Financial Inclusion

Initiatives

2019

Strategic Thrust 1: 3Building the digital financial infrastructure

Strategic Thrust 2: 8Fostering trust and financial literacy

Strategic Thrust 3: 17Creating compelling value propositions for a transaction account

National Strategy for 1Financial Inclusion (NSFI)

Financial Inclusion Initiatives 2019

Strategic Thrusts

Promoting agriculture value chain finance 23

In the Spotlight

Supporting global discussions on 25financial inclusion

Islamic banking towards financial inclusion 22

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23%of adults have a formal account

(BSP Financial Inclusion Survey 2017)

95.8%of municipalities have a

financial access point(BSP Q2 2019)

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“The goal of financial inclusion is to ensure all Filipinos are able to usefinancial services that are appropriate to their needs and capacity -whether for saving, payment, credit, insurance or investment.Financial services allow individuals and businesses - regardless ofincome and size - to effectively manage their finances and achievetheir financial goals.”

- Governor Benjamin E. Diokno in his keynote address for the 2019 Citi Microentrepreneurship Awards

Through the years, the Bangko Sentralng Pilipinas (BSP) has worked tirelesslyto promote financial inclusion as astrategic advocacy in pursuit of itsvision to provide a high quality of lifefor all Filipinos. With the passage ofRepublic Act (RA) No. 11211 of 2019amending the BSP charter, financialinclusion and its complementaryobjectives of financial literacy andconsumer protection became nolonger just a strategic advocacy but amandate of the BSP. Under Section 3of the law, BSP is mandated in theattainment of its objectives to“promote a broad and convenientaccess to high quality financialservices and consider the interest ofthe general public.”

BSP’s financial inclusion efforts havelargely been geared toward ensuringan enabling regulatory environmentthat allows a variety of players – newand incumbents alike – to viably servethe diverse needs of the unserved andvulnerable sectors of the economywhich include, among others, informalworkers, micro-entrepreneurs, andfarmers.

These efforts have borne fruit asmore financial service providersincreasingly pay attention to themass market as a vehicle forgrowth – offering products suchas the basic deposit account,expanding outreach through thecash agents and mobile apps, andoffering digital payments. Theseare the foundational piecestoward an inclusive digitalfinance ecosystem benefittingour target underserved sectors.

“The pursuit of financial inclusion requires an openness to allpossible transformative solutions and impactful innovations, such asdigital technology, new business models, and cross-sectorcollaboration.”

– Governor Benjamin E. Diokno at the 2019 Finex (Financial Executives Institute of the

Philippines) Conference

2,196,445Basic Deposit Account

(BDA) depositors(BSP Q2 2019)

113banks offering BDA

55 Participating institutions

31 Participating institutions

14 of which connecting as receiving institution only

BDA

Harnessing this platform has been amajor focus of BSP’s financialinclusion work in 2019. BSP hasdeepened collaboration with keyagencies for initiatives on financialeducation, digital ID, use oftransaction accounts for social cashtransfers and private sector wages,digital payments for transportation,agriculture value chain financingand MSME financing. Theseinitiatives are meant to build onand optimize the gains of having anenabling regulatory environmentfor financial inclusion.

Financial inclusion is necessarily awhole-of-nation undertaking.Beyond enabling regulations,financial inclusion requires thedevelopment of adequate digitaland financial infrastructure, awidely shared awareness and trustin financial services, and compellingvalue propositions for owning andusing a formal account. TheNational Strategy for FinancialInclusion (NSFI) and the FinancialInclusion Steering Committee (FISC)serve as a platform for effectivemulti-stakeholder collaboration keyto delivering the demands offinancial inclusion.

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(BSP November 2019)

(BSP November 2019)

(BSP Q2 2019)

National Strategy for Financial Inclusion

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NSFI

Launched in 2015, the National Strategy forFinancial Inclusion (NSFI) provides acomprehensive framework that underpinsefforts of the government and privatesector toward the shared vision for financialinclusion in the country.

It provides the platform for public-privatecoordination and cooperation as well asharmonization of policies and programsrelated to financial inclusion.

To provide guidance and oversight in theNSFI implementation, the FinancialInclusion Steering Committee (FISC) – anineteen (19) member strong interagencybody – was established in 2016 throughExecutive Order No. 208.

As the governing body tasked to drivethe implementation of the NSFI, theFISC members recognized the need topromote greater collaboration ingovernment and private sector towardthe development of two (2) focalareas, namely:1) Agriculture Value Chain Finance

(AVCF); and2) Digital Finance.

In its 7th meeting on 5 July 2019, theFISC discussed the proposed AVCF pilotproject initiated by the BSP which aimsto increase awareness and confidenceof banks to finance the agriculturesector using the value chain approach.Under the pilot project, selectedparticipating banks will receivetechnical assistance from the AsianDevelopment Bank for the design anddelivery of AVCF products for thepriority commodities and value chainprojects supported by variousgovernment programs. These includexxxx

the Philippine Rural DevelopmentProgram of the Department ofAgriculture (DA), Project Converge ofthe Department of Agrarian Reform(DAR), and RAPID Growth Program ofthe Department of Trade and Industry(DTI).

The FISC also expressed commitment toensure more Filipinos are able to openand regularly use a transaction accountso they can fully participate in the gainsof an inclusive digital financeecosystem. Discussions covered thepay-outs to conditional cash transferbeneficiaries of the Department ofSocial Welfare and Development(DSWD) and online platform forgovernment payment transactions ofthe Department of Finance (DOF).

The FISC also noted the sustainedefforts to forge strategic partnershipsto increase financial literacy in thecountry.

In 2019, the Department of Laborand Employment (DOLE) andDepartment of Transportation(DOTr) were onboarded in theinteragency body in light of theagencies’ role in promotingpayment of salaries through formalaccounts and digitizing payments inpublic transportation.

Financial Inclusion Steering Committee (FISC)

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Strategic Thrust 1

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One of BSP’s guiding principles for financialinclusion is that the low-income, MSME andagriculture sectors can be sustainably servedby the private sector with well-designedgovernment interventions that address thechallenges associated with serving thesesectors: high cost and high risk. BSP istherefore committed to support thedevelopment of market-enabling financialand digital infrastructure that cansignificantly improve cost-efficiencies,deepen customer insights, and mitigate risksto facilitate the delivery of innovativefinancial services for the target sectors.

Building the digital and financial infrastructure

National Payment System Act

RA No. 11127 or the National PaymentSystems Act (NPSA), is a landmarklegislation that provides thecomprehensive legal and regulatoryframework for the payment systems inthe country. As the appointed regulatorand overseer of the payment systems,BSP will be able intervene morestrategically in developing the digitalpayments landscape in the countrytoward greater efficiencies andinclusivity. An efficient retail paymentsystem is considered a backbone ofdigital finance.

Philippine Identification System (PhilSys)

RA No. 11055 of 2018 establishes thePhilSys as a national digital ID which isenvisioned to promote financialinclusion by addressing oft-citedaccount opening barriers by theunbanked (e.g., lack ofdocumentation), making onboardingmore cost efficient and facilitatingdigital finance innovations. The goal ofBSP as PhilSys nears implementation isto ensure that banks and e-moneyissuers are prepared to effectivelyleverage PhilSys to reach theunbanked. Toward this end, BSPactively participates in the PhilSysPolicy and Coordination Council(PSPCC) and its interagency technicalworking groups, specifically on the usecases and communication. It alsocontinuously engages with theindustry on implementation updatesand possible financial service use casesfor PhilSys. BSP has worked with theAsian Development Bank on theconduct of a study to assess thereadiness and requirements of theindustry to leverage PhilSys forinclusion.

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Credit Surety Fund

The Credit Surety Fund (CSF)program was conceptualized andlaunched by the BSP in 2008. TheCSF is a credit enhancementscheme which aims to give MSMEsaccess to non-collateral bankfinancing by way of surety coverissued jointly and severally by theparties of the CSF in favor of thecreditor bank. It is created bypooling the contributions ofparticipating cooperatives, non-government organizations, localgovernment unit and partnerinstitutions.

In 2015, the CSF program wasinstitutionalized through thepassage of RA No. 10744 or the“Credit Surety Fund CooperativeAct of 2015”. Under the law, theCooperative Development Agency(CDA) is the lead implementinggovernment agency of CSFresponsible for the registration,regulation, monitoring andsupervision of CSF cooperatives.The BSP’s role, on the other hand, isto spearhead the promotion,encouragement, creation andorganizational development of CSFcooperatives all over the country,and facilitate capacity building ofthe CSFs.

In 2019, in support of CDA’s transitionprocess as CSF regulator, the BSPconducted briefing sessions for thestaff of CDA’s newly established CSFdepartment on the details of RA10744 and IRR, and CSF programimplementation. BSP also hostedthree (3) business forums for themembers of the CSF cooperativeswhich cover topics such as businessregistration, MSME programs of thelocal government units (LGUs) andMSME loan products.

The Ifugao CSF was also launched on5 December 2019 as the 55th CSF andthe first to be launched afterthe implementation of RA 10744.Of the 55 CSFs, 2 have already beenregistered with the CDA in 2019: theTacloban City CSF Cooperative andBaguio City CSF Cooperative.

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Credit Risk Database

The CRD is a credit enhancementtool pioneered from Japan, whichuses financial data (sourced frombalance sheet, profit and lossstatement) and non-financial data(e.g., type of industry/sector,business location, etc.) as well asdefault-related information (e.g.,record on arrears, bankruptcy, etc.)to build statistical models that canbe used to predict thecreditworthiness of MSMEs.

The CRD collects data from itsmember financial institutions, whichis used to come up with a statisticalscoring model that calculates theprobability of default (PD) for eachMSME. A lower calculated PDindicates low credit risk for theMSME, while a higher calculated PDindicates elevated credit risk for anMSME. This development isexpected to broaden MSMEs accessto finance by lessening thedependence of banks on collateraland promoting risk-based lending.

The Japan International CooperationAgency (JICA) initiated the feasibilitystudies and plans for the operationalset-up of the CRD under the technicalcooperation program for thePhilippines. The BSP has agreed toserve as the lead responsible agencyfor the implementation of the CRDproject in the country.

To carry out the project, a ProjectImplementation Unit (PIU)administratively placed under CLIA andin coordination with the BSP’sFinancial Supervision Sector (FSS), willsoon be established with a strategicguidance from the CRD TechnicalWorking Group (TWG). The TWG iscomposed of representatives from theBSP, Department of Finance (DOF),Securities and Exchange Commission(SEC), and Department of Trade andIndustry (DTI) with the UP School ofStatistics as observer.

Warehouse Receipts System

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Movable Collateral Registry

BSP is actively supporting theimplementation of the PhilippineProperty Security Act (PPSA) whichprovides the legal framework togovern the use of movable collateralsuch as warehouse receipts,inventories, receivables andequipment, among others. Theimplementation of the PPSA, inparticular the online movablecollateral registry, is envisioned toexpand the types of properties thatMSMEs can use as acceptablecollateral to obtain credit from banksand other lenders. BSP is exploringpossible policy issuances to promotethe adoption of banks of the PPSAand expand their MSME loanportfolio.

Credit Information System

A well-functioning credit informationsystem and database promote risk-based lending and address informationasymmetry, thereby reducing the costof the credit risk assessment process oflending institutions. The CreditInformation Corporation (CIC) wascreated by law to be the country’scentral credit information, and toprovide access to reliable, standardizedinformation on credit history andfinancial condition of borrowers. In2019, BSP was granted four seats in itsBoard of Directors to support theeffective operations of the CIC as acrucial market-enabling financialinfrastructure.

BSP is advocating for the passage ofthe warehouse receipt system bill thatwill support farmers and agri-entrepreneurs by providing themtools to manage commodity pricefluctuations and access financingusing warehouse receipts ascollateral.

This bill complements the PPSA withwarehouse receipts being animportant use case for the movablecollateral framework. The proposedbill in congress will provide theneeded update to the existingcentury-old warehouse receipt law byputting in place, among others, acentral online registry, an oversightbody, and an accreditation frameworkfor warehouse operators.

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Strategic Thrust 2

Achieving financial inclusion not onlynecessitates providing access to financialproducts but also forging trust in thoseproducts and promoting financial literacy.Adequate consumer protection mechanismsare necessary to foster public trust in andcontinued use of welfare-enhancing formalfinancial services. Financial literacy on theother hand is about consumersunderstanding what it means and what ittakes to be financially healthy, which willthen compel them to seek out, use anddrive the demand for fit-for-purposefinancial services.

Fostering trust and financial literacy

Financial Education

Since 2018, BSP has adopted a financial education approach built on strategicinstitutional partnerships with both government agencies and private sector. Theultimate objective is to build an ecosystem of financial education advocates with ashared vision and collective responsibility for sustained and effective financialeducation programs.

The primary approach is to coordinate,collaborate and capacitate partners indeveloping and implementing financialeducation sessions as part of their ownregular capacity building programs toensure sustainability and measurablekey performance indicators.

A key component of this approach is arobust monitoring and evaluationsystem to ensure that desired outputs,outcomes and impact are reached.

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In this approach, the BSP serves as aconvenor of key stakeholders as well ascontent creator: developing financialeducation materials that are “productagnostic” or not linked to particularproducts/providers, leveraging on digitalmodes of delivering financial educationmessages, and seeking ways to bettermeasure program effectiveness.

The financial education materials areintended for use of its strategic partners thatalready have institutionalized deliverymechanisms wherein financial educationsessions can be mainstreamed.

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Department of Education (DepEd).The partnership aims to support DepEdin integrating financial education in theK to 12 curriculum to address learners’needs; and incorporating personalfinance management (PFM) sessionswithin regular training programs forteachers and is expected to reach 29million learners and more than 800,000teaching and non-teaching personnel.

To-date, 10 videos and 24 lessonexemplars as classroom learning toolswere co-developed. These multimedialearning tools discuss topics such asfinancial planning, saving, budgeting,debt management, investment,insurance, entrepreneurship andpreventing financial scams and will beused for classroom instruction, andtraining of teachers and non-teachingpersonnel, as required under DepEdMemorandum No. 032 dated14 March 2019 and DepEdMemorandum No. 107 dated 30 August2019.

The BSP also developed a personalfinance management module forteachers, and capacitated around 300trainers to cascade the module to theirpeers and colleagues nationwide.

Overseas Workers’ WelfareAdministration (OWWA). In 2019,the BSP partnered with OWWA toimplement PiTaKa (Pinansiyal naTalino at Kaalaman), a financialliteracy campaign for Overseas FilipinoWorkers (OFWs) and their families.Under this campaign, the BSP isdeveloping standard financialeducation modules for OFWs that willbe embedded in orientations thatOFWs and their families are requiredto take.

To date, BSP has completed a financialeducation module for use in Pre-Departure Orientation Seminars(PDOS) and presented it to more than600 trainers from OWWA-accreditedPDOS providers who will in turncascade the module to over2.3 million land-based and sea-basedOFWs. Standard modules are alsobeing developed for Post ArrivalOrientation Seminars (PAOS) andGeneral Orientations for OFWFamilies.

It is envisioned that the full roll-out ofthe PiTaKa campaign would reach ofaround 10 million Filipinos living andworking abroad.

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Partnerships

Armed Forces of the Philippines (AFP).The BSP’s partnership with AFP coversthe development and deployment oflearning tools tailored to circumstancesof the army for use in the trainingprograms for new recruits, seniorofficers and families of AFP personnel.This is in line with the AFPTransformation Roadmap, wherefinancial health is among the indicatorsbeing measured in AFP personnel’sIndividual Performance Scorecards.Training of Trainers (TOT) is currentlybeing designed to build internal capacityto deliver financial education sessions inkey stages of a soldier’s training.

This partnership is expected to benefitthe 140,000 uniformed and civilianpersonnel of the AFP.

Comprehensive Social BenefitsProgram (CSBP). The BSP is also partof the broader, inter-agencyComprehensive and Social BenefitsProgram (CSBP). In tandem with theDepartment of Trade and Industry(DTI) and Technical Education and SkillsDevelopment Authority (TESDA), basicfinancial literacy, entrepreneurship andskills development sessions areconducted for beneficiaries of soldiersand policemen killed or wounded inaction (KIA/WIA beneficiaries). Thefinancial literacy session is among therequirements for KIA/WIAbeneficiaries to receive their monetarybenefits.

Financial education for MSMEs.In 2018, the BSP partnered with DTI andtwo networks of microfinance non-government organizations to facilitateinformation sharing and greater accessto finance for MSMEs served by DTINegosyo Centers. One of the BSP’s tasksunder this partnership is to capacitateNegosyo Center personnel to deliverfinancial learning sessions as part of thebroader capacity building program forMSMEs. Technical discussions on contentand modules development are slated for2020.

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Partnerships

Digital literacy program. In 2019, theBSP partnered with E-PESO, a UnitedStates Agency for InternationalDevelopment (USAID)-funded program,to enhance cybersecurity awareness anddigital literacy in the country. Theunderlying objective is to increase trustand confidence in the security of digitalpayments and other financialtransactions. It is envisioned to supportthe BSP in expanding the digital financeecosystem through encouraging massiveusage by consumers across all sectors.

The Financial Education Stakeholders

Expo is BSP’s flagship program

for financial education convening

around 1,000 fin-ed stakeholders and

providing a venue for all to share their

work, explore partnerships and

leverage on existing initiatives.

It is organized annually in line with the

celebration of the Economic and

Financial Literacy Week as mandated

under RA No. 10922 and supports the

development objectives of Ambisyon

Natin 2040.

Aside from the partnership programs, the BSP also aims to promote financial

literacy through the annual FinEd Expo and PisoLit:

PisoLit is a financial literacy campaign on

Facebook (FB), managed by the BSP. It is a page

distinct and separate from the BSP official FB

account. PisoLit provides daily posts on

financial management tips, scam prevention

reminders, and consumer protection

advisories, targeted for young Filipinos and

netizens on the FB platform. Launched in

September 2017, PisoLit has now over 42,000

followers; averaging a daily reach of about

10,000 and engagement of 1,000. The BSP

continues to manage PisoLit and is

conceptualizing additional methods to increase

followers, reach and engagement.

FB: https://www. Facebook.com/pisolit/

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Box Article 1: 2nd Financial Education Stakeholders Expo

The BSP hosted the 2nd FinancialEducation Stakeholders Expo on25 November 2019 in SMX Manila.The event gathered more than 1,000stakeholders and advocates from thepublic, private, academic and civicsectors to undertake financiallearning sessions and activities,share updates on their financialeducation initiatives, understand thechallenges, find solutions andexplore partnerships.

The opening ceremony washighlighted by the milestone launchof the DepEd Financial EducationIntegration Policy and Roadmap,which sets guidelines for efficientand effective integration of financialeducation concepts, aligned withappropriate learning competenciesin learning areas across all gradelevels, within the K to 12 Curriculum.It also articulates DepEd’s intent tocapacitate teachers on two levels: aseducators teaching financialeducation concepts and asindividuals managing their ownpersonal finances.

The Expo included breakoutsessions on mainstreaming fin-ed inthe public school curriculum,customer-centricity in financialservices and stock market investing.It also featured interactive activitiessuch as a fin-ed board game,financial literacy game show, awardsshow and special performances.Exhibit booths showcased thefinancial education activities ofselected government agencies,private financial institutions andnon-government entities.

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“Through complementary,coordinated and collaborativefinancial education programs,we must aim to change the lifeof every Filipino towards afinancially healthy future.”

- Governor Benjamin E. Diokno in his opening remarks for the BSP

Financial Education Expo 2019

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Consumer Protection

Consumer Assistance Mechanism (CAM)The CAM has been put in place to ensure thatconsumer protection forms a substantial partof the BSP’s regulatory and supervisoryactivities over BSP-Supervised FinancialInstitutions (BSFIs). Through the CAM,consumers are provided an avenue for redress,should they be dissatisfied with the BSFI’shandling of their concerns. This service maybe accessed by the public through phone,postal mail, e-mail or by personal visit to theCEG where the consumer complainant will beattended to by a consumer specialist.

Draft Consumer Protection ActThe proposed Consumer Protection Act aimsto carve out from RA No. 7394 (Consumer Act)the provisions of Title IV (Consumer CreditTransaction) and have in place a stand-alonestatute governing Financial ConsumerProtection. This proposed bill provides, amongothers, for the authority of financial regulatorssuch as BSP, SEC and IC, to exerciserulemaking, surveillance and inspection,market monitoring and enforcement powersover financial persons/entities. The proposedBill covers, among others, the consumerprotection principles of transparency,disclosure, and responsible pricing, fairtreatment, effective recourse, privacy andprotection of client data. This bill aims to giveregulators stronger enforcement powers toensure consumer protection and foster marketdiscipline. This bill also takes into considerationthe increasing digital financial services beingoffered to the consumers.

The BSP recently issued on6 September 2019 BSP Circular No.1048, which amends existing regulationon Financial Consumer Protection. Thisis in line with BSP’s mandate topromote broad and convenient accessto high quality financial services andconsider the interest of the generalpublic, as provided by Section 3 ofRA No. 11211.

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The Circular revises the FinancialConsumer Protection Framework underCircular No. 857, Series of 2014, toadapt to the increased complexity offinancial products and the rapidtechnological innovations in financialproducts and services. It strengthensmarket conduct practices of BSFIs byestablishing guidelines thatinstitutionalize consumer protection asan integral component of corporategovernance and culture, as well as riskmanagement.

The Circular also underscores the BSP’scommitment to promote broad andconvenient access to high qualityfinancial services and consider theinterest of the general public byensuring that financial service providersconduct ethical business practices anddo not engage in practices that maycause harm to the consumer in theconduct of their business. It alsoemphasizes that BSFIs should notemploy practices that discriminate ortake advantage of vulnerable groupssuch as low-income earners or personswith disability.

Updated Consumer Protection Framework

Box Article 2: BSP Chatbot Recognized at the Central Banking Fintech andRegtech Global Awards 2019

Last September 4, 2019 in Singapore,the BSP won awards in two (2)categories—the Artificial IntelligenceInitiative and Data ManagementInitiative—in the Central BankingFintech and Regtech Global awards. Itwas the only institution to win in twocategories for this awarding year.

The BSP won in the ArtificialIntelligence Initiative category for itsdevelopment of a prototype Chatbotto provide the public a moreaccessible and efficient means toengage the BSP on financial consumerconcerns. From the existing manualprocess to using artificial intelligence(AI) and natural language processing(NLP), the Chatbot will be able toadequately and efficiently handleconsumer concerns coursed throughchannels including SMS and socialmedia. The solution addresses thepain points of the customer assistancemechanism (CAM) which receivesmore than 10,000 complaints,inquiries and requests from thegeneral public through conventionalchannels such as direct mail, phonecalls, and in-person visits to the BSPoffices.

The Chatbot is also envisioned toequip the BSP with more insight intocustomer experiences, bankingpractices and conduct as input toxxxxxxxxxxxxxxxx

policymaking and supervision anddevelop consumers’ trust in thefinancial system. This pioneeringsolution offers it with the wealth ofdata and intelligence that can be usedto understand consumer sentiment,identify emerging risks andopportunities, input to thesupervisory process, and ultimatelystrengthen trust in the financialsystem. The chatbot, in effect,amplifies the voice of the financialconsumer as input to policy making,regulation, and supervision. TheChatbot is expected to go live in mid-2020.

The BSP also won in the DataManagement Initiative category withthe development of a prototypeAPI-based prudential reportingsystem. This is part of BSP’scontinuing effort to strengthen itssupervisory capacity in a rapidlyevolving financial services landscape.

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Photograph courtesy of Central Banking Publications

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Strategic Thrust 3 Creating compelling

value propositions for a transaction account

In the 2017 Financial Inclusion Survey of the BSP, one ofthe top cited reasons for not having an account by the52.8 million unbanked Filipino adults is a reported lack ofneed for such. An account is typically associated as a toolfor saving, and not for anything else. The perceived lowutility of an account is corroborated by the fact only 18%of Filipino adults used their account for payments.Meanwhile, Findex data showed only 22% of wageearners receive salaries through an account; only 2.3%used an account to pay utilities; and 10% receivedgovernment payments through an account. Payments –sending and receiving funds – can be a critical use casefor an account among the unbanked considering thatnearly 9 out 10 reported to have payment transactions.To turn account ownership from being perceived as aluxury for some to a necessity for all, it is imperative todeliberately shift payment of social cash transfers, salariesand wages, remittances, bills payment from cash-based toaccount-based digital transactions.

Social Cash Transfers

The BSP is working closely withthe DSWD and the Land Bank ofthe Philippines to ensure the useof full-service transaction accountfor the distribution of the cashgrants under the PantawidPamilyang Pilipino Program (4Ps).Under the program, beneficiaryhouseholds receive health andeducation grants, subject tocompliance with programconditions. Depending onhousehold composition, monthlytransfers range from PhP500-2,000, which are paid everytwo (2) months.

Promoting financial inclusion among thebeneficiaries through the use of transactionaccounts is clearly aligned with theobjective of 4Ps as a human capitaldevelopment and poverty alleviationprogram. Through these transactionaccounts, beneficiaries will have the toolsto practice the discipline of saving, and usedigital payments to build a digital profilethat can be leveraged to access lower-costcredit.

Accordingly, the use of transactionaccounts for the 4Ps has beeninstitutionalized in the implementing rulesand regulations of RA No. 11310(“Pantawid Pamilyang Pilipino Program(4Ps) Act”).

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Box Article 3: Pantawid Pamilyang Pilipino Program

Launched in 2008, the Pantawid Pamilyang Pilipino Program has rapidlyexpanded to become the largest social protection and human developmentprogram in the Philippines. The program has been recently institutionalized withthe passage of RA No. 11310 or the “Pantawid Pamilyang Pilipino Program (4Ps)Act” in April 2019. The law provides stability and continuity to a program thatplays a central role in the government’s strategy to accelerate investment inhuman capital and break the intergeneration cycle of poverty.

With the objective to keep children in school and healthy, the program providesmonthly transfers to poor households with children and/or pregnant women, onthe condition that the household members comply with respective health andeducation conditions. The program covers about 4.4 million households, whichrepresent around 22% of the total population, making the Pantawid Pamilya oneof the largest conditional cash transfer (CCT) programs in the world. In 2019, theprogram budget amounted to 89 billion pesos.

Source: World Bank Social Protection Concept Note, September 2019

Private Sector Wages

The BSP and the Department of

Labor and Employment (DOLE) are

working together to promote the

use of transaction account for the

payment of wages and salaries. Part

of the game plan is to launch a

series of stakeholder forums on the

benefits of account-based wage

payments for both employee and

employer and the issuance of a

labor advisory encouraging

employers to use transaction

accounts. The first forum was held

in November 2019 with more than

150 participants from various

employer and worker groups.

“When we have a transaction account, we enjoy all the benefits afforded bydigital payments and innovations. When we have a transaction account, weare able to meaningfully participate in the gains of an increasingly digitaleconomy. Hindi tayo napag-iiwanan.

We organized this forum, as we believe that you, the labor and employmentsector, have much to gain and can play a big role in advancing financialinclusion. Payment of salaries and wages is a compelling opportunity to opentransactions accounts for our workers.

And based on existing official data, there are 25.5 million strong workforce inthe country—a massive client base that is hard to ignore for both financialservice providers and policymakers in our pursuit of our financial inclusionagenda.”

– Governor Benjamin E. Diokno Diokno in his closing remarks

for the First Financial Inclusion Forum for the Labor Sector

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Box Article 4: BSP and Department of Labor and Employment (DOLE)promote financial inclusion before the Labor Sector

The BSP, in partnership with DOLE, held a Financial Inclusion Forum for the LaborSector on 18 November 2019 at the BSP Complex in Manila. The event wasattended by more than 150 participants from various employer and workerassociations which included organizations of informal laborers such asconstruction workers and kasambahays.

The Forum was organized to promote awareness of digital payment innovationsthat can be used as a tool to further financial inclusion, more specifically byencouraging the distribution or payment of wages through formal transactionaccounts. The Forum featured speakers from the BSP’s Payment SystemsOversight Department (PSOD) which discussed InstaPay and PesoNet, as well asdigital payment solutions offered by market providers from GCash, PayMaya,Cebuana Lhuillier Rural Bank and Union Bank who all discussed their innovativeproduct offerings suitable for the workers and their employers.

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QR Ph

The use of QR codes for paymentshas been gaining traction as afaster, more convenient andcheaper alternative to thetraditional debit and credit cardpayments, especially for smallmerchants and consumers.Accordingly, BSP issued Circular No.1055 requiring all payment serviceproviders (PSP) to adopt thenational QR code standarddeveloped by the PhilippinePayments Management, Inc. (PPMI)to promote interoperability in theQR-driven payment services.

On 22 November 2019, the BSPand the payments industrylaunched the pilot P2P paymentuse case based on the national QRcode standard called QR Ph.

The event demonstrated how secure andeasy transfer of funds are by scanningthe QR code. Funds are transferred real-time via InstaPay. The pilot participantsjoining the event were Asia United Bank(AUB), China Banking Corporation (CBC),Land Bank of the Philippines, RizalCommercial Banking Corporation (RCBC),Paymaya, and Union Bank of thePhilippines (UBP).

“The digital life is upon us, and we can harness this tomake sure internet access and mobile phone ownership donot only lead to better social connections and convenientshopping, but also and more importantly, to greater abilityfor all Filipinos to use welfare-enhancing financial services.

Our financial inclusion and digital payments agendanecessarily go hand-in-hand. One is both an enabler and arequisite for the other. Our vision is to have more marketvendors, jeepney, and tricycle drivers accepting digitalpayments through QR code linked to transactionaccounts.”

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– Governor Benjamin E. Diokno in his closing remarks for the

First Financial Inclusion Forum for the Labor Sector

On 22 August 2019, Pres. Rodrigo Dutertesigned into law RA No. 11439 (ActProviding for the Regulation andOrganization of Islamic Banks) to promotesocioeconomic development in MuslimMindanao – the country’s poorest regions– through Islamic Financing. Islamicfinance can deepen financial inclusion notonly as it delivers Shari-ah-compliantproducts for the Muslim communities butalso – and more importantly - because itsvery essence is based on the principles ofsocial justice and equality. Islamic financeproducts are specifically created tosupport the needs and protect the rightsof the poor and underserved.

Islamic finance and financial inclusion,therefore, share a common end-goal.

RA No. 11439 will facilitate thedevelopment of Islamic Financing in thecountry by allowing other domestic andforeign Islamic banking players, eitherfull-fledge Islamic banks or Islamicbanking windows, to operate.Conventional banks will also be allowedto open Islamic banking unit or toestablish a separate subsidiary Islamicbank. As the appointed regulator, BSPenvisions a regulatory regime thataccommodates Islamic finance within aflexible but secular unitary framework.

In the Spotlight:

Islamic banking towards financial inclusion

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“For a country with Muslims representing 10% of its people, our financialinclusion narrative would be incomplete without touching on Islamicbanking and finance. This statement becomes even more relevant whenfaced with the inconvenient truth that the three poorest provinces in thecountry are predominantly Muslim, namely: Lanao del Sur, Sulu, andBasilan.”

– Governor Benjamin E. Diokno in his remarks for the 4th International Islamic Finance Conference

Despite its important role in promoting

inclusive economic growth, the

agricultural sector faces persistent

challenges in financing is constraining its

development. The mandated agri-agra

credit allocation has not effectively

improved the banking system’s exposure

to the sector with its measly ≈3% share in

the banks’ total loan portfolio. Agriculture

financing constraints abound, including

the lack of bankable projects, limited

technical expertise of banks, and the high

vulnerability of the sector to unfavorable

weather conditions and commodity price

fluctuations.

Recognizing these constraints, the BSP is

promoting agriculture value chain

financing (AVCF) as an innovative and

sustainable financing approach. Well-

organized value chains provide farmers

and farming groups access to modern

farming technologies and high value

markets – thereby improving their

productivity and income potential. AVCF

is an innovative approach as it uses the

strength of the entire value chain in

determining the creditworthiness of the

agri-entrepreneurs who otherwise would

not be able to access credit if banks only

relied on their individual credit profile.

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In the Spotlight:

Promoting agriculturevalue chain finance

The project kicked off in September 2019with the conduct of a bankers’ forum toformally present the pilot mechanics andelicit expression of interest toparticipate. Expected full roll out of theproject is in January 2020 with theselection of the participating banks andthe completion of the initial scoping ofthe potential value chain projects andenterprises for financing by the ADBconsultant.

It is envisioned that the successfulimplementation of the pilot willdemonstrate the viability of AVCF as afinancing approach and encourage morebanks to adopt it in order tostrategically serve the agriculture sector.

Lessons from the pilot will be used asinput for the development of an AVFCguide or toolkit and training program forthe banking industry.

Toward this end, the BSP is working withthe Asian Development Bank on a pilotAVCF with selected participating bankswhich will receive technical assistance.The project takes off from the results ofthe 2017/18 AVCF study conducted bythe ADB for the BSP which highlighted,among others, the need to develop thetechnical capacity and interest of banksto undertake AVCF.

The project also aims to forge strongercollaboration by banks and governmentagencies that have capacity buildingprograms for farmers andagrienterprises. By leveraging on thesegovernment programs, participatingbanks will be able to tap into anorganized pool of value chain players andprojects that are made bankable by theproductivity-enhancing and marketlinkage support services received. Thegovernment, on the other hand, will beable to optimize the desired programoutcomes by expanding the financingoptions for the target beneficiaries.

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BSP actively participates in international

forums as a platform to support financial

inclusion as a global development agenda

and nurture a community of committed

financial inclusion advocates. Through

these forums, the BSP continues to

reinforce its thought leadership and keep

abreast of emerging issues and trends in

financial inclusion.

International engagements enable the

BSP to participate in and shape key policy

discussions, as well as cultivate and

maximize networks that provide a source

of expertise and resources needed to

realize financial inclusion-related policies

and programs.

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In the Spotlight:

Supporting global discussionson financial inclusion

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Memberships

Alliance for Financial Inclusion (AFI).As one of the founding members of theAFI, the BSP remains an active member ofthe AFI network. AFI is a global alliance offinancial policymakers from developing andemerging countries working together toincrease access to appropriate financialservices for the poor. The BSP hasrepresentation in all AFI Working Groupslooking at the critical aspects of financialinclusion such as digital financial services,small and medium enterprise (SME)finance, consumer protection, globalstandards proportionality, nationalstrategy, data and measurement, andsustainable finance.

In September 2019, the Alliance forFinancial Inclusion (AFI) launchedpolicy models on E-money and DataCore Set. These knowledge productsconstitute practical policy solutions orhigh impact policy lessons that maybe adopted by members of thenetwork.

Box Article 5: A True Champion of Financial Inclusion

In recognition of the outstandingcontributions of the late GovernorNestor A. Espenilla, Jr. to theadvancement of financial inclusion,the Alliance for Financial Inclusionwith funding from its partners hasestablished the Nestor Espenilla Jr.Financial Inclusion Policy InnovationAward. The Award will be given toinstitutions that have made significantimpact in increasing access, usage orquality of formal financial services tothe unbanked population throughfinancial inclusion policy innovation.The Award provides monetary grantto the recipient institutions to enableit to further advance their financialinclusion agenda.

Governor Espenilla was instrumentalin the establishment anddevelopment of AFI. He served as theChairman of the AFI SteeringCommittee from 2012 to 2014, onbehalf of Governor Amando M.Tetangco, Jr. Since AFI’s inception,Governor Espenilla exhibited financialinclusion leadership in many ways.He led AFI in its transition toindependence and was contributoryin launching the Maya Declaration.

He championed impactful, innovativeand inclusive policies and approaches, aswell as helped shape the global financialinclusion agenda. There is widerecognition across the AFI Network andthe global financial inclusion communityof the spirit of innovation andcommitment to financial inclusion thatGovernor Espenilla embodied and thatthe BSP continues to champion

Late Governor Nestor A. Espenilla, Jr.

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Association of Southeast AsianNations (ASEAN). The BSP currentlyco-chairs with Autoriti MonetaryBrunei Darussalam (AMBD) theWorking Committee on FinancialInclusion (WC-FINC), one of theworking committees establishedunder the Economic Community ofASEAN to achieve regional financialintegration.

Work done under the 2019 priorityprograms of WC-FINC are namely:(a) conduct of digital financial services(DFS) self-assessment based on theGuidance Notes; (b) presentation ofcase studies on DFS by ASEANMember States (AMS) as part ofknowledge sharing initiative; (c) on-going development of Guidance Noteson Monitoring Financial InclusionToolkit; and (d) continued capacitybuilding programs.

Eleven (11) capacity building eventswere conducted in 2019, along withstrategic capacity building activitieswith development partners on keyareas such as consumer protectionand digital financial literacy,Monitoring and Evaluation frameworkfor AMS.

Better Than Cash Alliance (BTCA). BTCA

is a partnership among governments,

private organizations, and development

institutions aimed at broadening

inclusive growth by supporting the

transition from cash to digital

payments. The BSP is a BTCA member

and presently serves as a regional

representative to the Alliance’s Editorial

and Publication Committee.

In December 2019, BTCA released its

study which reported that the volume

of e-payments usage in the Philippines

grew from 1% in 2013 to 10% in 2018,

while the value of e-payments rose

from 8% to 20% during the same

period. The study also revealed that

women in the Philippines are ahead of

the men in adopting digital payment

solutions.

Other Engagements. The BSP is also

part of the Innovations for Poverty

Action (IPA) Policy Advisory Group,

Fintech Leaders’ Roundtable, Islamic

Financial Services Board (IFSB) Task

Force, and G20 Global Partnership for

Financial Inclusion (GPFI).

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Knowledge Exchange and Study Visits

The BSP regularly conducts knowledge exchange programs and hosts study visits as

part BSP’s commitment as active member of the global community advocating

financial inclusion and as a leading voice and thought leader. In particular, the BSP

shares its roles in microfinance, regulatory and financial inclusion initiatives, such as

the National Strategy for Financial Inclusion (NSFI), to interested institutions.

For 2019, the BSP hosted 52 participants fromthe following central banks/monetaryauthorities and international institutions:

- Bank of Uganda- Chuo University- Swabalamban, Nepal- Rural Microfinance Development Center of

Nepal- Center for Self-Help Development of Nepal

ACKNOWLEDGEMENTS

The cover and section photographs featured in thispublication are courtesy of the BSP, MicrofinanceCouncil of the Philippines, Inc. (MCPI), GoogleImages, and Mr. Manuel Ligon.

FINANCIAL INCLUSION INITIATIVES 2019

Bangko Sentral ng PilipinasA. Mabini cor. P. Ocampo Streets, Malate, Manila 1004

http://www.bsp.gov.ph/about/advocacies_micro.aspfinancialinclusion@bsp.gov.ph