Survey cites problems why banks can’t reach underground economy

By Manuel Cayon, Businessmirror, Feb 19, 2017

DAVAO CITY—The Bangko Sentral ng Pilipinas’s (BSP) effort to widen its reach among unbanked Filipinos is being hampered by the restrictions being imposed by the banking sector, industry sources said.

Even the banks have appealed to the BSP and the Anti-Money Laundering Council to help them persuade bankable entrepreneurs in the underground sector to avail themselves of bank services and facilities to access financing and income safekeeping.

A key policy recommendation of the 2014 Consumer Finance Survey (CFS) has urged the government and the financial community to strengthen their efforts and advocacies, as the number of Filipino households with bank accounts remained at a low 14 percent nationwide.

Raymund Nonato, Davao City branch head of the Philippine Business Bank, said the government inclusion plan should look into current banking policies, including such basic requirements as presenting two government-issued identification cards and verification against money laundering, which continue to keep a large section of the population away from the banking system.

Government representatives in the CFS presentation at the BSP on February 16 said bankable individuals in the underground economy have no government-issued IDs to present.

“There’s also the strict Amla [Anti-Money Laundering Act] verification requirement that, in some cases, first-time depositors would be asked to state creditable reference persons to allow them in as depositors,” Nonato said.

However, the high opening amount and maintaining balance required for bank accounts were among “the foremost reasons” cited by 92.3 percent of respondents for not having a deposit account.

Other reasons cited by households were do not need a bank/cash account 2 percent); bank/institution location is far (1.7 percent); cannot manage an account (1.2 percent); service charges are too high (1.0 percent).

Nonato was also concerned with respondents’ reply for not keeping a bank account that they “do not like to deal with banks/institutions and do not trust banks/institutions”.

Rosabel B. Guerrero, director of the BSP Department of Economic Statistics, presented the result of the 2014 CFS.

The data showing low financial inclusion corroborated the separate results of the National Baseline Survey on Financial Inclusion conducted by the Inclusive Finance Advocacy Staff in 2014.

“The said survey shows that out of the 43.2 percent adults who currently have savings either through banks or cooperatives, 32.7 percent put their money in banks. The results therefore indicated that only 14.1 percent of adults save in banks,” she said.

The CFS survey pointed at the banks as the most popular type of depository institution, and they include commercial banks (50.2 percent), rural and cooperative banks (13.8 percent), savings and thrift banks (10.1 percent) and microfinance banks (9 percent).

“Together, the banking system held 83.1 percent of deposit accounts of households. Other depository institutions of households were: multipurpose and credit cooperative (11.4 percent), paluwagan (4.1 percent), and savings and loan associations (3.6 percent),” it noted.

The 2014 CFS showed that “commercial banks were the most popular depository institutions both in National Capital Region and in the areas outside the NCR”. The respondents said they prefer certain depository institutions due to proximity to home (29.2 percent), efficient service (24.7 percent), it is a major bank (6.7 percent), personal acquaintances (5.1 percent) and proximity to workplace (4.7 percent).

Guerrero said the comments on financial inclusion would be forwarded to the BSP policy bodies for consideration.

She added that private groups have conducted their own efforts at widening their literacy advocacy among their clientele. Among these were the insurance and financial houses, which included literacy in their periodic meetings with clients while discussing their respective products.