Unbanked majority dents financial industry growth

CEBU, Philippines - The exclusion of several citizens from the formal banking system is an economic issue that has impact on the growth of the financial industry.

According to MasterCard, a global financial services firm, a large number of the Philippine population – until now – has remained unbanked or underserved.

The financial firm reported that about 73 percent of the country’s population has no access to financial products and services. While an estimated 2.5 billion people of the world's population have no formal bank accounts. 

Being financially excluded implies having no connection with financial institutions, while being underserved means having no access to any form of electronic payment.

One real challenge for the banking industry is to include those who are barred from joining the economic mainstream, said Gino Gonzalez, president of Cebu Bankers Club.

Missed opportunity

The excluded ones, he said, are such missed opportunities, considering that the more money circulates in the banking sector, the greater potential the economy will grow.

“First, let’s look at the basic reason. A lot of people still have no excess money that they could deposit to banks. They only have enough or little mao na nga wa kaayo ni sila mo-bangko,” Gonzalez told The FREEMAN in an interview.

The CBC official has considered the exclusion issue as part of the Philippines’ being a third world and developing country. In fact, no developed country has achieved 100 percent banking yet.

“If more money is placed in banks, mas dako ang mapa-lend out ngadto sa mga negosyo – more credit will be made available,” he said.

But the Bangko Sentral ng Pilipinas, in its 2013 financial inclusion report, noted an increase in bank deposits and loans.

It said deposit accounts in banks jumped by 9 percent to 45.4 million accounts in 2013 from 41.8 million in 2012; while loan portfolio rose by 27 percent to P4.25 trillion in 2013 from P3.34 trillion in 2012. 

The expansion of bank and ATM networks around the country has helped the banking system become more inclusive in recent years, the central bank said.

It also stated the banking system’s overall physical network continues to expand on the back of the growing number of banking offices and ATMs which have a year-on-year growth rate of five percent and 19 percent, respectively.

The presence of micro-banking offices which are intended for the low-income families has helped bring banking services to the countryside.

However, Gonzalez claimed much have still to be done to improve bank presence in the provinces where only few rural banks exist.

Most of banks are situated in key cities in the country. The BSP said 56 cities and municipalities were served by MBOs in 2013, a 12 percent higher than in 2012. MBOs in the nation hiked by 26 percent to 465 in 2013, up from 370 in the previous year.

‘Friendlier now’

The banking industry, Gonzalez explained, has tried to transform into a “friendlier” institution so that even the ordinary individuals would not hesitate to understand the sector.

“Twenty years ago, the banks were perceived as seryoso ug formal kaayo. Karon, the advertisements are made to be more friendly and are using Tagalog na gani. In a way, the approach has changed,” he further stated.

The digital age also plays a crucial role in financial inclusion.

The increasing Smartphone usage drives the technology’s potential to be part of the monetary habits of those excluded.

Most of today’s people including the unbanked have actually access to mobile technology and this is an opportunity that could drive increased financial inclusion.

Technology is definitely the future of the banking system and its future depends on it, the bank official said.

“With the help of technology, we can now do banking at home. You don’t have to go to physical banks as anyone can use the Internet to transact,” he continued.

The presence of technology is just one factor that will spur financial inclusion in a developing country like the Philippines.

But financial education to the people is still the most important, he said, making them understand how saving and financial management can help them in their everyday living.

 (FREEMAN)