Overview of Financial Inclusion

Initiatives of the BSPInitiatives of the BSP

Current Access to Finance Scenario

• 610 out of 1634 (37%) municipalities have no banking office (end-June 2013)

• Regional disparities in the distribution of access points

• Concentration of banking services are in the high income and urbanized areas (43% of the total number of deposit accounts and urbanized areas (43% of the total number of deposit accounts and 68% of the total amount of deposits are in National Capital Region)

• Only 2 out of 10 households have a deposit account (2009 Consumer Finance Survey)

• Archipelagic barriers pose a large challenge to financial access

With at least one banking office

Unbanked

Cohesive and Consistent Guiding Principles

• Financial inclusion is a worthy policy objective and

something that should be pursued alongside the promotion

of stability and efficiency in the financial system.

• Financial inclusion and financial stability are mutually

reinforcing. Evidence toward this should be collected.

• Financial stability and financial inclusion are not inevitable. • Financial stability and financial inclusion are not inevitable.

Both demand at least the same measure of energy,

imagination and serious attention from policy makers.

• In addressing financial access issues, market based solutions

are feasible and should be encouraged. It is necessary to

establish a supportive regulatory environment for the said

market based solutions to work.

• These solutions, of course, present real and valid risks but

these are concerns that can be managed.

Cohesive and Consistent Guiding Principles

• All financial service providers should be properly and

proportionately regulated to uphold consumer protection

and financial system integrity.

Vision of an Inclusive Financial System

• Providing access to financial services for all

• Characteristics of an inclusive financial system:

1) wide range of financial services that serve different

market segments,

2) financial products appropriately designed, priced and

tailor-fitted to market need, tailor-fitted to market need,

3) wide variety of strong, sound and duly authorized

financial institutions utilizing innovative delivery channels

and

4) effective interface of bank and non-bank products,

delivery channels, technology and innovation to reach the

financially excluded

(Philippine Development Plan 2011-2016)

Deliberate Approach to Financial Inclusion

• Fully understand the business model

• Proceed with caution and flexibility

• Institute risk-based supervision – proportionality is key!

• Support continuous innovation

• Strengthen internal capacity

– Creation of high-level Inclusive Finance Steering – Creation of high-level Inclusive Finance Steering

Committee

– Four working groups

– Creation of Inclusive Finance Advocacy Staff, Specialist

Examination Groups (Micro, SME and Core IT)

Key Financial Inclusion Strategy

Policy,

Regulation

and

Supervision

Data

Measurement

and

management

Consumer

Protection

and Financial

Education

Advocacy

Policy, Regulation and Supervision Initiatives

Wider Range of Products• Micro-deposits

•Microinsurance

•Micro-agri Loans

•Microfinance Plus

•Housing Microfinance

Expanded Physical

Network

• Opening of Micro-banking

Offices (MBOs)

Expanded Virtual Reach Lower Barriers to Expanded Virtual Reach

• E-money Issuers

•E-money Network Service

Providers

Lower Barriers to

Customer Acquisition

• Updated Anti-Money Laundering

Rules

Enhanced Internal Capacity of the BSP

Wide Range of Products

• Circular 694, Notes on Microfinance

– Microfinance Loans

• Microenterprise Loans

• Housing Microfinance Loans

• Micro-Agri Loans

• Microfinance Plus• Microfinance Plus

– Microfinance Savings Deposit Account

– Microinsurance

Results so Far

• 186 mostly community based banks with microfinance

operations currently serving over 1 million clients with

outstanding portfolio of PhP 8.035B

• These clients are saving PhP 8.872B

• 19 banks already offering housing microfinance with an

outstanding portfolio of PhP 235.3 Millionoutstanding portfolio of PhP 235.3 Million

• 35 banks providing micro-agri loans (PhP 845.12 Million)

• 76 have been issued “No Objection Notices” for

microinsurance

*As of end-June 2013

Expanded Physical Network

• Circular 694, Establishment of Micro-banking Offices

(MBOs)

– Addresses obstacles in establishing bank offices

• Relatively low cost (i.e low infrastructure, no

theoretical capital needed)

• Need not be attached to a microfinance bank or • Need not be attached to a microfinance bank or

branch

• Viable in light of complete range of product offerings

Expanded Physical Network

• Circular 694, Establishment of Micro-banking Offices

(MBOs)

– Expands the products and services that can be offered

• Micro-loans

• Micro-deposits

• Check deposits of existing microfinance clients• Check deposits of existing microfinance clients

• Microinsurance

• E-money Conversion

• Collection/ Pay out of benefits from government

• Utility payments

• Purchase of foreign currency

Results so Far

Applications# of

Applications# of Offices

Conversion /Establishment of

MBOs - Approved52 548

Under process 9 37

This is significant as there are around

49 municipalities which are serviced

only by MBOs! (as of end-June 2013)

* Data as of end-June 2013

Expanded Virtual Reach

• Circular 649, Electronic Money Circular and Circular 704,

Electronic Money Network Service Providers

– Defines electronic money

– Allows the establishment of e-money issuers (whether

bank or non-bank)

– Provides the platform for an efficient retail payments – Provides the platform for an efficient retail payments

platform

– Fosters the establishment of a ubiquitous agent network

Expanded Virtual Reach

• Banks can develop linkages with e-money issuers. As clients

can transact remotely through the e-money platform,

banks:

– Increase value of service to clients

– Increase efficiency

– Lower costs– Lower costs

– Reach new clients

• With existing clients an e-money ecosystem in the local

community can be developed

Results so Far

• 24 E-Money Issuers - Banks

• 3 E-Money Issuers – Non Banks

These EMIs currently have an agent

network of over 15,000 and

continuously expand

In 2012, there were 188 million e-

money transactions amounting to

• Over 50 rural banks with electronic banking (mostly mobile

banking using e-money) from none in 2005

money transactions amounting to

PhP 613 Billion

Results so Far

• Increasing competition, enhancing efficiencies and

lowering costs. Illustrative example: (Domestic)

Sending PhP

1,500 and

Encashment

E-Money* Remittance

Agent

Pawnshop* Bank

Total for P1500 P11.50 P120 P80 P152.50Total for P1500

principal

amount

P11.50 P120 P80 P152.50

% of PHP 1,500 .7% 8% 5.3% 10%

*Average of 2 e-money providers/ pawnshops

Results so Far:

• Enabling meaningful retail payments: Government to

People (G2P)

– E-money is now being used to deliver Conditional

Cash Transfers (CCTs)

– Government savings in reaching 400 municipalities

500,000 beneficiaries500,000 beneficiaries

• Presents potential for similar opportunities – Public

school teachers? Soldiers?

Lower Barriers to Customer Acquisition

• Circular 706, Updated Anti-Money Laundering Rules and

Regulations

– Provides scope for banks to have a risk-based and tiered

system of classifying customers

– Establishes a framework for applying reduced, average

and enhanced due diligence based on the type of and enhanced due diligence based on the type of

customer as well as for customer acceptance, retention

and identification process and record keeping

– Allows outsourcing or reliance on third party for face to

face/KYC

– Liberalized list of acceptable IDs

Consumer Protection

• Issuance of price transparency

and disclosure rules for all credit

granting entities (banks and non

banks and even businesses with

credit activities)

• Issuance of market conduct

regulations particularly behavior

of agents

Financial Education

• Steady advocacy for personal finance and financial

literacy

• Establishment of Comprehensive Economic and

Financial Learning Program with various targeted

audiences

• Conduct of financial learning for microfinance client • Conduct of financial learning for microfinance client

sand the unbanked

• Conduct of Fin-ed Expos

Data Collection and Management

• Initial status report on state of

financial inclusion in the

Philippines

• Spatial mapping and geocoding of

access points

• Participation in international fora • Participation in international fora

on financial inclusion data

• Preparatory work for national

base line survey and product

catalogues

THANK YOU!THANK YOU!

www.bsp.gov.phwww.bsp.gov.ph

Links to relevant information on BSP website

• Annual reports on BSP microfinance/financial inclusion initiatives:

http://www.bsp.gov.ph/about/advocacies_micro.asp

• Financial inclusion quarterly publication

http://www.bsp.gov.ph/publications/regular_fip.asp

• BSP Circulars related to microfinance:

http://www.bsp.gov.ph/about/advocacies_micro_circ.asp

• BSP Circulars search page: • BSP Circulars search page:

http://www.bsp.gov.ph/regulations/regulations.asp

• Financial education/consumer assistance initiatives:

http://www.bsp.gov.ph/about/advocacies_fin.asp

• Advisories/primers for financial consumers:

http://www.bsp.gov.ph/publications/primers.asp

• Manual of Regulations:

http://www.bsp.gov.ph/regulations/reg_MORB.asp

Inclusive Finance Advocacy StaffInclusive Finance Advocacy StaffOffice of the Deputy Governor

Supervision and Examination Sector10th Floor, Multi-Storey Building

BANGKO SENTRAL NG PILIPINASMabini Street, Manila, Philippines

Contact InformationContact Information

(632) 708-7701 local 2896(632) 708-7482

Eduardo C. Jimenez, BSP Microfinance Consultant (Eduardo C. Jimenez, BSP Microfinance Consultant (ejimenez@bsp.gov.phejimenez@bsp.gov.ph) ) PiaPia Bernadette Roman Bernadette Roman TayagTayag, Head, IFAS (, Head, IFAS (proman@bsp.gov.phproman@bsp.gov.ph))

Rochelle D. Tomas, Bank Officer, IFAS (Rochelle D. Tomas, Bank Officer, IFAS (tomasrd@bsp.gov.phtomasrd@bsp.gov.ph))