The Bangko Sentral ng Pilipinas (BSP) is urging banks and other financial institutions to develop by capitalizing on digital technology, specifically in microfinance.
“Digital technology enables efficiencies and scale in financial service delivery. Technology—once only available to the wealthy is now within reach,” Bangko Sentral Governor Nestor Espenilla Jr. said during 15th Citi Microentrepreneurship Awards launch in Manila over the weekend.
“The sooner we realize this, the sooner we can adopt digital technology as strategy enabler. Our inability or refusal to use technology can undermine our efforts to deepen the impact of microfinance and drive financial inclusion,” he said.
The central bank recognizes the power of digital technology and has adopted policy packages geared to expand the digital finance ecosystem.
These policy packages include the National Retail Payments System, the use of cash agents, and the risk-based know-your-customer procedure.
“In the BSP’s digital finance policy package, banks and other financial service providers now have a better platform to expand their reach and deliver better and cheaper product to their clients in digital solutions,” he said.
Another opportunity in the operating landscape is the government’s focus on rural and micro, small and medium enterprises development.
“This matters as investments in crucial infrastructure like roads and irrigation systems support agriculture and local businesses. Investments in these sectors improve the productivity and risk profile of your target market: rural workers and micro-entrepreneurs,” he said.
These market-enabling interventions makes rural financing a fertile ground for service providers looking to expand their client base, Espenilla noted.
“I believe there are three crucial things institutions need to develop in taking advantage of these opportunities in the operating environment,” he said.
More organizations must use digital innovations strategically not just in their information technology infrastructure but also in their strategy, culture and human resource skills, he said.
“Yes, this will necessarily involve financial investment commitment but the gains will be worth it and there are cause-effect in approaches that can be explored such as outsourcing and cloud-based services,” he said.
Espenilla said good governance is needed as the viability and sustainability of institutions will be determined ultimately by the quality of corporate governance.
“This is important not just a matter of regulatory compliance but because good governance is a strategic asset that will drive value to your business and to your clients,” he said.
“We serve clients better when we give them products that will meet their needs, improve their financial resilience and reduce vulnerability. To do this, we must first understand their motivations, their values and other factors that drive their behavior,” Espenilla added.