FINANCIAL INCLUSION IN THE PHILIPPINES: A REGIONAL ASSESSMENT TATUM BLAISE TAN

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1 FINANCIAL INCLUSION IN THE PHILIPPINES: A REGIONAL ASSESSMENT TATUM BLAISE TAN

2 FINANCIAL INCLUSION IN THE PHILIPPINES Financial inclusion aims at drawing the unbanked population into the formal financial system so that they have the opportunity to access financial services ranging from savings, payments, and transfers to credit and insurance. (Hannig and Jansen 2010) Eight out of ten households are unbanked In terms of credit, among the respondents who borrowed, banks were not among the main sources of financing. Consumer Finance Survey, BSP, 2009 The Philippines consistently fell under the low IFI category in two separate studies covering the years 2004 to Cross-country research by Sarma (2008 and 2012)

3 MOTIVATION OF THE STUDY The study intends to delve deeper in explaining the relatively weak state of financial inclusion in the Philippines by providing a more empirical regional-wise analysis on the issue and identifying the socio-economic factors that could shed light on the financial inclusion gap across the different regions.

4 % ADOPTING THE RESEARCH DESIGN SARMA (2012) Dimension( Notation( Indicator(*( Bank%penetration% Pi% Number%of%bank%accounts%per%1000%adult% population% Availability% banking%services% of% ABS i % Number%of%banking%offices%per%1000%adult% population%% Number%of%ATM%per%1000%adult%population% Number% of% alternative% financial% service% providers%per%1000%adult%population% Usage% U i % Outstanding% loans% and% deposits% as% proportion% of%the%region s%gdp% The formula for the IFI becomes:!!"!! = 1 2!!! +!"#!! +!!!! 3 + 1!!!! + 1!"#!! +! 1!!! 3!

5 PRESENTATION OF RESULTS Regions Banking Penetra/on Availability of Banking Services Usage Na/onal Capital Region Cordillera Administra/ve Region I- Ilocos II- Cagayan Valley III- Central Luzon IV- A Calabarzon IV- B MIMAROPA V- Bicol VI- Western Visayas VII- Central Visayas IFI

6 PRELIMINARY RESULTS (CONT.) Regions Banking Penetra/on Availability of Banking Services Usage VIII- Eastern Visayas IX- Zamboanga Peninsula X- Northern Mindanao XI- Davao Region XII- SOCOSKSARGEN XIII- CARAGA Autonomous Region of Muslim Mindanao Average Legend: Red font High IFI region (0.6 to 1) Black font Medium IFI region (0.3 to < 0.6) Blue Font Low IFI region (below 0.3) IFI

7 LOW IFI REGIONS

8 CORRELATION WITH SELECTED SOCIO-ECONOMIC INDICATORS

9 INDICATOR I: GDP PER CAPITA, BY REGION (HIGH VS. LOW IFI REGIONS), , , , ,000 Financial inclusion and income levels tend to move in the same direction. Sarma (2012) 150, ,000 50,000 0 NCR Central Luzon Calabarzon Central Visayas Davao Region Ilocos Cagayan Valley Mimaropa Bicol Eastern Visayas Zamboanga Peninsula SOCOSKSARGEN CARAGA ARMM III IV-A VII XI I II IV-B V VIII IX XII XIII Source: National Statistical Coordination Board

10 INDICATOR II: POVERTY INCIDENCE AND SUBSISTENCE INCIDENCE, 2012 In percent Poverty Incidence Subsistence incidence 0 NCR CAR Ilocos Cagayan Valley Central Luzon Calabarzon Mimaropa Bicol Western Visayas Central Visayas Eastern Visayas Zamboanga Peninsula Northern Mindanao Davao Region SOCOSKSARGEN CARAGA ARMM I- II- III- IV-A IV-B V- VI- VII- VIII- IX- X- XI- XII- XIII- Source: Poverty Statistics, National Statistics Of9ice

11 INDICATOR III: LEVEL OF URBANIZATION NCR CAR Ilocos Cagayan Valley Central Luzon Calabarzon Mimaropa Bicol Western Visayas Central Visayas Eastern Visayas Zamboanga Peninsula Northern Mindanao Davao Region SOCOSKSARGEN CARAGA ARMM I II III IV-A IV-B V VI VII VIII IX X XI XII XIII Source: National Statistics Of2ice

12 INDICATOR IV: FUNCTIONAL LITERACY RATE, NCR CAR Ilocos Cagayan Valley Central Luzon Calabarzon Mimaropa Bicol Western Visayas Central Visayas Eastern Visayas Zamboanga Peninsula Northern Mindanao Davao Region SOCOSKSARGEN CARAGA ARMM I II III IV-A IV-B V VI VII VIII IX X XI XII XIII Notes: 1) Includes years old 2) The national literacy rate is Source: National Statistics Of9ice

13 INDICATOR V: MAIN SOURCE OF INCOME (ENTREPRENEURIAL ACTIVITIES) Share of Microenterprises, % 6% 95% 5% 90% 85% 80% 4% 3% 2% 1% 75% 0% NCR CAR Ilocos Cagayan Valley Central Luzon Calabarzon Mimaropa Bicol Western Visayas Central Visayas Eastern Visayas Zamboanga Peninsula Northern Mindanao Davao Region SOCOSKSARGEN CARAGA ARMM I- II- III- IV-A IV-B V- VI- VII- VIII- IX- X- XI- XII- XIII- Share of Microenterprises to Total Number of Establishments (LHS) Share of Microenterprise loans to Total Loans (RHS) Sources: Bangko Sentral ng Pilipinas and Department of Trade and Industry

14 INDICATOR VI: SHARE OF AGRICULTURE IN TOTAL EMPLOYMENT, % 70% 60% 50% 40% 30% 20% 10% 0% NCR CAR Ilocos Cagayan Valley Central Luzon Calabarzon Mimaropa Bicol Western Visayas Central Visayas Eastern Visayas Zamboanga Peninsula Northern Mindanao Davao Region SOCOSKSARGEN CARAGA ARMM I- II- III- IV-A IV-B V- VI- VII- VIII- IX- X- XI- XII- XIII- Legend: Yellow columns High IFI region; Gray Medium IFI Region, and Orange Low IFI region Source: Bureau of Agricultural Statistics

15 CONCLUSION AND RECOMMENDATION Regional-wise results comport with the findings of cross-country studies (income, poverty incidence, and literacy rates) On a more distinct note, Low IFI regions in the study appear to have: extrication between the availability of financial services and its actual utilization. predominance of entrepreneurial activity as the main source of income and high share of employment to agriculture.

16 CONCLUSION AND RECOMMENDATION Promote financial literacy Strengthen the institutional presence and develop of innovative financial instruments Decentralization of development Support Islamic banking

17 REFERENCES Hannig, A. and Jansen, S. (December 2010). Financial Inclusion and Financial Stability: Current Policy Issues, Asian Development Bank Working Paper No /12/21/4272.financial.inclusion.stability.policy.issues/ what.is.financial.inclusion/#sthash.ydj70iqh.dpuf Sarma, M. (June 2008). Index of Financial Inclusion, Indian Council For Research On International Economic Relations, Working Paper No Sarma, M. (July 2012). Index of Financial Inclusion- A Measure of Sector Inclusiveness, Berlin Working Papers on Money, Finance, Trade and Development, Working Paper No. 07/ wp_07_2012_sarma_index-of-financial-inclusion.pdf Bangko Sentral ng Pilipinas (BSP) (2009). Consumer Finance Survey(CFS).

18 THANK YOU