The high-growth trajectory set for the macroeconomy puts pressure on the financial system to generate the necessary resources to support heightened economic activity.
This provides the strongest justification for positioning the financial system to be regionally-responsive and development-oriented.
In order to engender sustainable and equitable growth, those in the margins of society must be part and take benefit from the nation building process. As things stand, their access to financial services has been limited by physical incapacity,19 geographic distance, high cost of credit and stringent documentary requirements. Consequently, these sectors remain vulnerable and their need for consumption smoothing persists.
One way to address this is through the promotion of inclusive finance wherein everyone has access to all financial services including, but not limited to deposit account services, credit services, remittances, and insurance services.
To this end, the Philippines has already made great strides in its effort to make financial services available to everyone not only through banks and insurance firms but also through other institutions such as cooperatives and microfinance non-government organizations. Moreover, technological innovation in mobile and electronic delivery channels has also helped in improving efficiency and availability of financial services. All these have been made possible through the establishment of an enabling policy and reg'ulatory environment that encourages a market-oriented approach to the provision of financial services to previously excluded segments of the population like the enterprising poor.
These notwithstanding, there remains to be room for improvement for Philippine financial inclusion and the following reform strategies shall be pursued to attain this:
1. Establish a conducive and regulatory environment that balances financial inclusion objectives with financial stability goals.
a) Institutionalize market-based policy through issuance of law anchored on the greater role of the private sector in the provision of financial services and market-oriented interest rates with the National Strategy for Microfinance as a foundation.
b) Craft a national financial inclusion strategy20 that officially defines financial inclusion, the medium-term strategies to be undertaken and the responsibilities or accountabilities of all stakeholders both government and private.
2. Promote the use of alternative products and delivery of financial services in underserved and unserved areas of the country such as:
a) Microinsurance21
The promotion of microinsurance products and services, for instance, aims to expand the delivery of simple and affordable risk protection oriented financial products to the less privileged and the informal sector against financial distress and other unfortunate events i.e., typhoon devastation on crops.
Specific action plans include the following:
• Formulate performance standards for microinsurance;
• Foster public-private partnership on microinsurance product development; and
• Institutionalize microinsurance financial literacy program.
b) Credit Surety Fund Program (CSF)
The CSF is a program that involves the creation of a trust fund contributed by cooperatives from a province and its provincial government intended primarily to make micro, small and medium enterprises (MSME) bankable by giving them access to formal sources of financing by means of a surety cover as a substitute for collateral.
c) Microhousing
According to data from the Housing and Urban Development Coordinating Council (HUDCC), the projected housing needs of the Philippines plus projected new households by 2010 is 655,821.
It used to be that banks are not able to compete with the rates provided by government housing programs because they are subsidized, but lately, the government has been trying to shift towards a market-oriented housing finance system. Thus, the development of micro-housing finance schemes could help alleviate the situation of the homeless poor.
3. Explore other facets of inclusive finance framework such as agent banking and use of non-bank financial institutions as delivery channels.
In pursuit of this specific reform objective, there is a prior requirement to promote evidence-based policy making and impact measurement by establishing a systematic method of collection, monitoring and analysis of financial inclusion related data to address the need for accurate, reliable, and consolidated statistical data on various financial inclusion issues and required innovations. This shall integrate existing financial inclusion statistics as well as address gaps in the current statistical environment through information exchange and cooperative arrangements with other concerned agencies.22
4. Adopt a holistic approach to financial literacy and consumer education.
5. Encourage the continuing development of new loan products and other banking services aimed to address the special needs of the poor, women and persons with disability (PWDs).
Unlike other borrowers, the target market for microfinance products23 such as those belonging to the agriculture sector might have cash flows that are different from those observed from the usual borrower. Likewise, there is a wide variety in the purpose of their loan application: consumption smoothing, financing for educational needs and funds for migration purposes such as placement fees, document processing fees. Hence, these warrant the introduction of financial products specifically designed for this group of borrowers.
In terms of the delivery of financial services, the need to expand the number of ATMs and other banking products including announcements or financial literacy materials in Braille24 to cater to the unique requirements of the blind remains a going concern. At present, most ATMs have a dot on the number "5" digit (middle digit in a 3×3 matrix consisting of nine numbers) of the ATM console to guide the visually impaired and only a small number of ATMS has the digits "1-9" in complete Braille. There is also a need for bank forms to be available in Braille or to be read aloud by a dedicated staff to a blind client. For the physically challenged, greater compliance of institutions, including banks to install facilities and devices within their premises that enhances the mobility of disabled persons pursuant to Batas Pambansa Bilang (BP) 344 needs to be ensured. This includes the installation of appropriate ramps and lowering the keypad console of ATM machines to aid the access of depositors who are in wheelchair.
________________________________________________________________________________________________
19 Refers to persons with disability (PWD)
20 National Strategy for Microfinance was formulated in 1998 and initiatives to institutionalize microentrepreneurship for poverty reduction and inclusive economic development were reemphasized as a policy statement in the latest speech of President Benigno S. Aquino III before the PinoyME People Powered Markets on 22 February 2011.
21 The Microinsurance Regulatory Framework (MRF) was launched in January 2010 to provide a policy and regulatory environment that will facilitate the participation of the private sector in providing risk protection for the poor and ensure that the rights and priveleges of the poor are protected.
22 These include the National Confederation of Co-operatives (NATCCO), CDA, APPEND and other microfinance or cooperative related organizations involved in the inclusive finance agenda.
23 Based on existing laws and BSP regulations, microfinance loans are those granted to farmer-peasants, artisanal fisherfolk, workers in the informal sector, migrant workers, indigenous groups of people and cultural communities, differently-abled persons, senior citizens, victims of calamities and disasters, youth and students, children and urban poor.
24 The Braille system, developed by a blind Frenchman Louis Braille in 1825, is a widely used method of reading and wrting for the blind.