In early 2020, the COVID-19 global crisis ravaged the country, forcing massive lockdowns and necessitating unprecedented response measures. Against this backdrop, the Bangko Sentral ng Pilipinas (BSP) continued to deliver on its commitment to financial inclusion.
On 23 June 2022, the Office of the President issued Memorandum Circular No. 97 that institutionalized the Financial Inclusion Initiative, which is the whole-of-government support for the implementation of the National Strategy for Financial Inclusion (NSFI) 2022-2028 and the adoption of financial inclusion as a development agenda at both the national and subnational levels. The NSFI was launched in January 2022 to support the Filipino people’s aspiration for a “matatag, maginhawa, at panatag na buhay” as espoused in both the government’s Philippine Development Plan and the AmBisyon Natin 2040. The Circular directs all government agencies to support the successful implementation of the NSFI by incorporating relevant priority initiatives in the agency work programs, policies, and budgets. It also encourages the regional development councils and the local development councils to adopt financial inclusion objectives, targets, and programs, in line with the NSFI, in their respective plans. Local government units (LGUs) are also encouraged to promote financial inclusion in their jurisdictions, particularly through, among others, their capacity development programs and provincial development and physical framework plan.
Prior to this, BSP has been leveraging on technological innovations as a key strategy with the intent of bringing BSP closer to the Filipinos despite the pandemic. Among the many initiatives was the 2020-2023 BSP Strategy, which underscored the commitment of the BSP to contribute to the goal of a better quality of life for all Filipinos.
The BSP aims to establish an inclusive financial system by year 2023, with at least 70 percent of adult Filipinos having a transaction account. An inclusive financial system is one where every Filipino has effective and convenient access to a wide range of financial services appropriately designed and relevant to the individual’s needs and capacity. Toward this goal, the BSP launched numerous initiatives on financial inclusion that include:
Increasing uptake of transaction accounts
The Basic Deposit Account (BDA) policy enhancement work was done in 2021. This led to the issuance on 12 January 2022 of Memorandum No. 2022-003, which provides additional guidance and further clarifications on the implementation of the BDA Framework (Circular No. 992 issued in 2018).
Unlike other bank accounts, a BDA, which is designed to promote financial inclusion, is easier to open and maintain. Among other features, it does not require a maintaining balance, does not have dormancy charges, and may be opened for as low as ₱100.
As a result of BSP’s initiatives, 8.0 million people were onboarded to the formal financial system for the first time with their own bank accounts as of 25 May 2022. This was a significant increase from the 7.6 million people who had BDA accounts as of Q3 2021 that had an aggregate deposit amount of ₱4.8 billion placed in 137 banks. This was also a radical increase from the 6.2 million depositors with ₱4.5 billion deposits in 130 banks as of Q3 2020.
A related initiative was the BSP’s support to the co-location strategy of the Philippine Statistics Authority (PSA) and the Land Bank of the Philippines (Landbank) in the rollout of the national ID program. Under the strategy, Landbank co-locates in the registration areas for the Philippine Identification System (PhilSys) so that the registrants may open bank accounts.
The BSP also promoted the digital distribution mode for the various cash assistance programs of the government. Under this approach, cash assistance was disbursed directly to the accounts of the beneficiaries.
Following these developments and in line with the PhilSys co-location strategy with LBP, on 26 January 2022, the DILG issued an advisory enjoining LGUs to, among others, implement digital disbursement for the local and national cash assistance programs.
Enhancing the digital finance infrastructure
The BSP continues to provide strong support for the development of digital finance infrastructure crucial for financial inclusion. The BSP is actively involved in the implementation of the PhilSys, as partner of PSA, in the production of the PhilSys ID cards. The BSP is supporting the creation of necessary policies, guidelines, and standards to promote PhilSys use cases, particularly toward its broad adoption in the financial sector to promote inclusion.
Recognizing the critical role of internet connectivity in broad-based adoption of digital financial services, the BSP, together with Financial Inclusion Steering Committee members, also actively supports Executive Order (EO) No. 127 on “Expanding the Provision of Internet Services through Inclusive Access to Satellite Services,” which President Rodrigo Roa Duterte signed on 10 March 2021. The EO is meant to bridge the internet infrastructure gaps in rural and remote communities, as satellite technology represents instant and readily deployable broadband infrastructure suitable for these areas. To raise awareness on EO No. 127, the BSP co-organized a webinar with The Asia Foundation (TAF) on 29 June 2021.
In September 2021, the BSP and the Agence Française de Développement (AFD) signed a grant facility agreement aimed at strengthening regulatory capacity for digital finance. The grant facility is expected to be completed by 2026.
On November 2021, the BSP and the Alliance for Financial Inclusion signed an agreement for the development of an agent registry in the Philippines. The agent registry is a web portal of agents, such as small shops, convenience stores, supermarkets, pharmacies, and pawnshops, where clients can perform basic financial transactions, such as cash in and cash out. This regulatory technology tool is targeted to be completed in 2022.
Promoting access to finance for the MSME and agriculture sectors
The BSP promotes innovative financing approaches to increase access to finance by the micro, small, and medium enterprises (MSME) and agriculture sectors.
In partnership with the Japan International Cooperation Agency, the BSP implements the Credit Risk Database (CRD) project. The idea is if banks have information on credit risk of MSMEs and agriculture sector borrowers, the former will have more confidence in lending to the latter. Through engagements with banks, the number of pioneer participating banks to the CRD project increased from 17 as of end-2020 to 26 as of end-2021. Furthermore, the construction of the initial credit scoring model has commenced using data collected as of October 2021. The project is targeted to be completed by Q1 2023, with the CRD scoring service to be launched within the said quarter.
In partnership with the Asian Development Bank (ADB), the BSP has engaged six participating pilot banks in the implementation of the Agriculture Value Chain Financing (AVCF) pilot project. This project aims to demonstrate the viability of the AVCF approach in servicing the financing requirements of the agriculture sector. The BSP also supports the conduct by a development partner of a Supply Chain Finance (SCF) Market Development Study to promote SCF as an innovative approach in MSME financing by leveraging on MSMEs’ receivables, inventory flows, and supply chain relationships.
To gain better understanding on the needs and unique challenges of MSMEs, the BSP coordinated with ADB in conducting a national MSME demand-side survey, with particular focus on women entrepreneurs. This initiative will generate new insights and more granular data on MSME’s access to finance, which could support evidence-based policymaking. To date, all project activities have been completed, and the study is targeted to be finalized by Q1 2022.
The BSP established a technical working group (TWG) with industry associations and government institutions to develop a standard business loan application form to make the loan application process more streamlined and borrower friendly for MSMEs. The TWG has already developed the standard form, which has been piloted by 11 banks for three months ending 15 January 2021. The next step is to formalize the adoption mechanism through a regulatory issuance by the BSP targeted for release in 2022.
In line with Republic Act (RA) No. 10744, the BSP continues to provide capacity building for Credit Surety Funds (CSF). 15 webinars were conducted by the BSP in 2021 for the CSFs, which were attended by 1,985 participants. A total of 55 CSFs has been established nationwide since the launch of the program in 2008, 26 of which have already been registered as CSF Cooperatives with the Cooperative Development Authority (CDA). To ensure successful collaboration and effective implementation of RA No. 10744, the BSP also entered a Memorandum of Agreement (MOA) with CDA in March 2021 to formalize cooperation arrangements.
The BSP also continues to monitor microfinance, which remains an important source of credit for the entrepreneurial poor. Microfinance in the banking sector has grown significantly over the years. From 119 banks offering microfinance to over 360,000 borrowers with total microfinance loans amounting to ₱2.6 billion in 2002, there are now 144 banks serving 2 million borrowers with total microfinance loan portfolio of ₱25.9 billion as of Q3 2021.
The BSP also further expanded low-cost touchpoints through Cash Agents. To address the issue of cashing-in and cashing-out in an account at a time and place of the individual’s convenience, the BSP issued Circular No. 940, which provides the framework for cash agents or third-party entities that can conduct financial activities on behalf of banks. Cash agents are low-cost financial touchpoints that are easily scalable and less costly to deploy than automated teller machines (ATMs) and actual bank branches. Through cash agents, people can do cash-in and cash-out transactions and perform basic banking transactions through their local convenience store, pharmacy, or gas station. The active promotion of Circular No. 940, which was issued in 2017, has resulted in the establishment of 7,186 cash agents nationwide by Q2 2019. The number of touchpoints through agents has expanded tremendously to over 58,000 cash agents and over 84,000 e-money agents in the country by 2020. This translates to 91% LGUs with access to an agent.
The central bank coordinated with the Department of Labor and Employment (DOLE) to promote the payment of workers’ salaries and other disbursements through transaction accounts. The engagement secured the commitment of DOLE to release an advisory encouraging the use of transaction accounts for the workers’ salaries and to collaborate with the BSP in the rollout of information sessions on this payment method.
The BSP also actively supported legislative efforts that promote or complement financial inclusion. The BSP provided support and technical inputs in the development of 1) RA No. 11055 or the PhilSys Act; 2) RA No. 11057 or the Personal Property Security Act, which provides small businesses and farmers an avenue to access financing through the use of movable assets as collateral; and 3) the Financial Consumer Protection Act. The BSP also backed the passage of BSP Charter amendments, making financial inclusion and its complementary objectives of financial literacy and consumer protection an explicit mandate of the BSP.
To promote financial literacy in the country, the BSP has adopted a financial education (FinEd) approach built on strategic institutional partnerships with both government agencies and the private sector to effectively reach a wider percentage of Filipinos, including: 29 million Department of Education (DepEd) learners and 800,00 teaching and non-teaching personnel; 2.3 million overseas workers and 600 Overseas Workers Welfare Administration (OWWA) trainers; 140,000 personnel of the Armed Forces of the Philippines (AFP); and 1.7 million civil servants.
Under Monetary Board (MB) Resolution No. 456 dated 15 March 2018, the BSP signed a MOAwith DepEd and the BDO Foundation to institutionalize FinEd in the students’ curriculum and skills training for teachers.
The BSP supported DepEd in integrating FinEd in the Kinder to Grade 12 (K-12) curriculum to address learners’ needs and incorporate personal finance management (PFM) sessions within regular training programs for teachers. Under this partnership, the BSP co-developed 10 videos and 24 lesson exemplars as classroom learning tools. These multimedia learning tools discuss topics, such as financial planning, saving, budgeting, debt management, investment, insurance, entrepreneurship, and preventing financial scams.
BSP also promoted FinEd for Overseas Filipino Workers (OFWs) and their families. Under MB Resolution No. 124 dated 17 January 2019, the BSP signed a MOA with OWWA and the BDO Foundation to implement PiTaKa (Pinansiyal na Talino at Kaalaman), a financial literacy campaign for OFs and their families. Under this campaign, the BSP is developing standard FinEd modules fit for OFWs. The modules will be embedded in mandatory orientations that OFWs and their families are required to undertake. To date, the BSP has completed a FinEd module for use in Pre-Departure Orientation Seminars (PDOS) and presented it to more than 600 trainers from OWWA-accredited PDOS providers. Standard modules are also being developed for Post-Arrival Orientation Seminars (PAOS) and General Orientations for OF Families. Full roll-out of the PiTaKa campaign would mean an outreach to around 10 million Filipinos living and working abroad. This figure does not yet account for their families in the Philippines.
The BSP likewise promotes FinEd among uniformed personnel and their beneficiaries. The BSP supported the AFPin promoting financial literacy as a key component in the personal scorecard or performance evaluation of uniformed personnel in the Philippine Army (PA), the Philippine Navy (PN), and the Philippine Air Force (PAF). Under MB Resolution No. 124 dated 17 January 2019, the BSP partners with PA and the BDO Foundation to implement the Financial Literacy Program for Soldiers and their Families. The BSP has started working with the PA in designing a Training of Trainers (TOT) to build internal capacity to deliver FinEd sessions in key stages of a soldier’s training.
The BSP is also part of the broader, interagency Comprehensive and Social Benefits Program (CSBP). In tandem with the Department of Trade and Industry (DTI) and Technical Education and Skills Development Authority (TESDA), the BSP conducts basic financial literacy, entrepreneurship, and skills development sessions for beneficiaries of soldiers killed or wounded in action (KIA/WIA beneficiaries).
The BSP also aims to embed FinEd sessions in training programs required for completion by civil servants and AFP personnel. This objective is in line with Civil Service Commission (CSC)’s thrust to enhance financial literacy skills of the public sector workforce, and with the AFP Transformation Roadmap, which considers financial wellness as integral pillar of personnel’s holistic development.
MSMEs are also among the target audience of the BSP’s FinEd campaign. Under MB Resolution No. 1314 dated 10 August 2018, the BSP signed a MOA with DTI and two networks of microfinance non-government organizations to facilitate information sharing and greater access to finance for MSMEs served by DTI Negosyo Centers. One of the BSP’s tasks under this partnership is to capacitate Negosyo Center personnel to deliver financial learning sessions as part of the broader capacity building program for MSMEs.
The BSP is also targeting financially underserved sectors like beneficiaries of the government’s cash transfer programs, persons with disabilities, and young professionals from the Business Process Outsourcing (BPO) industry in its FinEd campaign. The BSP has initiated discussions with the Department of Social Welfare and Development (DSWD), the National Council for Disability Affairs (NCDA), and the IT and Business Process Association of the Philippines (IBPAP) on the matter.
The BSP also conducts the FinEd Stakeholders Expo, which is an annual flagship event that convenes FinEd stakeholders and provides a venue for all to share their work, explore partnerships, and leverage on existing initiatives. The first expo was organized by BSP on 27 to 28 November 2018. In 2019, the expo was attended by over 1,000 stakeholders from the public, private, non-government, and academic sectors.
The BSP also actively promotes FinEd via social media, such as through PisoLit, a financial literacy campaign on Facebook (FB). It provides daily posts on financial management tips, scam prevention reminders, and consumer protection advisories targeted to young Filipinos and netizens on the FB platform.
The BSP also conducts Financial Learning Seminars (FLS), which are personal finance management sessions. Topics may be customized based on the expressed needs of requesting institutions.
The BSP develops various information and learning materials focused on FinEd and consumer protection. In 2018, the BSP issued advisories on phishing/spoofing, text scams, virtual currencies, fake documents, and “sangla” ATM schemes. It also issued new primers on the BSP Consumer Assistance Mechanism, PisoLit, online banking, and financial planning. The BSP will continue to innovate content and explore digital delivery mechanisms.
The BSP promotes financial inclusion, especially in underserved areas such as the Bangsamoro Autonomous Region in Muslim Mindanao. The central bank issued preliminary regulations related to Islamic finance, including Circular No. 1069 on the Guidelines on the Establishment of Islamic Banks and Islamic Banking Units (IBUs), Circular No. 1070 on the Shari’ah Governance Framework, and Frequently Asked Questions on Islamic Banking through Memorandum No. 2020-052 dated June 18, 2020.
The BSP supports the DTI in its e-commerce program for MSMEs (P2M, P2B, B2B) and is coordinating with the Small Business Corporation to promote digital payments in implementing its MSME loan programs. In line with its FinEd initiatives, the BSP began implementing its Digital Literacy Program (DLP) in 2020 with the ultimate objective of enhancing consumer trust in the digital finance ecosystem and increasing digital financial services usage.
Paleng-QR Ph Program
With the goal of promoting financial inclusion through a whole of nation undertaking, the BSP and the Department of Interior and Local Government (DILG) signed a joint memorandum circular on the Paleng-QR Ph Program.
The circular, which aims to institutionalize and promote the implementation of the Paleng-QR Ph by local government units across the country, was signed by DILG Secretary Eduardo M. Ano and BSP Governor Benjamin E. Diokno on 21 June 2022.
By promoting the acceptance of digital payments in the country’s public market and tricycle hubs, the program aims to bring the welfare-enhancing benefits of digital finance innovations to micro- and small entrepreneurs, as well as the communities they serve.
Inspired by a finalist entry in the 2021 BSP Youth Summit Student Competition, the Paleng-QR Ph program can further demonstrate the practical utility of owning a transaction account for the average Filipino consumer.
LGUs are expected to assist the onboarding of target users to a transaction account, such as by organizing an
account opening day,” in coordination with financial service providers who already have QR Ph capabilities.
The BSP’s financial inclusion efforts have been recognized internationally. The Philippines remains among the global leaders in financial inclusion, according to the “Global Microscope 2020” report of the Economist Intelligence Unit (EIU), the research arm of The Economist Group.
In the report released in Q4 2020, the Philippines ranks 2nd in Asia, next to India, and 8th worldwide, tied with Brazil. The study assessed the financial inclusion environment in 55 countries across five dimensions: government and policy: stability and integrity; products and outlets; consumer protection; and infrastructure. Focusing on the role of financial inclusion in the COVID-19 response, the EIU also recognized the initiatives of the Philippines to mitigate the adverse economic impact of the pandemic.
Amid the COVID-19 crisis, the BSP considered the challenges as opportunities. The pandemic became a catalyst in accelerating digital financial transactions and further emphasized the importance of financial inclusion. To bring the BSP closer to the people, the BSP intensified implementation of policies and programs toward an inclusive financial system––one that provides accessible, affordable, and suitable financial services for all Filipinos.