PH posts biggest gain in digital, financial inclusion

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The Philippines bested 25 other countries in terms of improvement in digital and financial inclusion in 2016 with its score up 8 percentage points from a year earlier.

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This is based on the “2016 Financial and Digital Inclusion Project (FDIP) Report: Advancing Equitable Financial Ecosystems (Report)” recently released by the Brookings Institution, one of the world’s oldest think tanks.
The report examines access to and usage of secure, affordable formal financial services by underserved populations.

The objective of FDIP is to give policymakers, the private sector, representatives of non-governmental organizations, and the general public the information that helps improve financial inclusion in their respective countries and beyond.

An FDIP team produces an annual report and scorecard after evaluating the commitment and progress toward financial inclusion across a set of geographically, economically, and diverse countries.

In 2016, Brookings increased its sample to 26 geographically, economically, and politically diverse countries from 21 last year.

The countries were assessed using criteria classified under four general dimensions: Country Commitment, Regulatory Capacity, Mobile Capacity, and Adoption of Traditional and Digital Financial Services.

The institution also expanded the scoring criteria to include consumer protection framework for financial services as part of the Country Commitment, smartphone adoption and availability of merchant payments via mobile money in the Mobile Capacity, and frequency of account usage under Adoption.

Countries assessed in the report were Kenya, Colombia, Brazil, South Africa, Uganda, Philippines, Rwanda, Chile, Mexico, Nigeria, Turkey, India, Indonesia, Pakistan, Peru, El Salvador, Tanzania, Zambia, Bangladesh, Dominican Republic, Malawi, Vietnam, Haiti, Afghanistan, Ethiopia, and Egypt.

PH score improves
According to the report, the Philippines scored 76 percent this year from 68 percent last year, besting Uganda (78 percent), South Africa (78 percent), Brazil (78 percent), Colombia (79 percent), and Kenya (84 percent).

This development was attributed to the launch of the Philippine National Strategy for Financial Inclusion (NSFI); strong performance in terms of mobile capacity, as measured through smartphone penetration; and highest rate of adoption of mobile money accounts among the South East Asian countries included in the report.

“The launch of the Philippines’s national financial inclusion strategy, combined with growth in unique mobile subscribership and the development of interoperable digital financial services, drove a substantial increase in the Philippines’ ranking between 2015 and 2016,” the institution said.

The activities of alternative financial service providers, including remittance agents, pawnshops, and mobile and telecommunications providers, have supported the efforts of banks to promote financial inclusion, it said.

Enhancements in financial literacy among consumers and the implementation of the national financial inclusion
strategy should help boost the adoption of formal financial services moving forward were also noted.

In particular, the Philippines garnered the highest scores in Country Commitment (100) and Regulatory Environment (100) and achieved a high score in Mobile Capacity (94) and more modest points in Adoption (42). The scores were positive improvements from the levels in 2015.

The 2016 report acknowledged the Bangko Sentral ng Pilipinas (BSP) in shepherding the implementation of the NSFI and advancing the high-level inter-agency Financial Inclusion Steering Committee (FISC).

The BSP is also recognized for its past leadership role in the Alliance for Financial Inclusion (AFI), an international organization of policymakers pursuing financial inclusion; its commitment to the AFI Maya Declaration, a set of objectives aimed at deepening financial inclusion in the Philippines; and its support to the Better than Cash Alliance, a multi-sectoral international coalition working to shift the global use of physical cash to digital transactions.

The report noted the ongoing collaborative work among regulators and industry stakeholders to boost inter-operability, efficiency, convenience, and utility of the country’s digital ecosystem.

Foremost is the National Retail Payments System (NRPS), a policy framework that defines governance, institutional and operational principles to guide market players and retail payment channels.

The NRPS aims to enable a more efficient, safe, affordable and inclusive retail payment infrastructure that allows digital transfers from any account to any account in any type of institution, through the use of any digital device.

The NRPS targets to digitize 20 percent of retail transactions by 2020. This is a significant and necessary goal considering that only 1 percent of the 2.5 billion payment transactions made in the Philippines is electronic.

Based on results of its cross-country analysis, Brookings provides key suggestions to further expand digital and financial inclusion in all countries.

The call to action includes setting quantifiable financial inclusion targets to measure the success of initiatives, as well as data collection focused on barriers to mobile ownership, connectivity, and SMS and data usage to better inform the development of inclusive mobile ecosystems, and consequently providing of digital financial services.

Brookings suggests greater coordination between financial and telecommunications regulators and industry players to address uncertainties in the regulatory environment, scale up the provision of financial services to target markets, and facilitate the development of digital identification mechanisms crucial for taking on board the marginalized markets into the formal financial system.

For its part, the BSP said it remains committed to creating an enabling regulatory environment where digital financial products are provided safely and efficiently, benefitting the consumers with consistent and affordable services.

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