By Norman P. Aquino
The Philippines provides the best access to financial services to people among 12 countries in Asia, reflecting the central bank’s efforts to boost inclusion and tackle poverty, an Economist Intelligence Unit study shows.
The Southeast Asian nation beat India and Pakistan in the EIU’s annual financial-inclusion scorecard and was third among 55 countries worldwide, after Peru and Colombia. The report cited Philippine companies’ role in serving the poor and a growing mobile-payment system led by banks and telecommunication utilities.
“The Philippine microfinance sector has enjoyed considerable support and the government’s focus on this sector has been a key tool in reducing poverty,” the EIU said. “The private sector plays a greater role in the provision of financial services, resulting in a wider range of products.”
In an archipelago made up of more than 7,000 islands, financial, security and logistical challenges remain in reaching the poor. Distribution remains skewed toward highly populous and urbanized areas, which often results in lenders charging higher interest rates, according to the study.
“More cities and municipalities have access to financial services, thanks to mobile banking,” Bangko Sentral ng Pilipinas Governor Amando Tetangco said in a speech on Nov. 5. The central bank is “leveraging technology” to increase the poor’s access to funds, which remains a challenge, he said.
Overindebtedness is an issue with multiple financing, while microfinance coverage in the Mindanao region in the nation’s south is negligible, the EIU said. Financial literacy remains an issue, with many Filipinos not understanding the value of savings, it said. Only about 27 percent of adults have deposit accounts, the unit said, citing World Bank data for 2011.
Six of the top 10 countries from last year’s index are among the best performers this year—Bolivia, Cambodia, Colombia, Peru, Pakistan and the Philippines. Countries with experience in serving lower-income households tend to have a better financial infrastructure, while regulators that embraced micro-credit earlier are more willing to accept new products and services, it said.
The EIU cited Peru’s strong credit-reporting systems and client-protection rules, Colombia’s pricing transparency, and efforts to provide cheap insurance to low-income people in the Philippines and India, which scored fifth. Indian Prime Minister Narendra Modi has been urging banks to open branches and accounts for the poor as part of a plan to end poverty.