Many Filipinos still ‘financially excluded and underserved’

MANILA, Philippines–While modern gadgets have become almost basic necessities for an ever growing number of people, technology appears not to have broadened much the reach of banking institutions and services.

A study conducted by MasterCard, “The Road to Inclusion: A Look at the Financially Excluded and Underserved,” found that millions of people, even among Southeast Asia’s young, economically active and thoroughly “wired” populations, were still not reached by or were not interested to be part of the banking system.

In the Philippines, the average age of the “financially excluded or underserved” was 41 years, the study found. It said “a typical member of the target groups could be said to fall in the economically active age group.”
The education levels of the excluded and underserved in the Philippines were also high—high school and above.

“These education levels indicate a stronger potential than may have been expected to reach out and educate these target groups about the benefits of financial inclusion,” the study says.
The Bangko Sentral ng Pilipinas (BSP) defines financial inclusion as “a state wherein there is effective access to a wide range of financial services for all.”

The study found that low disposable incomes discouraged many from doing business with banks. These people were concerned that banking their modest resources would involve “extra financial expenses and commitments,” like maintaining account balances, which they could not afford.

Automated teller machines (ATMs), meant to ease the hassle of banking transactions, were viewed by many with distrust.

As the study found, “across all markets, there is reluctance to adopt the usage of ATM cards … this is considered a risk—there is high possibility of forgetting the PIN (personal information number) code and in turn ‘money is stuck.’ There is a perception, especially among older people, that there is a possibility of never regaining access to the money anymore. Other reasons of potential loss of money to the ATM are technology failure; offline ATMs that ‘eat your card.’”

The local 2009 Consumer Finance Survey, the BSP said, found that only two of 10 Filipino households had deposit accounts, and 26.6 percent of adults had a deposit account. The National Capital Region accounted for almost half (43 percent) of deposit accounts and 68 percent of the total amount of deposits.

Now, both the government and private sector had decided that, if people would not go to the banks, then they would bring the banks, or their financial services and products, to the excluded and underserved, using means and tools that people were already already familiar with, like mobile phones and tablets and banking apps (applications). They may also products and services that are convenient and secure, making it easier for potential clients to manage their finances.

The BSP said that, beyond availability, the products and services should be “appropriately designed, of good quality and relevant to benefit the person accessing the said service.”

Matthew Driver, president for Southeast Asia of Mastercard who was in Manila recently for the World Economic Forum, stressed the need to bring “the right solution to the right segment.”

He pointed out that, in the region, financial exclusion involved “a wide range of people, and happens across the board, so we have to find solutions that will address needs of different groups.”

To get access to customers, financial institutions had to bring suitable services at the right time, Driver said. The challenge, he added, was finding the right solutions and making them available. Programs also had to be appealing.

Prospective bank clients need to feel respect, and must be offered the right kinds of products. One product that offers clients convenience and security is the reloadable prepaid card, Driver said. With the prepaid card, transactions are transparent and may help those who want to control their spending.

Mobile phone users with prepaid accounts may find it quite easy to adapt to a reloadable card. Like the prepaid phone card, the reloadable bank card may be topped up anytime with any amount.

Unlike cash transactions, where there are almost no record of spending, prepaid card use will be documented, allowing the card holders to monitor their spending, Driver said. The card holders may adjust their spending by loading the right amount of money on their accounts.

The key, Driver said, was education. People had to be assured that their money, no matter how small, would be more secure in banks, and that access to their assets need not be as difficult as they feared.

They should also learn the benefits of putting their money in banks, like interest earnings and access to financial products and services. They need to learn to trust the banking industry, he added.

Driver said, at the grassroots level, MasterCard was working with non-government organizations “to make people more aware of the benefits of financial planning, discipline of saving and organizing finances … to provide security to their families.”

At the industry level, he said, the MasterCard Center for Inclusive Growth was working with academics on leadership development initiatives and with telecommunication companies to develop apps on financial literacy, sharing best practices, helping train trainors and program managers.

The center wants to promote financial education at multiple points, he said. It is now working with various sectors in information and education programs.

In terms of promoting financial inclusion, Driver said, the Philippines was one of the more advanced among developing countries, even though bank penetration was low. Many institutions and organizations supported inclusion, and banks had a good understanding of opportunities.

He said it was just “a matter of putting it all together and creating the right environment.” He mentioned that the country, for instance, had been doing mobile money transfer for 14 years.

“Hopefully, banks can develop services that will make them appealing to people and use technology to make services relevant to consumers available,” Driver said.

He pointed out that new technology meant that bank clients need not travel long distances to carry out transactions.

Poch Villareal, MasterCard country head for the Philippines, said financial inclusion would allow small businessmen to conduct cashless transactions no matter where they were.

Driver said better technology, like the use of biometrics such as fingerprint for access, would increase people’s confidence in the banking system and reduce costs by allowing the creation and distribution of products at lower rates.

Villareal said a BSP directive would, in a few years, replace magnetic strips on cards with the more secure embedded chips. With this shift, people may gain more confidence in the banking system and feel more security. This, in turn, will help broaden the client base of financial institutions. –Linda B. Bolido, Philippine Daily Inquirer

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