Why is financial inclusion important to the economy?
According to the World Bank, financial inclusion means that individuals and businesses have access to useful and affordable financial products and services, whether that be transactions, payments, savings, credit or insurance that is delivered in a responsible and sustainable way.
In a study prepared eight years ago, the Bangko Sentral ng Pilipinas (BSP) noted that access to financial services remains an important challenge. It said that while there is a sustained increase in the number of banks and ATMs, the distribution is highly skewed toward highly populous and urbanized areas. At that time, only two out of 10 Filipino households had a deposit account in a formal financial institution. Majority or 55 percent of adults are users of money transfers and loan and bill payment service providers.
The BSP noted that developments in technology, regulations in electronic money, among others, is transforming the delivery of financial services from the traditional brick-and-mortar infrastructure to a system supplemented by authorized alternative financial service providers, new players like telecommunication companies, and innovative delivery channels.
The BSP is now talking about digital financial inclusion as the future of the financial system, realizing that the country and its people are too fragmented geographically to reach out using traditional means. Digital financial inclusion means digital access to and use of formal financial services by the unserved and underserved population.
In the Philippines, where there are more people with mobile phones than bank accounts, going digital appears the only way to reach new markets that brick-and-mortar bank offices are unable to service.
When the pandemic struck, most people found themselves not able to go out of their house and were forced to do electronic fund transfers and payments using online banking or utilize other financial services powered by financial technology or fintech. The use of digital technology for financial services was no longer limited to the wealthy.
What appeared to be a dream is now within arm’s reach of the BSP. According to BSP Governor Ben Diokno, they are confident that by 2023, 50 percent of all financial transactions will be conducted digitally. This digital transformation is also encouraging more people to open bank accounts so that by the same year, it is expected that 70 percent of Filipino adults would have formal bank accounts.
In fact, the BSP has already recorded a 5,000 percent increase in digital transactions since the quarantine restrictions started.
Now, even palengke stalls and sari-sari stores are using QR codes to enable their customers to transfer funds for payment of their purchases.
BTI Payments, a subsidiary of Sydney-based, ATM-market-industry leader Banktech says it recorded millions of transactions in 2020 and expects to double the figures every year for its CashConnect ATMs and Pay&Go kiosks numbering more than 600 nationwide.
Compared to banks, the services that fintech companies offer can be accessed even by those in far flung and isolated communities.
As demand for services offered by fintech companies increase by leaps and bounds, they are now investing more in improving the usability of their services to make sure that users’ funds are safe and to ensure the confidentiality of their users’ data.
In 2019, e-money transactions increased 36 percent to reach P760 billion, surpassing the growth of credit card and debit card transactions at 18 and 15 percent, respectively.
The Philippines is currently home to more than 190 fintech companies, with lending, payments, digital wallets, and remittances being the four most predominant. Electronic wallets and digital banking apps now define how Filipinos send and receive payments, pay bills, and how businesses accept payments and even disburse salaries.
The way people and businesses transact has changed and is not going to go back to how it used to be pre-pandemic. Let us hope that our regulatory environment can keep up with the needs of the times because supporting digital financial services is helping our economy function despite the challenges.
Shining moment for Phl
The Philippines was blessed to have had the opportunity of hosting the 30th edition of the biennial Southeast Asian Games in 2019.
And why is that?
The 2019 Games, held from Nov. 30 to Dec. 11, happened just a few weeks before the World Health Organization was informed of cases of pneumonia of unknown cause in Wuhan City, China on Dec. 31, and before a new novel coronavirus was identified as the cause and temporarily named 2019-nCOV.
The organizers have postponed this year’s games to next year, to be held in Vietnam, albeit still under a cloud of uncertainty due to COVID-19 fears.
In 2019, more than 5,000 athletes from 11 countries participated, with the Philippines emerging overall champion and winning a total of 387 medals, 149 of which were gold. It was our shining moment as a country.
Even Olympic Council of Asia vice president Wei Jizhong praised the organizers and President Duterte for the successful hosting of the SEAG, saying the country is prepared to host larger sporting events.
Unfortunately, our hosting was marred by allegations when Senate Minority leader Franklin Drilon claimed that the SEAG cauldron was extravagant as it cost P50 million to construct. The real cost though is P45 million, but the claim sparked an outcry from netizens and Filipino athletes, some of whom said that the amount could have been better spent on them for their allowances and training.
The cauldron was designed by no less than the late National Artist for Architecture Francisco Mañosa.
Then Speaker Alan Peter Cayetano, who chaired the Philippine Southeast Asian Games Organizing Committee (PHISGOC), appeared before the Senate to dispel any misgivings and was able to put the matter to rest. He could have invoked legislative protocol and interparliamentary courtesy, but he did not.
Two years later, in a TV interview, Cayetano revealed that the construction of the cauldron was, in fact, funded by the private sector and that he did not profit a single centavo from the SEAG hosting.
Despite being the biggest SEA Games so far, the Philippine government only spent P6 billion for it, with the rest coming from sponsorships. Singapore, the 2015 SEAG host, spent an equivalent of P15 billion. Singapore also commissioned the top-rated DP Architects to build its SEAG cauldron at a cost equivalent to P63 million.
President Duterte personally chose Cayetano to head PHISGOC to ensure that the funds for the SEAG would be properly spent and accounted for up to the last centavo. And indeed, the President chose well.
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