The Philippines remains a global leader in financial inclusion according to the 2018 Microscope, a cross-country study which assessed the enabling environment for financial inclusion in 55 jurisdictions. The Philippines is ranked fourth in the world and first in Asia, together with India, in terms of having a conducive environment for financial inclusion. The first three spots belong to Latin American countries, namely Peru, Colombia, and Uruguay.
The report noted that the Bangko Sentral ng Pilipinas (BSP) “has been ahead of the curve in identifying opportunities and setting guidelines for financial inclusion.” It recognized that the BSP’s focus on “creating a digital finance ecosystem has led to the introduction of a sound payments infrastructure that helps various financial sector players to reduce their costs and further their outreach.”
According to the report, the top-performing countries demonstrate strong government support and commitment to financial inclusion as evidenced by a national strategy which facilitates coordination among various stakeholders. These countries have balanced policies and regulations that enable different types of institutions to offer financial services to the low-income population. Another common strength among top-ranked countries is the ease with which customers can access a variety of financial products and outlets because there are no disproportionate requirements to open an account or avail inclusive insurance products.
Several enablers of financial inclusion in the Philippines are cited such as the enhanced regulations on pawnshops and money service businesses, and regulation on cash agents and branch-lite units to further extend the reach of financial services. There is interoperability among agents allowing a wide variety of actors to function as outlets via commercially viable models. The coordination between the public and private sector under the National Strategy for Financial Inclusion (NSFI) has produced positive results such as the increase in the percentage of municipalities with at least one financial service access point from 88% in 2015 to 92% in 2017.
Recent developments supporting digital financial inclusion are likewise mentioned in the report such as the launch of two payment schemes – PESONet and InstaPay – under the National Retail Payment System. It also recognized our regulation allowing electronic Know Your Customer (KYC) procedures and the promising role of national ID for supporting digital transactions. Another enabling factor is the close collaboration with industry players through the BSP’s “test-and-learn” approach to financial technology (fintech). This approach provides a testing ground for new business models to guide the BSP in assessing potential risks and coming up with proportionate regulations that address those risks.
Because of the fintech revolution, the report underscored the importance of increasing supervision capacity for digital financial services. It recognized the specialized training for financial supervisors in the Philippines on risk management and supervision specific to microfinance and financial inclusion, and ongoing pilot of the BSP to enable technology-led supervision through the use of Application Programming Interface (API) in regulatory reporting and chatbot for handling of financial consumer complaints.
The Global Microscope is regularly undertaken by the Economist Intelligence Unit (EIU), the research arm of The Economist Group. The 2018 edition looked at five key domains to assess a country’s financial inclusion environment: 1) government and policy support; 2) stability and integrity; 3) products and outlets; 4) consumer protection; and 5) infrastructure. In light of the digital revolution, the EIU added indicators on digital financial services to each domain of the framework. Since 2009, the Philippines consistently belongs to the top-ranked countries in terms of having an enabling environment and regulatory framework for microfinance and financial inclusion.