Access to banking products and services continues to expand, proving that the financial sector is now more inclusive as seen in the growth of microfinance loan and the growing number of banks offering microdeposits and microinsurance. Given their geographical reach, rural banks serve as important access points to low-income individuals.
With the clear agenda of the Bangko Sentral ng Pilipinas (BSP) to achieve inclusive growth, combined with the issuance of regulations that support such goal, low-income clients have gained increased access to formal financial services.
Recently, the BSP presented significant data on financial inclusion, which highlights that there are now 69 institutions that are offering microdeposit accounts, which rose by 36 percent to 1.5 million in 2013.
Bank accounts classified as microdeposits do not require a maintaining balance and are exempt from dormancy charges, which effectively remove the barrier to access a deposit account and encourage low-income individuals to save.
In terms of providing microfinance loan products, 182 banks are identified to have microfinance operations, 137 of which are rural banks and 18 are cooperative banks. The BSP Report indicates that the microfinance loan portfolio has increased by 3 percent in 2013. Growth in Microfinance Plus and housing microfinance loan is largely attributed to rural banks long engaged in microfinance.
The low-income sector has not only been provided access to a wide array of microfinance products and services in order to build their assets. To provide microfinance clients a mechanism to protect their lives and that of their assets, rural banks were allowed to cross-sell microinsurance.
By end of 2013, half-a-million microinsurance policies are in force, covering around 1.4 million insured Filipinos through rural banks. To date, 81 banks have already been issued with a BSP No Objection Notice and as of July 2014, there are already 42 rural banks issued with agent license to cross-sell microinsurance products.
With the liberalization of policies on cross-selling, simple insurance products such as traditional life and non-life may now be sold inside bank premises regardless of whether the financial product provider belongs to the financial conglomerate or not. With this development, rural banks may expand their product menu to better serve their market.
The potential of mobile financial services to reach those without physical access to banks is yet to be maximized, as there is a gap between registered users and active users of mobile banking. To close this gap, the Rural Bankers Research and Development Foundation, Inc. is offering a course on consumer education for branchless banking to assist its members in designing a program to encourage active use of branchless banking services.
Inclusive growth is poised to continue its upward trend given the policies in place that create an environment that supports it. To further boost such growth, rural banks are reaffirming their commitment to continue expanding access to financial products and services to the financially underserved Filipinos.