“Our BSP chief is the guru of financial inclusion.”
If we are a little better off today economically, we should thank our governor of the central bank, the Bangko Sentral ng Pilipinas chief Benjamin E. Diokno.
No Filipino has done more to contain the economic impact of the pandemic and encourage banks to do more for the common man.
He helped rescue the economy from total collapse by pumping P2.3 trillion into the financial system. That’s 13 percent of the size of the economy or GDP.
For his efforts to digitalize Philippine banking and for the Bangko Sentral’s extraordinary response to contain the economic fallout from the pandemic, the prestigious Banker magazine has recognized Diokno as the “Central Banker of the Year 2022,” Global and Asia Pacific. That is like beating 200 other central bank governors for the plum.
“Creating a strong banking sector that supports individual consumers while moving forward with the digital banking agenda has been the goal of the 2022 winner of the Central Bank Governor of the Year award,” wrote The Banker, in citing the BSP chief.
Diokno, said The Banker, “has helped to see the Philippines through the Covid-19 pandemic, and pushed ahead with his modernization agenda for the country’s banking system.”
He brought interest rates down to 2 percent per year, the lowest ever. Usually if there is a crisis, the tendency of central banks is to raise interest rates to contain the inflation rate from raging and to protect their currency. Because if you don’t raise interest rates, money will flee to places where it gets higher return or yield. Yield, of course, is a question of a country’s stability and investors’ confidence in the system.
Diokno has done the opposite, by lowering interest rates to their lowest ever, and still he has been able to manage our inflation rate. And the peso is stable, thanks to $107 billion in foreign reserves that can buy 10 months imports and pay short-term debts eight times.
The BSP chief is the guru of financial inclusion. Only 30 percent or 23 million of 76 million adult Filipinos have a formal bank account. That means more than 53 million Filipinos have no bank account. Sadly, out of 1,634 towns, 509 towns do not have a single bank branch, only ATMS or money padala agents.
In his short stint so far, Diokno has been able to recruit millions of Filipinos into the banking system. How? By forcing the banking and financial system to digitalize. Using of course the mobile phones of Filipinos. And by teaching Filipinos to be more literate about digitalization. Like forcing them to get a single national ID in exchange for having a bank account, say, at the state-owned Land Bank.
Diokno wants that by the end of his term, in 2023, 70 percent of adult Filipinos would have a bank account—double today’s 23 million people, or 53 million. And that 50 percent of retail payments are digital, up from less than 10 percent today.
Today, there are 14.2 million active e-money wallets, up 62 percent from a year ago. Instapay digital payments are up 589 percent, from 6.2 million in 2019 to 42.9 million today, with value of transactions rising 360 percent, from P52.7 billion to P242.5 billion. But in value, the share of digital payments is still small, just 12 percent; and in volume, just 9 percent.
There is today one cell phone for every one Filipino. So if you force the banks to use cellphones to benefit their depositors and clients, then you right away include millions into the banking system.
Diokno finished his bachelor’s degree in Public Administration from the University of the Philippines (1968). He earned his master’s degree in Public Administration (1970) and Economics (1974) also from UP.
He also holds a Master of Arts in Political Economy (1976) from the Johns Hopkins University in Baltimore, Maryland, USA and a Ph.D. in Economics (1981) from the Maxwell School of Citizenship and Public Affairs, Syracuse University in Syracuse, New York, USA.
According to The Banker, Diokno has helped to see the Philippines through the COVID-19 pandemic, and pushed ahead with his modernization agenda for the country’s banking system.
“I am truly honored to be named The Banker’s Global Central Bank Governor of the Year,” acknowledged Ben Diokno.
“This award recognizes the effort we at the BSP, the central bank, have put forth over the past year, amid extraordinary challenges,” he added.
While the entire world was ravaged by the pandemic, The Banker notes that BSP forcefully implemented policy responses to enable Filipinos to adapt to new ways of working, doing business, and living.
Diokno vows to continue working towards a stronger, technologically savvy, more inclusive, and more sustainable Philippine economy.
After seeing a 9.6 percent decline in gross domestic product during 2020, the economy has rebounded during 2021, recording a 12-percent increase in the second quarter and a 7.1 percent rise during the third quarter of the past year.
With inflation having an impact globally, Diokno has taken the stance of holding interest rates low (2 percent) for as long as possible to maintain stability. Believing that the current environment is transitory, he decided to hold on to an accommodative monetary policy to support the economy.
In seeking to bring the Philippines in line with its neighbors, the BSP governor has advocated a cash-lite economy, to encourage the move to digital payments.
Tied to this, he is supporting local payment providers through the use of the national ‘QR PH’ standard for QR code payments, which are increasing and on track to reach the target of 50 percent of all payments by 2023.
Diokno aggressively pushed digital banking to bring more Filipinos into the formal banking sector.
The BSP chief launched financial literacy programs. Banks have been told to be more customer-focused, an attitude he wants across the entire financial space, including insurance and capital markets, to help the underserved feel comfortable and secure to access financial services.
BSP imposed greater regulation on payments providers to protect consumers from scams and fraud. He believes banks should compensate bank clients who lose money because of scams using the banks’ deposit system and data. “It is not appropriate for the banks not to pay the victims,” Diokno declares.
Diokno wants a stronger banking system, through mergers and acquisitions. Fewer but larger banks can better withstand external shocks. Bank mergers are freed from red tape. Processing has been reduced to 55 days, from an average of 160 days.