Pinoys need to improve financial literacy — BSP

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) said there is a need to improve financial literacy and capability to help Filipino families cope and recover from the socioeconomic impact of  a crisis such as the global coronavirus pandemic.

BSP Governor Benjamin Diokno said during an online Financial Literacy Summit organized by The Global Financial Filipino Investors (TGFI) the COVID-19 pandemic has highlighted the need for every individual and household to be prudent in managing finances.

“This pandemic has been difficult, not only for the Philippines, but also for the rest of the world. It is adversely affecting the physical, emotional and financial well-being of individuals and families,” Diokno said.

Diokno said job loss, business closures, payments of loan obligations, utility bills, medical expenses, rent, food and other daily needs all cause distress.

“Financial distress is a reality for Filipino families living from paycheck to paycheck, those relying on low-income livelihoods, and those dependent on remittances from relatives abroad. Even families who were doing relatively well are increasingly becoming vulnerable as the pandemic continues,” he said.

The BSP chief said financial un-preparedness limits the ability of families to cope and recover from the socioeconomic impact of the ongoing health crisis.

“Even without a crisis, the failure to save for specific goals such as an emergency fund, or the unnecessary expenses that lead to over-indebtedness, can compromise the health, harmony and happiness of families,” he said.

Data showed only 23 percent of Filipino adults have accounts, while the most vulnerable sectors have no bank accounts where social assistance could be quickly channeled.

Nearly half or 48 percent of adults have savings, but 68 percent of them keep savings at home. More than a third of Filipino adults are unable to meet regular spending needs, and resort to loans to deal with emergencies.

Furthermore, only four percent of the adult population use electronic payments and only 18 percent have insurance, while only three percent invest in financial instruments.

Aside from lack of budget, Diokno said lack of awareness and perceived high costs are often cited by respondents as key reasons for not opening an account, not saving, not using e-payments and not getting insurance.

The BSP chief added many are unaware of their availability and accessibility, or choose to disregard their value as risk management and coping mechanisms.

“Painfully, the COVID-19 pandemic has surfaced their importance,” he said.

Diokno said families who consistently managed their money smartly, and exercised financial planning before the pandemic are better off at this time, compared to those who did not.

Of the seven financial literacy related questions, Diokno said Filipino adults were only able to correctly answer three as they have little understanding of compounding interest; the effect of inflation on the buying power of households and investment risks, returns and diversification.

Survey results also shows that Filipinos have a forward-looking attitude, but scored low in daily money management and long term financial planning.

Diokno said the central bank would continue to proactively partner with government and private institutions in order to equip target sectors of the population with knowledge and skills necessary for them to make prudent financial decisions, become resilient in managing financial shocks, and eventually be economically empowered.

Likewise, he added the BSP is intensifying its digital literacy program to enhance cybersecurity awareness and digital literacy of Filipinos.