The government’s updated six-year financial inclusion blueprint will have a clear-cut focus on micro, small and medium enterprises (MSMEs), start-ups, and agriculture financing, said Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno.
“Explicit focus on MSME and agriculture financing in the new strategy aims to maximize these sectors’ role as pathways to inclusive growth,” said Diokno on Wednesday, Feb. 16. The MSME sector with 63 percent of total employment is a major source of livelihood for a large population of Filipinos.
Led by the BSP, the government launched a refreshed 2022-2028 National Strategy for Financial Inclusion (NSFI) in January, which is a crucial, pandemic-proof update of the previous 2015 NSFI.
The new NSFI is targeting a more broad-based growth and financial resilience. “The new strategy departs from the principles-based approach of the old one and adopts a six-year timeframe, key performance indicators and targets as new strategy elements,” said Diokno in a press briefing.
The updated NSFI’s primary objective is financial resilience since many Filipinos, especially the poor, are facing increased vulnerabilities from the health crisis and climate change, said Diokno. Financial resilience, as defined by the BSP, “refers to the ability of individuals and households to reduce and mitigate risks, as well as cope with and recover from various shocks to minimize impact on their long-term financial well- being.”
Diokno said the NSFI has four desired outcomes and one of them is increased access to finance for MSMEs, startups, and the agriculture sector. “For this outcome, we will monitor access to loans and lines of credit by MSMEs and farmers, and extent of guarantee support for MSMEs and agriculture loans,” he said.
Other hoped-for results for the new strategy are: reduced disparities in financial inclusion; improved financial health and resilience; and a more financially capable and empowered consumers.
Diokno said to improve access of small businesses to credit and financing, the government’s intervention would have to focus on enhancing the agriculture and MSME financing ecosystem.
“This recognizes the need to put in place adequate market- enabling financial infrastructure to encourage greater private sector participation in serving the financial needs of enterprises and smallholder farmers. Financial infrastructure can facilitate cost and risk reduction, as well as innovations that make MSME and agriculture financing viable for market players,” he said.
During the press chat, the BSP chief said that generally, they are satisfied with how financial inclusion has improved since the launch of the NSFI in 2015.
“Overall we are satisfied with what we accomplished in 2021 for our work in financial inclusion,” he said.
Diokno said the number of adult Filipinos with a transactional account -- which is the BSP’s banner indicator of financial inclusion -- grew sharply based on their supply-side proxy measures.
From the fourth quarter of 2019 to the third quarter of 2021, he said that 3.6 million new basic deposit accounts or BDAs were opened. Similarly, active e-money accounts increased by 16.8 million between year-end 2019 and 2020.
The BSP has two goals of shifting or converting at least 50 percent of all retail transactions into digital by next year, and to get 70 percent of the population to be part of the financial system, also by 2023. This was BSP’s objectives when it crafted its Digital Payments Transformation Roadmap (DPTR) for 2020 to 2023.
Diokno said on Wednesday that at the rate that they are moving, there is “a strong likelihood that we are going to meet our target to onboard 70 percent of adult Filipinos by 2023, sooner rather than later.”
“We estimate that from 2020 to the third quarter 2021, around 20 million unbanked adults have been onboarded to the financial system based on the increase in the number of BDAs and active e-money accounts,” he noted.
From 21 million banked adults in 2019, Diokno said the BSP estimates that about 41 million or 53 percent of adult Filipinos already have a transaction account as of the third quarter of 2021.
“We’re also optimistic that the results of the 2021 financial inclusion survey to be published in mid-2022 will validate this estimate of significant growth in ownership in the last two years,” he added.
The number of BDAs which have no maintaining balance and could be opened with just P100, reached seven million as of the third quarter of 2021.
Diokno, who chairs the Financial Inclusion Steering Committee (FISC) which is the interagency governing body that leads the collaborative approach in implementing the NSFI, said the FISC will organize working groups with members coming from the government such as regulators, policymakers and local government associations.
Banks and non-bank financial institutions, telecommunications, internet service providers and similar sectors, and their industry associations are also part of the collaborative approach. Consumers as represented by consumer groups, civil society organizations, basic sectors and the transacting public are also crucial in the success of the new NSFI’s working groups, with supporting institutions such as donors, development partners, academe, and think tanks, said Diokno.
Diokno also said that to localize the national strategy, the NSFI will be adopted and monitored at the sub-national level. The regional and local development councils will be tasked to implement the NSFI initiatives in their respective jurisdictions, he added.