How Financial Inclusion Will Drive Economic Development 

In 2014, the World Bank conducted a survey in which 3,000 Filipino adults were given a seven-question quiz to gauge their financial literacy. It involved computing for interest and inflation rates, and defining basic financial concepts like savings and insurance. Despite being a multiple-choice quiz, the result was disheartening. Only 2 percent of the sample could answer all questions correctly, while only 30 percent could answer at least three. 

This supports the findings of the Bangko Sentral ng Pilipinas (BSP) in 2017 on its Financial Inclusion Survey, in which it found only 23 percent of Filipino adults have formal savings, a number that has hardly changed in the past three years. And it’s just the most basic indicator of financial access. 

The BSP has long campaigned that “a financially sound citizenry can be more effective in productively contributing to the Philippine economy.” It’s especially important at a time when the middle class continues to rise, and more enjoy greater purchasing power. Anyone living near the country’s business hubs, from Makati to Davao, could feel, that in the last few years or so, the economy is in high gear. Almost every year a new mall is opened, or an existing one is up for renovation; condominiums dot major thoroughfares, and big consumer brands, once only available abroad have become more accessible as they set up shop in the country. 

 

Even the numbers have been on a positive note for some time. 

The Philippines has been among the fastest-growing economies in Southeast Asia for the past five years, just next to Vietnam in the first quarter of 2019 with a GDP rate of 5.6 percent. Household spending has been accelerating too, reaching 9.8 percent in the last quarter. The strong economic performance of the country has led both the players of the big leagues and the emerging names in the startup scene to come to this side of the world to do business. Truly, the country has been on an upswing. 

And yet, not everyone is taking advantage of the growing number of opportunities available today, either due to lack of awareness or perceived incapacity, two factors that could be better solved with better financial literacy. 

A public that knows how to handle cash can build a strong credit line to start businesses and eventually provide jobs. They could be an active investor in local markets and support various industries. They could be sustainable enough that they ensure their hard-earned money is spent on valuable assets. 

 

So how can financial literacy be improved? 

Starting them young, for one, can create a strong ripple effect. The BSP has already launched last year a nationwide campaign that aims to integrate financial literacy lessons in the K-12 program. The World Bank has already said those who have had strong savings habit as a child are more likely to make financially sound decisions as an adult. Children could also eventually influence their families and friends to apply the lessons they’ve picked up from school. 

As for the adults, it’s never too late to teach them basic financial concepts. Raising the awareness levels of Filipinos that there are now various financial products available, catering especially to those with lesser income segments, can empower them. They too, can still take control of their finances. 

 

Financial literacy as a fintech advocacy

Fintech firms offering tools and products that were once only available at banks are in the frontline in this effort. These days, there are now mobile apps that allow one to start a saving account and even avail of loans. 

In 2018, Cashalo made credit application more accessible by allowing eligible users to avail of emergency and personal loans through a mobile app. The cash could easily be sent to the user’s nominated bank account as processing only takes less than 24 hours. Dutch bank ING also recently launched its first digital bank in the Philippines, allowing Filipinos to start a savings account through a mobile app. 

For a social-media-savvy country where 7 in 10 Filipinos wield smartphones, these fintechs are making financial products more readily accessible to the greater majority. The exposure even to one basic financial product can pave the way and encourage Filipinos to explore all the other available options to become financially literate and participate in new digital economy and society.

An empowered people isn’t just a win for themselves, for personal gain. As Filipinos become more responsible with their hard-earned money, it’s one big push for a stronger economy too, as the BSP has prescribed. 

Indeed, a loan could spell one business’s growth or if a child will go to college. A savings account could secure a family’s future, or help a young professional have a comfortable retirement later in life. Without those wins, the country is robbed with potential talents that could contribute to national productivity. The data supports a simple yet highly sensible connection: the most financially literate countries are some of the most progressive, and even the happiest ones. It’s one more area wherein fintech can abet and help sustain the Philippines’ imminent economic rise.