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Banking System More Inclusive According to BSP Report


The Bangko Sentral released its 2013 Report on the State of Financial Inclusion in the Philippines, the third one since the maiden release in 2011. This report aims to measure the level of access to financial services in the country, track the effects and progress of targeted policies and initiatives as well as enable evidence-based policy making.

The Philippine banking system has become more inclusive over the years. The network of banks and ATMs continues to expand in terms of number and physical reach, with a year-on-year growth of 4% and 15%, respectively. Usage of formal financial products and services has increased, as seen in the growth of bank deposits and loans. Deposit accounts in banks increased by 9% or around four million new accounts from 2012. While the growth is driven by an increase in the higher brackets of deposit accounts, there has also been an observable increase in the deposits from small savers which account for 75% of total number of deposits in banks. The loan portfolio has also expanded by 27% to PhP 4.25 trillion in 2013. While the NCR accounts for a significant portion of these deposits and loans, growth in terms of amount of deposits was also observed in all regions in Visayas while the highest loan growth of 55% from 2012 was in Central Visayas.

Most noteworthy in the report are the gains in financial inclusion particularly in bringing financial services to areas which were previously unbanked or unserved. 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.

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% 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. In 2013, the number of operating MBOs increased by 26% to 465 in 2013 from 370 in 2012.  Fifty-six (56) cities and municipalities are served by MBOs alone, a 12% increase from the year prior.  Majority of the local government units that are served only by MBOs belong to the lower tier in terms of income.

 The increase in the use of electronic money has likewise been significant. This signifies the greater access to transactional accounts which can be considered a first step toward financial inclusion. In 2013, registered e-money accounts reached 26.7 million, a 34% increase from 2010. Transactions similarly jumped to 217 million transactions in 2013 from 138 million in 2010. These transactions include bills payments, person-to-person payments, purchases, among others.

Microfinance also continues to grow in the banking system with loan portfolio growth of 3% 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% to P2.96 billion in 2013 from P2.33 billion in 2012. In terms of volume, the total number of micro-deposit accounts surged by 36% to 1.5 million accounts in 2013 from 1.1 million accounts in 2012.  For microinsurance, data from the Rural Bankers Association of the Philippines (RBAP) indicated that the total number of rural bank clients with microinsurance rose by 153% to 1.4 million in 2013 from around 543,500 in 2012.

Finally, other FSPs remain important access points of financial services especially in areas where banking presence is either lost or not yet established. 398 out of 604 unbanked local government units have access to other FSPs. This means that only 206 local government units (equivalent to 13% of 1,634 LGUs and 4% 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.

The report shows that the Bangko Sentral’s efforts in expanding access have contributed to an increased usage of financial products and services.  Yet there is still work to be done. 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. The Bangko Sentral believes that with the continuous initiatives to improve the collection of both supply-side and demand-side information on financial inclusion, it will be able to craft evidence based policies that will ensure greater access to financial services to those that need them the most.

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