According to a recent release, a US$ 300 million loan was approved by the Board of Directors of the Asian Development Bank (ADB) in support of the Philippine government’s effort to expand financial services across the country.
This is especially for the entrepreneurs, the small businesses, the farmers, the workers and the individuals, including women and vulnerable households.
The objective of the policy-based inclusive Finance Development Program is to aid the Philippines in developing a resilient and inclusive financial sector.
The project will help the Government strengthen the institutional and policy environment of the Philippines for expanding financial services.
Moreover, it will be an investment towards supporting the networks and infrastructures such as the national retail payment system and the new national identification system.
The loan will also improve the abilities of financial institutions such as rural banks to offer financial products, particularly through the application of new technologies.
More people are expected to open bank accounts, save more at financial institutions, and have access to wider range of other financial products and services as a result of all of these.
This program is a reflection of the strong commitment of both the Philippine Government and the Bank to expand financial inclusion in the country and address the challenge of high inequality, which continues to persist despite the rising and sustained economic growth.
Moreover, it builds on the significant actions taken by the Government to strengthen the policy framework for financial inclusion and the infrastructure that supports the delivery of these services.
This program has all the right ingredients to achieve positive gains in financial inclusion and to improve the lives of Filipinos from Tawi-Tawi to Batanes.
Entities that will benefit from the program are the public and private sectors.
Having better access to a wider range of appropriate financial services and stronger protection against economic shocks are benefits that businesses, including MSMEs, and individuals will enjoy.
A growth of 6.7% was experienced by the Philippine economy last year, considered the fastest among members of the Association of Southeast Asian Nations (ASEAN).
However, the country ranks among the highest in income inequality, with a Gini coefficient of 0.44 in 2015 as compare with Thailand’s 0.38.
Only 34% of Filipino adults had a bank account in 2017, compared with Thailand’s 82% and Indonesia’s 49%.
As of last year, only 12% of Filipino adults borrowed from a formal financial institution while 35% of cities and municipalities had no banking offices.
The Philippine Government has taken steps to address low financial inclusion in the recent years.
It adopted the first National Strategy for Financial Inclusion in 2015 and proposed reforms that will expand financial services.
For instance, it has committed US$ 40 million to support the development of a national identification system, which will improve data collection and help people, especially the poorest and most vulnerable population without identification, to gain access to financial services.
The passage of legislation establishing a national movable collateral registry will expand lending to businesses by mitigating the risks for banks.
The Bank has been working with the Government and other development partners since 2000 in order to support the country’s goal of increasing financial inclusion.
Its areas of support include agriculture finance, financial literacy, microinsurance and crop insurance, and Islamic finance.
The Bank is also assisting the effort of a rural bank in Mindanao to migrate its core banking system to a cloud-based core banking solution to reduce cost, improve efficiency, and increase overall outreach.
Aside from the ADB loan, the program may receive an additional €150 million in financing by the Agence Française de Développement and joint technical assistance, which will support the government’s goal of building a resilient and inclusive financial sector.