Getting around financial inclusion hurdles

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In a recent study conducted by the Asian Development Bank, the Philippines turned out to be well behind its regional peers when it comes to financial inclusion.

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According to the study, the Philippines was at the 120th spot, while its neighboring countries such as Singapore ranked 25th and Malaysia at 41st. The scoring was based on several indicators, which included the ratio of automated teller machines (ATM) per 100,000 adults and domestic credit to gross domestic product ratio.

Although the study highlights the fact that financial inclusion is indeed an elusive goal, the country’s financial sector has always been on its toes in promoting a more all-encompassing growth, especially among the lower class.

Rural banks, created for the particular reason of empowering the countryside, have long been at the forefront against this long-standing fight against poverty. Fortunately, there are now developments in banking channels and the regulatory environment that enable them to better perform their roles as economic catalysts.

The dawn of technological innovations has proven to have an impact on the clients’ demands and thus, on the way banks conduct their business.

To keep up with the increasingly fast-paced environment, banks now find themselves investing in mobile banking and other electronic banking services.

As for rural banks, the shift to electronic banking is starting to unfold. Central bank data showed that the number of ATMs of rural banks jumped to 463 as of September 2014 from 288 in the same period last year. It also showed that of the 106 banks with electronic banking facilities approved by the Bangko Sentral ng Pilipinas (BSP), 46 were rural and cooperative banks.

Technology as a tool for financial inclusion offers great potential for it allows banks to reach even the farthest area at a lower cost. The use of such innovations also proves to be quite feasible as more Filipinos show sign of willingness to adopt electronic banking. According to BSP data, the number of e-money transactions rose to 217 million in 2013 from 138 million in 2010.

The presence of banks is likewise bound to get stronger with changes in the regulatory environment as initiated by the central bank. The most recent development is BSP’s move to expand the allowable activities of micro-banking offices (MBO). Following the regulation, MBOs are now allowed to engage in additional services such educational, health, and emergency loans.

While technological advancements and regulatory amendments do not ensure the ultimate realization of an inclusive growth, these developments are expected to serve as effective stepping-stones for banks to get around and overcome the hurdles towards financial inclusion.

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