Philippines ranks 3rd in global EIU financial inclusion ranking

The Philippines is one of the top three countries in the world that have the most effective financial inclusion programs, based on the “Global Microscope 2014” index of the Economist Intelligence Unit (EIU) which assessed the “enabling environment” of 55 countries.

It is an improvement from the 2013’s ranking which listed the country as fourth in the world.

“Peru, Colombia and the Philippines demonstrate the most conducive environments for financial inclusion,” the report said. The Philippines improved its score to 79 (out of 100) from last year’s 67.9, trailing behind to Peru’s 87 and Colombia’s 85.

EIU highlighted the Philippines’ leadership in the micro-insurance regulation and the government’s committed and documented financial- inclusion strategy or programs. “The Philippines government’s multi-year development plan includes a financial- inclusion strategy with specific commitments, many of which have been implemented, including financial- education initiatives,” said EIU.

The report also discussed the country’s challenges to ensure longterm success such as in implementation. “While the Philippines is at the forefront of promoting and creating an enabling environment for financial inclusion, some sector experts believe that delivery and implementation are weak.”

The fragmented economic sectors are a significant financial, security and logistical challenges, in a country of 7,000 islands. The EIU said the concentration of microfinance institutions (MFIs) in urban and semi-urban areas with larger populations leads to banks charging higher interest rates on loans. “Non-regulated financial institutions, namely, co- operatives, are not well supervised and engage in deceptive practices and charge high interest rates.”

There are also areas that MFIs are too few and scarce, specifically in Mindanao where EIU said coverage for microfinance is “negligible.” The report also pointed out the multiple financing problems or over-indebtedness, however they also acknowledged efforts to improve on this with the establishment of a credit data bureau or the Credit Information Corp. which should be in place by the end of this year. The Credit Information System Act was legislated in 2008.

“Lastly, financial literacy continues to be a problem, as many Filipinos do not understand or value the importance of savings,” said EIU. The report cited a World Bank data that only 26.6 percent of the adult population has a deposit account.

The EIU said the Bangko Sentral ng Pilipinas’ (BSP) efforts to improve and promote financial literacy as part of its financial inclusion agenda have gained traction over