Presentation made by Undersecretary Gil Beltran at the 10th Financial Literacy Summit, 20 April 2016
Financial literacy is the most important component of the Philippines financial inclusion policy. The Philippine financial literacy program is comprehensive; it covers all sectors from policymakers, regulators, microfinance providers down to the clients. It is a continuing activity for many government institutions.
When the Philippine Department of Finance launched its Microfinance Program in 1995 and Microinsurance Program in 2010, we involved all stakeholders and invited their representatives to nationwide meetings in all 16 regions of the country to contribute to the details of the program. We had the legislators, regulators, microfinance and microinsurance providers and their federations, retail outlets, practitioners and clients in the discussions.
First, we formulated a national strategy, consulting stakeholders every step of the way and then launched the strategy along with the issuance of regulations and memoranda of agreement for coordinated policies and programs.
Thus, 18 years after the launch of the Microfinance Program, we had 10 million microborrowers and 5 years after the launch of the Microinsurance Program, microinsurance products covered 37.6 million lives, 37% of the total population.
Indeed, the financial literacy program should cover everyone, all from ages 5 to 100. We have financial education in the schools, lectures for overseas Filipino workers who, as a group, remit US$28 billion annually, and lectures on financial market for young people who make up 1.3 million employees of the BPO (Business process outsourcing) sector who, as a group, generate about US$25 million in revenues annually.
To many sectors, technology has enlarged access to financial services. Mobile phones, ATM cards and computer gadgets can now enable transactions between great distances at low cost. Web sites now educate the public on the budgets and actual expenditures of government institutions, provide credit information on micro- and small-scale enterprises to prospective lenders (through the Credit Information Corporation) and prioritize the liens on real estate and movable collaterals used to secure loans (through the Land Registration Authority’s collateral registry).
Financial literacy should include a listing of financial (stocks, bonds, insurance and mutual funds) products available in the market because these should compete on equal footing with consumer products for the investor’s money.
If the financial literacy program succeeds, financial stability is enhanced because stakeholders make rational decisions and manage their funds and businesses well. They are also protected from fraudulent transactions and dubious deals. Regulators, with the assistance of local governments, can check on the activities of regulated entities. Clients who are well informed of their rights can access the alternative dispute mechanisms offered by regulators to settle complaints.
Financial stability, in turn, fuels economic growth. Using the 50.8% gross savings-GDP average of the Philippines from 2005 to 2015 as a benchmark (World Bank data), a 10% improvement in the efficiency of financial management could boost the country’s GDP growth by 5 percentage points.