks, rural banks and cooperative banks to 16 percent from 20 percent until end-December 2020.

While the Philippines scored lowest in the infrastructure dimension with 69 points, this is an improvement from last year’s score owing to ongoing initiatives on digital connectivity, digital identification, and digital payments infrastructure.

Overall, the results of the EIU Global Microscope 2020 reinforced the critical role of financial inclusion particularly during economic shocks like the crisis caused by the COVID-19 pandemic.

The report emphasized the importance of digital infrastructure that included access to identification, mobile phones and financial accounts to facilitate efficient delivery of cash assistance to vulnerable segments. It also noted that better data integration is needed for proper targeting of cash aid program beneficiaries.

While microfinance institutions and other financial service providers that serve the “last mile” have been hit by the pandemic, the EIU report observed that efforts to protect these institutions varied despite having over 140 million low income customers worldwide.

The report further called for a comprehensive data privacy and cybercrime protection framework following the sustained efforts to promote increased uptake of digital financial services.

The Global Microscope is an annual cross country assessment of the enabling environment for financial inclusion. Since 2009, the Philippines has consistently belonged to top-ranked countries in terms of having a supportive framework for inclusive finance. Latin American countries–Colombia, Peru, Uruguay, Argentina and Mexico—dominated the top five spots of this year’s rankings.

TSB