Perception and knowledge of credit products offered by formal channels deteriorated among unbanked Filipinos, increasing the urgency for the government to ramp up efforts on financial inclusion to help the country reach upper-middle income status much sooner.
A survey of 1,000 consumers between March and April this year showed only 54 percent of the country’s unbanked population are knowledgeable about the concept of credit, such as credit cards, housing and personal loans, according to the 2024 Credit Perception Index (CPI) published by global information and insights company TransUnion on Friday.
This was lower compared to the 70 percent of the general population who said they are knowledgeable about credit.
The results yielded a 2024 CPI score of 39 percent for the country’s unbanked population, lower than the 53 percent reading recorded for the same segment in 2023.
Such findings, TransUnion said, not only showed “a deterioration of credit perception and knowledge” but also indicated that “knowledge gaps still exist between the unbanked population and other populations.”
“I would believe this is more in terms of looking at a skewed population … still feeling that they (unbanked Filipinos) have been left behind,” Yogesh Daware, chief commercial officer at TransUnion Philippines, said in a press conference.
The latest report increased the need to intensify state efforts to onboard more Filipinos to the formal financial system in line with a goal to lift the Philippines to the upper-middle income group before the end of President Marcos’ term.
Digital
According to the Bank of International Settlements (BIS), a 1-percentage point increase in digital payment use is associated with a 0.10-percentage point growth in gross domestic product per capita, and a 0.06-percentage point decline in informal employment. A wider adoption of digital payments could also translate to greater access to credit, BIS said.
Latest data from the Bangko Sentral ng Pilipinas (BSP) showed the share of digital payments to total retail payment transactions in the country grew to 52.8 percent in 2023, from 42.1 percent in 2022. That means out of the 5 billion total monthly transactions recorded last year, more than 2.6 billion of them were successfully converted to digital form.
It was a feat that exceeded the expectations of the central bank, which was hoping to digitalize 50 percent of retail payments in the country by 2023. The growth in digital payments also bodes well for the BSP’s goal to onboard 70 percent of adult Filipinos to the formal financial system by 2023.
“The central bank has been obviously effective in terms of implementing programs and activities that promote financial inclusion. Now, this is to ensure that the reach of financial services is not only restricted or confined only to the urban provinces,” TransUnion’s Daware said.