By Lee Chipongian
The Philippines ranked first in Asia in financial inclusion and fourth in the world, according to the latest 2018 Global Microscope by the Economist Intelligence Unit (EIU).
The EIU, the research unit of The Economist Group which did a 55 cross-country jurisdiction study, ranked the Philippines along with India, in terms of having a conducive environment for financial inclusion in the region. Globally, Peru, Colombia, and Uruguay were ahead of the Philippines.
The Bangko Sentral ng Pilipinas (BSP) in a statement cited the EIU’s report that the BSP is “ahead of the curve in identifying opportunities and setting guidelines for financial inclusion” recognized the country’s digital finance ecosystem for “sound payments infrastructure that helps various financial sector players to reduce their costs and further their outreach.” The Philippines has been top-ranked in the EIU study since 2009.
The Global Microscope 2018 edition assessed five key domains in determining the level of a country’s financial inclusion environment. These are: 1) government and policy support; 2) stability and integrity; 3) products and outlets; 4) consumer protection; and 5) infrastructure. The digital financial services indicator has been added to each of the domains.
As one of the top-ranked nations, the BSP cited the government’s support in promoting financial inclusion, making it one of the countries that have “balanced policies and regulations that enable different types of institutions to offer financial services to the low-income population.”
“Another common strength among top-ranked countries is the ease with which customers can access a variety of financial products and outlets because there are no disproportionate requirements to open an account or avail inclusive insurance products,” said the BSP.
The EIU report cited the country’s enhanced regulations on pawnshops and money service businesses, and regulation on cash agents and branch-lite units to further extend the reach of financial services. There is also interoperability among agents allowing a wide variety of actors to function as outlets via commercially viable models.
The coordination between the public and private sector under the National Strategy for Financial Inclusion (NSFI) has produced positive results such as the increase in the percentage of municipalities with at least one financial service access point from 88 percent in 2015 to 92 percent in 2017, according to the BSP.
“Recent developments supporting digital financial inclusion are likewise mentioned in the report such as the launch of two payment schemes – PESONet and InstaPay – under the National Retail Payment System,” said the BSP.
The central bank’s regulation allowing electronic Know Your Customer (KYC) procedures and the promising role of national ID for supporting digital transactions were also recognized by the EIU.
“Another enabling factor is the close collaboration with industry players through the BSP’s ‘test-and-learn’ approach to financial technology (fintech),” said the BSP. This has allowed the BSP to assess potential risks and to approach these issues with “proportionate regulations that address those risks.”
“Because of the fintech revolution, the report underscored the importance of increasing supervision capacity for digital financial services,” said the BSP.
The EIU also cited the BSP’s specialized training for financial supervisors in the Philippines on risk management and supervision specific to microfinance and financial inclusion, and its ongoing pilot to enable technology-led supervision through the use of Application Programming Interface in regulatory reporting and chatbot for handling of financial consumer complaints.