the banking system in the Philippines has become more inclusive over the years, widening its reach into previously unserved areas to boost the number of deposit accounts and expanding banks’ loan portfolios, a new report released by the central bank on Tuesday said.
In its 2013 Report on the State of Financial Inclusion in the Philippines, the Bangko Sentral ng Pilipinas (BSP) said the Philippine financial system continues to expand its reach, but added that there is much more work to do to improve Filipinos’ access to finance.
The network of banks has achieved year-on-year growth of 4 percent while that of ATMs in the country has grown by 15 percent, the report said.
Usage of formal financial products and services has spread, as shown by the increase in bank deposits and loans, it said.
Deposit accounts in banks rose 9 percent, equivalent to about 4 million new accounts from 2012, while the loan portfolio of banks has expanded by 27 percent to P4.25 trillion in 2013.
The BSP said most noteworthy is the improvement in financial inclusion, particularly in bringing financial services to previously “unbanked” or unserved areas.
“These significant strides have been made possible by strategic policies that the Bangko Sentral has set in place, such as those on microbanking offices, the framework for electronic money (e-money), which facilitates access to transactional accounts and retail payments, microfinance and the strengthening of other financial service providers (FSPs) such as non-stock savings and loans associations (NSSLAs), pawnshops, remittance agents, other non-bank financial institutions, among others,” it said.
The report pointed out that there has been a modest, yet meaningful, drop in the number of municipalities that are unbanked from 611 to 604.
In the municipalities that have gained banking presence, 73 percent of them were due to the establishment of other banking offices (OBOs) or micro-banking offices (MBOs), the scaled down banking office targeted to poor and low income clients.
“As designed, MBOs are, indeed, effectively serving the banking needs of the unbanked or underbanked, especially those living in the countryside,” it said.
In 2013, the number of operating MBOs rose 26 percent to 465 in 2013 from 370 in 2012. Fifty-six cities and municipalities are served by MBOs alone, a 12 percent increase from the prior year.
The BSP report also said there has been a significant increase in the use of electronic money, which signifies the greater access to transactional accounts that can be considered a first step toward financial inclusion.
In 2013, registered e-money accounts reached 26.7 million, a 34 percent surge from 2010. Transactions similarly jumped to 217 million transactions in 2013 from 138 million in 2010.
The BSP report also underscored the expansion of microfinance in the banking system, with loan portfolio growth of 3 percent to P8.7 billion in 2013 from P8.4 billion in 2012.
Micro-deposits have also been on an uptrend where accounts grew by 27 percent to P2.96 billion in 2013 from P2.33 billion the previous year. In terms of volume, the total number of microdeposit accounts surged by 36 percent to 1.5 million accounts from 1.1 million accounts during the same period.
Meanwhile, other FSPs remain important access points of financial services, especially in areas where banking presence is either lost or not yet established, the report said.
The publication noted that 398 out of 604 unbanked local governments now have access to other FSPs, which means that only 206 local governments (equivalent to 13 percent of 1,634 local governments and 4 percent of the total Philippine population) are left unserved.
“Strengthening these institutions and allowing them to participate in a productive ecosystem will enable useful access to financial services in the areas that they serve,” it said.
However, the BSP report said while significant progress has been made in financial inclusion measurement, there is still much work that needs to be done to create a clearer picture of financial inclusion in the Philippines.
“Moving forward, the BSP is committed to continuously improve its financial inclusion
data framework by implementing demand-driven data gathering exercises so that later on, there will be solid evidence to assess progress and measure impact of regulations on financial inclusion,” it said.
The central bank also said in the report that work is underway for a national baseline survey that will measure financial inclusion from the demand side and provide first-hand information on the quality (consumer experience) and welfare (consumer impact) dimensions of financial inclusion.
“With the continuous initiatives to improve the collection of both supply-side and demand-side information on financial inclusion, the BSP envisions that data and deeper measurement will play greater role in its financial inclusion policymaking,” it added.