Philippines’ DOF eyes 3 rural banking reforms to widen financial inclusion
Three initiatives are being pushed by the DOF that will enable the rural banking system to meet the challenge of reducing the number of unbanked Filipinos in the country.
(1) The Secured Transactions Reform Bill also known as the Financial Inclusion Bill
(2) A fully automated credit information system
(3) Consolidation Program for Rural Banks
The reality that a majority of Filipinos remain unbanked even when economy is growing at a fast pace was described by Finance Secretary Carlos Dominguez III as “not a good indicator,” because this means they have neither access to financial services nor ways to participate in investments.
Finance Secretary Dominguez is hoping that rural bankers would be at the forefront of national efforts to adapt to technological change, as this development would “immeasurably contribute to the dramatic transformation of our economy.”
“Technological changes will revolutionise the way we do banking. I urge you to embrace the changes that are forthcoming. This revolution in the financial sector will power our economic growth and help us be competitive into the future,” Secretary Dominguez encouraged members of the Rural Bankers Association of the Philippines (RBAP) at the organisation’s 65th national convention held at the SMX Convention Centre.
The DOF is pushing the congressional approval of the Secured Transactions Reform Bill, or the Financial Inclusion Bill, which would increase the use of technology in rural lending. It would also enable farmers and countryside entrepreneurs to tap their warehouse receipts, farm equipment and other forms of property as collateral to access credit.
This bill will enable micro, small and medium enterprises (MSMEs) and millions of unbanked Filipinos to take advantage of the economy’s rapid growth, Secretary Dominguez said
The DOF is also pushing the development of a fully automated credit information system that will equip financial institutions with a modern centralised credit registry under the Credit Information Corporation in order to facilitate lending activities.
The system is almost fully established and undergoing a series of final tests.
Moreover, the Bangko Sentral ng Pilipinas (BSP) has reactivated its Consolidation Program for Rural Banks to encourage mergers and consolidation of rural banks and further strengthen the country’s banking industry.
“I encourage all of you to take a closer look at this program, appreciate the synergies and economies of scale that integration will foster. It will make possible the most efficient use of the common infrastructure, systems, and resources of the smaller banks,” Secretary Dominguez explained during the event.
Secretary Dominguez also urged rural bankers to familiarise themselves with the recent advances in financial technology (FinTech) while the government rushes the completion of the digital backbone for processing payments in real time.
“The success in achieving the mission of financial inclusion is eminently measurable. If we are able to bring down the number of the unbanked over the next few years, the banking system should have contributed towards building a more inclusive economy,” he said.
He pointed out that the Philippines is now one of the best performing economies in Asia, second only to Vietnam’s 7.4% and matching China’s growth rate of 6.8% in the first quarter of this year.
The DOF also wants the Congress to pass a bill that will shift rice trading from quantitative restrictions to tariffs in order to stabilise the supply and lower the retail price of rice, as well as approve legislation implementing a national ID system to enhance the efficiency of transactions in the economy.