PHL still among microfinance global leaders

Posted on December 14, 2015

THE PHILIPPINES has remained among the top countries offering microfinance with its model of financial inclusion paying off, according to a report from the Economist Intelligence Unit (EIU).

The Philippines remained third out of 55 countries in terms of opportunities for financial inclusion with a two-point increase in its total score to 81, according to the EIU report The Global Microscope 2015: The enabling environment for financial inclusion.

In 2014, the Philippines also placed third with a score of 79, the best in Asia.

“The Philippines continues to achieve considerable local and global milestones in its pursuit of financial inclusion, owing to the country’s success in terms of the variety of players, which provides a wide range of financial services and products to the public,” the report read.

In particular, the EIU cited Bangko Sentral ng Pilipinas (BSP) initiatives, including the launch of the National Strategy for Financial Inclusion in July, as among the key developments this year, alongside technology-assisted products and alternative financing providers as among the drivers to sustained efforts for inclusion.

“The addition of alternative financial-service providers, such as remittance agents, pawnshops, and mobile and telecommunications providers, complements banking services and has led to a decrease in the percentage of cities and municipalities that are unserved, from 36.6% in 2014 to 13% since 2011,” the Economist magazine’s unit said.

The EIU report assesses a country’s performance on 12 indicators: government support for financial inclusion, regulatory and supervisory capacity, prudential regulation, regulation and supervision of credit portfolios, regulation and supervision of deposit-taking activities, regulation of insurance targeting low-income populations, regulation and supervision of branches and agents, requirements for non-regulated lenders, electronic payments, credit-reporting systems, market-conduct rules, and grievance redress mechanisms.

An additional factor of “stability” is also weighted to account for political and policy stability.

The Philippines secured a perfect score for government support, regulatory capacity, the supervision of credit portfolios, regulation of branches and agents, and redress systems.

Peru (90 points) and Colombia (86) remained the top two countries for financial inclusion. The Philippines was followed by India (71) and Pakistan (64), while Chile and Tanzania (62) tied at sixth and Bolivia and Mexico (60) tied at eighth. Ghana (58) rose in the ranks to clinch the 10th place.

Finishing at the bottom of the rankings were Haiti, Congo, and Madagascar.

“One of the key takeaways from the 2015 Microscope is that there is very little policy slippage around financial inclusion; new policies are being adopted and existing ones further implemented,” the report said, though citing concern on “limited” progress among nations with average gains of only two points for the year.

As for the Philippines, the country has yet to make more progress on providing credit access on a sizeable chunk of unbanked residents, alongside putting forward technology-assisted schemes for the financial system.

“While the Philippines has been a leader in promoting and creating an enabling environment for financial inclusion, there is still much to be done, as only 26% of adult Filipinos have savings accounts and only 10.5% have access to formal credit,” the study read.

“Challenges remain in terms of scaling market innovations, particularly in technology-driven initiatives. There is also a chronic need for financial education and consumer-protection initiatives across regulated and non-regulated institutions.”

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