The 2014 Consumer Finance Survey (CFS) is the second quadrennial survey conducted after the 2009 inaugural CFS. The CFS generates data on the financial conditions of households, including what they own (financial and non-financial assets) as well as from whom and how much they borrow (sources of credit and level of indebtedness). It also generates data on the income, spending and insurance coverage of households. The 2014 CFS has a sample size of 18,000 households covering all regions in the country, except Leyte province (displaced due to typhoon Yolanda) and Autonomous Region in Muslim Mindanao (ARMM).
CFS results indicate a significant increase in the country’s labor force for the next ten years
The results of the survey showed that the Philippines has a young population. The age distribution of household members showed that 21.5 percent were 5-14 years old and 20.2 percent were 15-24 years old while those who were about to retire or were close to compulsory retirement (aged 55-64 years old) and the elderly (65 years old and over) accounted for 8.0 percent and 5.9 percent of the household members, respectively, at the time of the survey. These figures indicated that a significant increase in the country’s labor force could be expected considering that a much bigger number of young people will enter the labor force every year compared to the number of older people who leave the labor force working age group.
Home appliances, own residence and motor vehicles are the most common types of assets owned by households
The most common types of assets held by households were home appliances and their own residence. Other types of assets owned by households were motor vehicles, retirement insurance, deposit accounts and other real property apart from respondent’s residence such as land, house and lot, and farm and precious objects. A very small percentage of households owned securities and investment products such as stocks, bonds, mutual funds and unit investment trust funds.
Household liabilities are in the form of consumer and real property loans
With respect to liabilities, a bigger percentage of households had outstanding consumer loans such as all-purpose loans and motor vehicle loans while few households had outstanding loans on their residence and other real property and credit card loans.
Three in every four households own/co-own their houses or both houses and lots
House dwelling is the single biggest asset of many households. About three-fourths (or 75.5 percent) of households were homeowners (with 44.1 percent owning or co-owning their houses and lots while 31.4 percent owning or co-owning their houses only). Non-homeowners, which comprise about 24.6 percent of the total number of households surveyed, were renting/leasing (6.7 percent), and neither owning nor renting their housing unit (17.8 percent), or caretakers of other people’s residence (0.1 percent). Majority of households that owned their houses/houses and lot acquired their property through cash followed by inheritance/gift (39.4 percent).
Housing is generally acquired by households either through purchase in cash or inheritance
Majority of households that owned their houses/houses and lot acquired their property through cash (51.7 percent) followed by inheritance/gift (39.4 percent).
The primary source of housing loans is Pag-IBIG in AONCR, and the National Housing Authority (NHA) in NCR
Government institutions continued to be the most popular providers of housing loans, followed by banks and money lenders. Relatives and friends, and in-house financing and financing institutions also provided a significant portion of housing loans.
One in two households pay an annual interest rate of 10 percent or lower on housing loans
In terms of lending rates, 50.8 percent of the households (with loans) paid an annual interest rate of 10 percent and below on their housing loans.
Nearly 6 in 10 households with outstanding housing loans pay ahead or on schedule
More than half of households with outstanding loans (55.9 percent) paid their monthly amortization either ahead of or on schedule, while the rest were behind schedule.
One in eight households owns other real property apart from their residence
About 13 percent of households owned other real property (aside from their residence) in 2014. Of these, 83.5 percent owned one other real property, 13.2 percent owned two, and 3.4 percent owned three or more. A considerable number of households that owned other real property acquired them through inheritance/gift (59.8 percent). These were followed by those that acquired property through cash payment (33.2 percent), Comprehensive Agrarian Reform Program (3 percent), loan (2.1 percent), and combined cash and loan (1.5 percent).
More than a quarter of households own at least one motor vehicle
The survey showed that more than a quarter (27.5 percent) of households owned at least one vehicle. Among those households that owned vehicles, about six for every ten (60.3 percent) owned motorcycles.
One in eight households that owns a motor vehicle avail themselves of a motor vehicle loan
About 11.9 percent of households that owned motor vehicles had outstanding loans on their vehicles. A bigger percentage of NCR households had outstanding loans on vehicles (15.4 percent) compared to those in AONCR (11.5 percent).
Majority of households own various types of appliances
Majority of households (90.6 percent) owned various types of household appliances. In the NCR, almost all households (99.7 percent) owned household appliances. Meanwhile, in AONCR, 10.9 percent of households did not have any household appliance. On average, five different types of appliances could be found in any household in 2014. NCR households own seven different types of appliances while in AONCR, there were three types.
Eighty six percent of households are unbanked
Majority of households or 86 percent did not have a deposit account. This means that only the remaining 14 percent save their money in banks. The foremost reason cited by households for not having a deposit account was not having enough money to keep an account. Other reasons cited by households were: (1) do not need a bank/cash account (2 percent), (2) bank/institution location is far (1.7 percent), (3) cannot manage an account (1.2 percent), (4) service charges are too high (1.0 percent), and other reasons (1.6 percent) such as minimum balance is too high, do not like to deal with banks/institutions and do not trust banks/institutions.
Based on the odds ratios, results show that majority of household heads who are employed in private establishments and government are banked. In contrast, majority of household heads who are self-employed, worked for private household, other household’s farm, and in other informal occupations, are unbanked.
Eight in ten deposit accounts are placed in commercial banks
Banks were the most popular type of depository institution. These included commercial banks (50.2 percent), rural/cooperative banks (13.8 percent), savings/thrift banks (10.1 percent) and microfinance banks (9 percent). Together, the banking system held 83.1 percent of deposit accounts of households. Other depository institutions of households were: multipurpose/credit cooperative (11.4 percent), paluwagan (4.1 percent), and savings and loan association (3.6 percent).
About 7 in 10 deposit accounts pay interest
Not all deposit accounts were interest-bearing. About 7 in 10 households had interest-paying deposit accounts. This indicated that 30 percent of the households still prefer to maintain deposit accounts even if their average daily balance falls below the required amount to earn interest or had earned a negligible amount of interest.
The percentage of respondents who have one or more retirement plan/s declines
The survey results showed that the percentage of respondents that had at least one retirement or insurance plan from both/either the government and/or private companies stood at 24.2 percent in 2014.
The percentage of respondents’ spouses who had at least one retirement or insurance plan from both/either the government and/or private companies declined to 27.1 percent in 2014 from 44.9 percent in 2009.
Inheritance come mostly from parents
About 24.6 percent of households reported receiving an inheritance. Majority of them received only one inheritance. A bigger percentage of households in AONCR received inheritance (25.4 percent) than in NCR (19.3 percent). Inheritance came mostly from parents (88.2 percent), followed by grandparents (5.4 percent), other relatives (4.2 percent). The most common inheritance received was real estate such as land or farm (58.0 percent), and houses, condominiums, and townhouses (30.4 percent).
Households also received inheritance in the form of house and lot (9.9 percent), cash (1.9 percent) and others (0.9 percent).
Two percent of households have credit cards
About two percent of households had credit cards. A bigger percentage of NCR households were credit card holders (3.9 percent) compared to those in AONCR (1.1 percent).
About seven in ten (71.4 percent) credit card holders paid their monthly bills through banks’ operations. These included over-the-counter transactions (65 percent), mobile banking (3.5 percent), internet banking (2 percent), and ATM bank-to-bank transfers (0.9 percent). Meanwhile, 18.9 percent were paid in Bayad Centers, 3.9 percent through direct cash payments and 1.9 percent through salary deduction.
About one in seven households avail themselves of other loans such as personal, salary, multipurpose, and business loans
Aside from housing and real estate, motor vehicle, and credit card loans, 15.2 percent of households availed themselves of loans such as personal, salary, multipurpose, and business loans. These were used primarily for business start-ups and expansion, educational expenses, debt payments, medical, and house improvement expenses.
The most popular collateral being used by borrowers is “Sangla ATM”
About eight different kinds of assets of households were used as collateral on their loans (e.g., personal, salary, multipurpose, business, educational and emergency loans). The “Sangla ATM” was the most used collateral of the borrowers at 39.9 percent. This was followed by land (22.5 percent), appliances (11.7 percent), vehicles (7.7 percent) and harvest (6.0 percent).
The main sources of household income are wages and salaries
More than half (50.5 percent) of the respondents’ household income came from wages and salaries. Other sources of household income were businesses including self-employment (18.1 percent), financial assistance from government (13.5 percent), financial assistance from abroad (13.2 percent) and financial assistance from other households (10 percent).
Two in 10 households own a business or a farm
The percentage of households who own a farm or business decreased from 40.6 percent in 2009 to 18.1 percent in 2014. Businesses of households were mainly in wholesale and retail trade; agriculture, hunting and forestry; and accommodation and food service activities. In NCR, businesses were mostly in the wholesale and retail trade; followed by accommodation and food service activities; and other industries.
One in eight households receives financial assistance from abroad
About one-eighth of households received financial assistance from abroad in the form of cash, gift, or other forms of transfers in 2013. The average amount received by each of these households was P59,295 a year, while the median amount was P10,000.
The median total income of households is P106,180
The average and median total income of households in 2013 were P178,607 and P106,180, respectively.
The biggest expenditure of households is on food and beverage consumed at home
Food and beverages consumed at home accounted for 42.7 percent of the annual household expenditures. This was followed by rent (12.2 percent), regular transportation (9 percent), education (6.5 percent), food and beverage consumed outside the home (6.4 percent), electricity (6.2 percent), medicine and medical services (3.7 percent), utilities such as gas and water (3.1 percent), communication (3.1 percent), house repairs and maintenance (2.5 percent), clothing (1.2 percent), travel and recreation, celebration during special occasions, and purchase of furniture and appliances at 0.8 percent each, and household help services (0.6 percent).
Respondents are inclined towards saving and display good sense in the use of their extra money
The percentage of respondents with inclination towards saving money and putting it in the bank (if they have surplus money) increased. The increase was more pronounced in the NCR at 60.5 percent (from 51.8 percent in the 2009 survey) than in AONCR (for Regions 1, 7, and 11) at 32.9 percent (from 29.4 percent). Those who preferred to save cash at home remained broadly steady at 38 percent. The improvement in respondents' preference to save in banks could be due to their perception that it is safer to keep money in the bank.
Seven in ten respondents are not risk takers when it comes to income and business
Most respondents would not risk their income to undertake risk-taking activities that could possibly increase their current level of income. About 7 in 10 respondents chose to stick to their current level of sure income of P2,500 per week rather than take the risk of entering into a new business and earn from P1,000-P4,000 per week. Likewise, respondents were asked also to choose between receiving P10,000 cash now or waiting a month to get P10,500. Majority of respondents preferred to get the cash at once rather than wait for a month even the amount will increase. These attitudes reflect respondents’ risk aversion with respect to income from both economic activities and interest earnings.
Survey results affirm relevance of the BSP’s financial inclusion and financial education initiatives
Some policy implications can be drawn from the results of the survey. First, the government and the private sector should strengthen efforts and advocacy towards greater financial inclusion. One of the initiatives of the BSP is to support and intensify the expansion of micro-banking offices (MBOs) in unbanked municipalities to enable lower income individuals to open an account with a maintaining balance less than P100 and without dormancy charges. This is line with the BSP Circular No. 694 issued on 14 October 2010 which allows for the establishment of micro-banking offices in unbanked cities and municipalities that service micro deposits and micro loans.
Second, some government retirement programs/policies should be expanded to cover more working and non-working Filipinos.
Third, financial education campaigns for employers and employees in MSMEs and private households, in sectors lagging behind in financial inclusion should be increased and financial education in the country’s school system from elementary to college should be institutionalized.
Fourth, there is a need to also include in the government’s financial education programs the importance of retirement insurance and regular/timely payment of premiums to national pension and retirement funds among household members.
Lastly, there is a need to monitor credit granted through “shadow banking” transactions and the possible regulatory and supervisory infrastructure to monitor system-wide risk exposure to particular sectors without reducing credit opportunities for consumers.
Read Full Report