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2015/FDM1/010 Session: 3

Financial Inclusion and Financial Integration

Purpose: Information Submitted by: Philippines

Finance and Central Bank Deputies’ MeetingTagaytay, Philippines

5-6 March 2015

Financial Inclusion and Financial Integration

Pia Bernadette Roman TayagHead, Inclusive Finance Advocacy Staff

Bangko Sentral ng Pilipinas

APEC FINANCE AND CENTRAL BANK DEPUTIES’ MEETING5 March 2015Tagaytay City

What is financial inclusion?

• A state wherein there is effective access to a wide range of financial services for all Filipinos

Unserved and Underserved

•MSMEs

•Low income population

•Population in frontier areas

•Population unserved due to religious barriers

•Farmers, fisherfolk, agrarian reform beneficiaries

Financial Inclusion Toward Inclusive Growth

Household Level

•Allows HH to seize opportunities and manage shocks•Increase in output and productivity

•Able to mobilize broad based savings and invest in growth of productive sector•Deep and diversified financial system contributes to financial stability

EconomyFinancial System

•Economic Growth

•Reduced Inequality

•Broad based share in economic benefits

Oth

er Facto

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Oth

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“A regionally responsive, development-oriented and inclusivefinancial system which provides for the evolving needs of its diverse

public” and supports inclusive growth (Philippine Development Plan 2011-2016)

Financial integration can boost the positive effects of financial inclusion at each level.

Access to markets, value chains by small enterprises Access to a

broader range of financial services

Shared financial service infrastructure – credit bureaus, registries

Financial Inclusion/ Exclusion

Source: Demirguc-Kunt and Klapper (2012)

2.5 billion adults are unbanked

80% of the world’s poor population is financially excluded

Adults with an account at a formal

financial institution (%)

0-15

16-30

31-50

51-80

81+

No data

Philippine Country Context - Access

37%

of the 1,634 cities and municipalities do not have a banking office

archipelagic barriers pose a big challenge to financial access

*All figures are as of end-Dec 2012

15%of total population lived in unbanked cities and municipalities

For every 10,000 adults,

1 bank

2 ATMs

With at least one banking officeUnbanked

92%

5%

72%Eastern Visayas

ARMM

CAR

NCR

66%

0%

7%

CALABARZON

Central Luzon

% of unbanked cities and municipalities

2 out of 10of adults have a deposit

account

of adults had a loan in a formal financial institution in the past year

share of insurance premiums to GDP

Filipino households havea deposit account

43%

70%

of the total number of deposit accounts

of the total amount of deposits

are concentrated in NCR

of adults are users of money transfer and loan and bill payment

service providers

Philippine Country Context - Usage

% SMEs with a deposit account at a formal financial institution

% SMEs with an outstanding loan or line of credit

98%

30%

Initiatives for Financial Inclusion

Policy and Regulation

Financial Education and Consumer Protection

Advocacy

Enhanced Internal Capacity and Comprehensive Data Framework

Key Policies and Regulatory Issuances

Widened range of productsMicrodeposit

Microenterprise loanMicrofinance plus

Micro-agri loanHousing microfinance

Microinsurance

Expanded virtual reachE-money issuers

E-money network service providersTechnology-driven business models

Expanded physical networkLiberalized bank branchingMicro banking offices

Liberalized customer on-boardingUpdated anti-money laundering rules

Outsourcing rules

Enhanced consumer protection frameworkRevised rules for Truth in Lending Act

Market conduct regulationConsumer assistance mechanism

Tangible Gains

179 banks with MF operations serving more than 1 million clients with loans outstanding amounting to PHP 9.4 billion (USD 213 million)

• 72 banks with 1.9 million microdepositaccounts

• 40 banks distributing microinsurancecovering 29 million individuals*

* Highest microinsruance coverage among nine Asian countries, Munich Re Foundation

Tangible Gains

Philippines1,634 municipalities92 million Filipinos

With 9,375 banking offices,37% of the cities and municipalities

(15% of the population)are unbanked

With the addition of over40,000 access points

(offsite ATMs, NBFIs, credit cooperatives, pawnshops, money changers, remittance agents,

e-money agents)only 13% of the cities and municipalities

(4% of the population)remain unserved

• Credit Surety Fund facilitating access to credit by the SMEs• 37 CSFs established in 27 provinces and 10 cities nationwide

• Cumulative loans approved reached PhP 1.5 Billion

• Kiddie Savings Program• 12 banks are participating in the program

• Awards programs highlighting excellent microentrepreneurs• Citi Microentrepreneurship Awards recognized 100 awardees since 2002

• BSP Stakeholders Awards inculding financial inclusion partners and champions

• BSP Economic and Financial Learning Program with carefully targeted audiences and key messages• 88% of provinces (71 or 81) have been reached covering more than 300,000

persons

• Approval of a Consumer Protection Framework

Tangible Gains – Financial Education, Consumer Protection and Advocacy

The Philippines ranked consistently has number one for policy and regulation for microfinance for five years in a row.

The Philippines was number one in Asia and top 3 in the world in terms of conducive environments for financial inclusion.

National Strategy for Financial Inclusion

Coordination

Trust building

Raising awareness

and understanding

Toward a common vision and clearly defined inclusive financial

system

• A financial system that is accessible and responsive to

the needs of the entire population toward a broad based and inclusive growth.

• This financial system also serves the traditionally

unserved or marginalized sectors of the population.

• This vision should be guided by a focus on the client.

Vision/ Goal

Empowered clients

Access

Quality

Welfare

Usage

The overall vision is a financial system that is accessible and responsive to the needs of the entire population toward a broad based and inclusive growth. In particular, to ensure that this financial

system also serves the traditionally unserved or marginalized sectors of the population. This vision should be

guided by a focus on the client.

Financial Inclusion Global Milestones

UN Year of Microcredit (2005)

Publication of “Building Inclusive Financial Systems”

G20 Leaders Recognition of the importance of financial inclusion and consumer protection post-crisis 2009

Creation of the G20 Global Partnership for Financial Inclusion (GPFI)(2010)

First Standard Setting Bodies Meeting on Financial Inclusion (2012)

Maya Declaration (2011)

40 countries have set tangible financial inclusion commitments

World Bank Survey (2011)

90% of the 142 countries have some financial inclusion agenda

APEC Financial Inclusion Working Group (2011)

www.bsp.gov.ph