Bangko Sentral ng Pilipinas

Financial Inclusion Initiatives 2017

Acknowledgement

Photographs used for the main andsection covers are from the MicrofinanceCouncil of the Philippines, Inc., (MCPI)featuring microentrepreneurs nominatedfor Citi Microentrepreneurship Awards(CMA) in the past years.

Table of Contents

The BSP and Financial Inclusion……………………………..1

Financial Inclusion Initiatives for 2017

Policy Initiatives …………………………………………………3

Stakeholder Partnerships and Advocacies…………..6

Financial Education and Consumer Protection…….12

International Engagements…………………………………16

Measurement and Monitoring……………………………20

In brief:

The BSP and Financial Inclusion

Financial inclusion is aboutproviding all Filipinos access toaffordable and client-centeredfinancial services that can help thembuild a better life for themselvesand their families.

Since 2000, the BSP has beennurturing an enabling environmentfor the delivery of financial productsspecifically for the low income andvulnerable sectors of society. Thegoal was to mainstreammicrofinance as a banking activityand enable market-based solutionsto address frictions and promotefinancial inclusion in a moresustainable manner. This approachhas enabled 163 banks – mostlyrural banks in the countryside – toserve more than 1.71 millionmicroentrepreneurs. Beyond credit,the microfinance regulations havealso enabled delivery of otherfinancial products such asmicrodeposit and microinsurance.

Moreover, our pioneering regulatoryframework for e-money issued in

2009 opened up the market to non-bank players and expanded theaccess points in the country.

Registered e-money accountscurrently stand at 11.4 million.

At present, 90.1% of ourmunicipalities have at least oneaccess point and 65.1% have bankbranches. Access point per 10,000adults stood at 9.8. These figures areexpected to grow as banks set upmore low-cost, low-key access pointssuch as branch-lite units and cashagents. Increased accessibilityhelped in improving usage offinancial services, as can be seen inthe year-on-year growth in deposits,both in terms of count (5.6%) andvalue (14.2%).

Based on latest available figures,31.3% adult Filipinos have atransaction account (Findex 2014)and 14% have a savings account(National Baseline Financial InclusionSurvey 2015).

Digital technology can significantly reducetransaction costs and expand reach – making itpossible and even compelling for banks andother financial institutions to serve the hugelyuntapped low–income market.

163Banks with

microfinance

Building on these gains, the BSPcontinues to create an enablingregulatory environment forfinancial inclusion. This time, it issetting its sights on digitalinnovations as catalyst andstrategic enabler for financialinclusion. Digital technology cansignificantly reduce transactioncosts and expand reach – makingit possible and even compellingfor banks and other financialinstitutions to serve the hugelyuntapped low–income market.

The goal is to develop a digitalfinance ecosystem that supportsthe diverse needs of all users in amanner that is secure,sustainable, convenient andaffordable. For the serviceproviders - whether new orincumbent, this ecosystemenables them to tap into a widerclient base, diversify revenuesources and secure new growthopportunities. To us, thisillustrates how the pursuit offinancial inclusion can supportfinancial stability objectives.

1.71Microfinance

clients

million

11.4E-moneyaccounts

million

Municipalities have at least one

access point

65%90%Municipalities

have bank branches

Filipino adults with transaction and savings account

respectively

31.3%14%

1

The pillars of such anecosystem would include:

1. An efficient retail paymentsystem that facilitatesdelivery of digital products,especially for small valuetransactors;

2. An expansive network oflow cost touch points toonboard new clients andfacilitate the digitizing anddisbursing of cash and otherfinancial transactions; and

3. Democratized access to atransaction account,wherein every person –regardless of economic andsocial stature – is able toopen an account and usedigital finance products.

Efficient retail payment system

Democratized access to a

transaction account

Expansive network of low cost touch

points

Financial education and sound market conduct

Undergirding these pillars arefinancial literacy and goodmarket conduct which aim todeepen the public’s trust infinancial products,particularly those offered indigital channels.

Together, these elements arecrucial not only to providethe unbanked access to anaccount, but also and mostimportantly, to enable themto actively use it and buildproductive relationship with

The goal is to develop a digitalfinance ecosystem that supports thediverse needs of all users in amanner that is secure, sustainable,convenient and affordable.

2

a formal financial institution.This can lead to greateraccess to other financialservices, including credit,investments and insurance.With technology, an enablingregulatory environment and akeen understanding of thelow-income market, banksand other service providerscan develop products thattruly meet the needs of theirclient.

Policy initiatives

3

Policy Initiatives

The BSP’s policy initiatives that promote efficiencies, level playing field,

responsible innovation and consumer protection create an enabling environment

for financial inclusion. While policy initiatives presented hereunder cover broader

regulatory objectives and issues, they are of particular relevance to financial

inclusion as they impact on the accessibility, affordability and fitness of financialproducts in the market.

• Circular No. 938 on the newsupervisory framework forpawnshopsIn light of the important role ofpawnshops in building a moreinclusive financial system, the BSPadopted a new supervisoryframework to strengthen thegovernance and market conduct ofthese entities. Pawnshop operatorsare now subject to stricter fit andproper rules and applicablestandards of corporate governance.They are also now required to adoptrelevant BSP regulations on financialconsumer protection, particularlyon disclosure and transparencystandards.• Circular No. 940 on Cash AgentThe cash agent regulation issuedunder Circular No. 940 allows banksto tap third-party entities as lowcost, low-key touch points.Promoting digital finance does notmean we do not need the physicalaccess points anymore. They are infact still crucial for on-boarding newclients and enabling them to movefrom cash to digital and vice versa.This ability to easily move from cashto digital helps promote ownershipand use of transaction accounts,particularly in the low-incomemarket.

• Circular No. 942 on the enhancedoversight framework for moneyservice businessesThe 2014 Global Findex Data of theWorld Bank shows that about three-quarters of Filipino adults whoreported sending or receivingremittances said that they use amoney transfer operator. Thisillustrates the important role ofremittance and transfer companies(RTC) in the provision of basicfinancial services especially to theunbanked. The BSP has accordinglyenhanced the existing regulations toensure that these entities areproperly supervised for theireffective compliance with AML andinternal control rules and guidelines.Regulated RTC include remittanceagents, remittance platformproviders and e-money issuers.• Circular No. 944 on VirtualCurrency (VC)Another recent issuance is theregulation of VC exchange entitiesand VC-based remittance business.Accordingly, such VC entities are nowsubject to BSP regulations to ensuretheir effective compliance with AML-CFT rules and relevant riskmanagement guidelines, especiallyon technology risk and consumerprotection. Regulating the VC

entities signifies BSP’sacknowledgement of virtualcurrency as an innovativeinstrument that can facilitate thespeed and affordability ofremittance and paymenttransactions.• Circular No. 950 on Risk-based and ICT-enabled KYCThe BSP Circular No. 950introduced refinements in theconduct of customer duediligence, among others. Underthe new rules, banks and othercovered institutions are allowedto offer a restricted account tocater to the unbanked sectorwho for valid reasons may notbe able to provide completecustomer information or anyvalid ID upon on-boarding. Theamendments also recognized theuse of information andcommunication technology andother reliable, independentsource documents, data orinformation for customeridentification and verificationsubject to appropriate controlsto manage attendant risks.These will facilitate customer on-boarding of the unbankedcustomers, especially in ruralareas.

4

• Circular No. 980 on the NationalRetail Payment System (NRPS)The BSP issued Circular No. 980 on 6November 2017 whichoperationalizes and enforces theadoption of the NRPS by the BSPsupervised financial institutions.NRPS is built on the principles ofinteroperability, inclusiveness and“coopetition”. With the issuance ofthis Circular, BSFIs are required toadopt transparent and fair marketpricing of electronic payments,transition from exclusive bilateral tomulti-party clearinghouseagreements and provide electronicfund transfer facilities in all availablechannels, among others. Byestablishing an interoperableecosystem allowing seamlesselectronic fund transfers andpayments between and amongaccounts, NRPS is a critical platformfor delivering innovative financialproducts particularly those designedfor the low-income market.• Basic deposit account (BDA) –for Monetary Board approvalHaving completed its consultationprocess, the BSP is now finalizingthe proposed BDA circular. BDA isdesigned as a low-cost, low-riskaccount, which will only requiresimplified KYC. The reduced KYCfeature has to be explicitly providedgiven the banks’ proclivity to apply“normal” rating for their depositclients, even for those who may berightfully classified as low risk. Toincentivize banks to market andoffer it to the unbanked, the BDA isproposed to have zero reserverequirement and insurancepremium, subject to the approval ofthe Philippine Deposit InsuranceCorporation (PDIC).

• Branch-lite (Approved by theMonetary Board on 14 December)“Branch-lite” is a concept whichallows a bank to perform bankingactivities and services chosen froman expanded menu of transactionaland non-transactional activities. This

Launched in late 2015, the NRPS is aregulatory framework that aims topromote the efficiency and safety ofretail payments in the country, ascharacterized by the increasedusage of digital payments, from thecurrent 1% to 20% by 2020. Anefficient retail payment system is apillar of digital financial inclusion.Central to the NRPS are themultilateral clearinghouseagreements for payment schemesthat will facilitate convenient,affordable and secure fund transfersbetween bank and e-moneyaccounts. The two priority paymentschemes are the PESO Net for batchfund transfer credit, and InstaPay

for 24/7, real-time low-valuetransfer credit.After months of industrydialogue and engagement, PESONet was launched on 8November 2017 while InstaPay isexpected to be launched in2018. The Philippine PaymentManagement. Inc. (PPMI) wasalso officially incorporated inAugust 2017, setting in place anindustry-led governance bodythat will drive optimal industrycollaboration, develop andimplement standards, andfacilitate strategic initiatives for amodern and efficient retailpayments.

gives the bank the flexibilityto determine theappropriate size andmodel of a banking officefor a specific area or localitybased on the market needs.

NRPS: Full steam ahead

Thirty three (33) BSP-supervised financial institutions (BSFIs) signed the PESONet ACHwhich was launch on 08 November 2017 in the BSP, City of Manila

5

Stakeholder Partnerships and Advocacies

6

Stakeholder Partnerships and Advocacies

While the BSP as a regulator is the primary shaper of the country’s financial

inclusion landscape, it recognizes that achieving the goal is a multi-stakeholder

undertaking. The BSP builds and leverages strategic partnerships with other

government agencies, the industry, multilateral organizations and civil society.

Engagement with these stakeholders are necessary to increase awareness and

broad-based support for financial inclusion, whether for the development of the

crucial financial infrastructure, promoting financial literacy or shaping laws and

regulations.

National Strategy for FinancialInclusionLaunched in 2015, the NationalStrategy for Financial Inclusion(NSFI) is the primary platform forinteragency cooperation. The NSFIhas been and continues to beinstrumental in securing the supportof the private sector

BSP and ADB conceptualized this conference with the goal of expanding ourcollective sense of possibilities for agri value chain financing and sparkingrenewed commitment to support the agriculture sector in the country…Wecannot talk about inclusive development and growth without giving earnestattention to this important sector.

Value chains can facilitate increased private sector financing by improving theproductivity and business sustainability of the chain actors, particularly thesmallholders. By addressing key risk factors such as unstable markets andincome source, value chains can encourage banks to develop products that canviably serve the financing needs of the actors in the chain.

Excerpt from the Closing Remarks of Former Governor Amando M. Tetangco, Jr. delivered during the BSP-ADB Conference on Financing Agri Value Chains on 10-11 May 2017

and development partners forfinancial inclusion. For 2017, thesewere as follows:• In May, the Asian Development

Bank sponsored a two-dayagriculture value chain financing(AVCF) conference attended by100 participants from banks,government, academe and NGOs.

It aims to promote AVCF as aninnovative approach to agriculturefinancing. ADB is also funding astudy to develop a roadmap topromote innovative agriculturefinancing in the country, particularlythrough AVCF and digital finance.• The World Bank will commence

its technical assistance for theconsolidated credit guaranteeprogram spearheaded by theBureau of the Treasury.

• The private sector (e.g., Fintq andBDO Foundation) have launchedadvocacy programs asimplementation support to theNSFI.

Financial Infrastructure DevelopmentThe BSP continues to activelyengage legislators and othergovernment agencies for thedevelopment of the neededinfrastructure to support financialinclusion. These engagementsinclude:

7

Digital IDThe BSP is working closely withthe lead government agencies(i.e., the Philippine StatisticsAuthority and Department ofFinance) for the passage of thenational ID bill which wasidentified by the LegislativeExecutive Development Council(LEDAC) in its August 2017meeting as an urgent measure.

participate in an increasingly digitaleconomy. The digital ID system is acrucial enabler for financialinclusion, with its potential toaddress persistent onboardingissues on the lack of verifiable IDsand the highly inefficient paper-based KYC processes which makeserving small-value transactorsunattractive.

Launching of theCauayan CityCredit Surety Fundon 02 October2017

"The national ID system will provide all Filipinosthe means to establish a verifiable digitalidentity which will enable them to gainfullyparticipate in an increasingly digital economy”

Secured Transactions Frameworkand Warehouse Receipt SystemSmall and medium enterprises(SMEs) find it difficult to obtaincredit from banks which require realproperty as collateral. Thepreference for fixed assets ascollateral can be attributed to theabsence of a legal framework togovern the use of movable collateral(e.g., warehouse receipt, crops,receivables and equipment). TheBSP is part of the Technical WorkingGroup that drafted the frameworkdocument and proposed bill onsecured transactions1. The proposedbill is an important legislation, as itcan expand the range of propertiesof MSMEs that can be used as loancollateral.

81Together with BAP, SEC, and SME groups for the DOF-LRA-IFC Project on Secured Transactions.

Credit Surety Fund (CSF)The CSF provides a maximum of80% surety cover for loans grantedby banks to borrowers that wouldotherwise have difficulty assessingsuch credit facilities due to usualbarriers such as insufficientcollateral, limited credit histories,and inadequate financial records. Asmandated by the Credit SuretyCooperative Act of 2015 (CSF Act),the BSP continues to spearhead thepromotion of CSF creation andorganizational development in thecountry. In 2017, several milestoneswere achieved, with the CSF loanapproval breaching P4.0 billionserving around 16,000 beneficiaries;launching of the 50th CSF inCauayan, Isabela; and publishing ofthe implementing rules andregulation of the CSF Act.

To support CSF development, theBSP will continue to providetechnical assistance and seminars toCSF cooperatives to enhance theirmanagement capabilities. The BSPwill assist the CDA in setting thecriteria and qualifications for CSFcooperatives and provide such otherforms of assistance as may bedetermined by the Monetary Boardto be consistent with its mandate.

The national ID system is envisionedto be the core identificationplatform that can support a range ofinnovative digital solutions tofacilitate the efficient andconvenient delivery of government,banking and other services. It willbe the trusted single source of truthfor establishing an individual’sidentity, but shall not convey proofof entitlement or eligibility whichthe so-called functional IDs aredesigned for (e.g., driver’s license,passport, social welfare ID). Assuch, the national ID system willhave a minimal set of datarequirements as follows: biometricdata, basic demographicinformation (name, date of birth,sex, address), and the uniquerandomized national ID number.This is aligned with the foundationalapproach for national ID adopted byother countries.As designed, the biometric-basednational ID will provide everyFilipino a means to establish averifiable digital identity which willenable him or her to gainfully

Financial Literacy Campaigns and AdvocaciesThe BSP conducts a number financial literacy and advocacy programs in partnership with various stakeholders.Literacy campaigns are focused on effective personal finance, banking products and services, and consumer rights.Advocacy programs also aim to raise awareness and inspire the public and financial inclusion partners through theachievements and stories of others.

Citi Microentrepreneurship Awards(CMA)The CMA is an awards programdeveloped through a public-privatecollaboration among Citi, BSP, andthe Microfinance Council of thePhilippines, Inc. (MCPI) with thegoal of recognizing inspiringmicroentrepreneurs and raisingawareness on microfinance. Nowon its 15th year, the program hasawarded a total of 123microentrepreneurs. It has beenreplicated by Citi in 34 countrieswhich demonstrates the enduringsuccess of the program.

In 2017, eight microentrepreneurswere awarded: one national winner,three island group winners, and fourspecial awardees for agri,community leadership,green/sustainable business, andyouth categories. Aside from cashprizes, the winners receivedinsurance coverage, mentoring andcapacity building support for thecontinued growth of theirbusinesses.

Guro ng Pag-Asa (Gantimpala parasa Ulirang PagtutuRO ng PAG-iimpok at Araling PanSAlapi)Guro ng Pag-asa is a joint programof the BSP and the Department ofEducation (DepEd) that motivatesteachers to help children developregular saving habits byincorporating lessons on saving,money management, andentrepreneurship

in their curricula. Another award,Bida sa Pag-iimpok atPangkabuhayan is given tostudents or student groups whohave implemented a sustainedsavings and entrepreneurialprogram for at least two years.The awarding ceremony for the2015-2016 winners were held on 7March 2017 in the BSP.

In a ceremony held on 07 March 2017 at the Bangko Sentral ng Pilipinas (BSP), Manila,Department of Education (DepEd) Secretary Leonor Briones (5th from right) and BSPGovernor Amando Tetangco, Jr. (3rd from left), Monetary Board members (from left)Juan De Zuñiga, Jr., Valentin Araneta, (from right) Armando Suratos, and Felipe Medallaled the awarding of the GURO ng PAG-ASA (Gantimpala para sa Ulirang PagtutuRO ngPAG-iimpok at Araling PanSAlapi), an initiative of DepEd and BSP

9

Comprehensive Social Benefits ProgramIn February 2017, the BSP, together with 16 other government agencies, entered into a Memorandum ofAgreement (MOA) to implement the Office of the President's Comprehensive Social Benefits Program (CSBP)which provides assistance to dependents of the uniformed personnel who were killed-in-action (KIA) andwounded-in-action (WIA) on 01 July 2016 onward. Under the CSBP, beneficiaries are required to attend thecapacity building training conducted by the BSP, DTI and TESDA to receive the second tranche of the financial grantamounting to P250,000. To date, the BSP has conducted a total of eight trainings for approximately 640beneficiaries.

Powerhouse in a Small PackageMs. Merle Arnaldo Paete, a native of Sorsogon, was named 2017 Citi Microentrepreneur of theYear. Described as a “powerhouse in a small package,” the diminutive but enterprising Ms.Paete started with a capital of Php 2,000 which she used to put up a sari-sari store. With thehelp of microfinancing and use of her own earnings, she entered into pili cultivation andmaking of bariw or woven mats in 2005.

Buoyed by her ingenuity and can-do attitude, Ms. Paete was able to diversify and add value toher already thriving business. Having learned about how the pili pulp and pili shells can beused to produce the pili oil, she has likewise developed her business into one in which nothinggoes to waste.

At present, Ms. Paete owns a three-hectare pili and coconut plantation, which yields 60,000pieces of pili fruit in a month. With an additional 70,000 pieces of pili fruit sourced fromneighbors, she is able to produce and sell 190 kilos of pili nuts, 20 bottles of pili oil, and 200kilos of pili shells. Ms. Paete is a main supplier of pili nuts, pili oil, and bariw to severalbusinesses, including exporters.

10

Project BRO (BSP Reaches Out)In coordination with theDepartment of Education (DepEd),Project BRO is a full-day series oflearning events targeting studentsenrolled in Grades 1 to 10 inselected public and private schools.It is designed to educate theparticipants of the value of spendingwisely, saving early and saving inbanks. The sessions consist ofgames, fun activities and interactivetalks about saving. At least 90 daysafter the BRO, a “Banking Fiesta” iscoordinated with the BankMarketing Association of thePhilippines (BMAP), wherein BMAPmember banks visit schools andopen kiddie/teen savings accountsfor students, with minimumrequirements (student ID and atleast P100 opening balance). TheBRO awards are conferred annuallyto the outstanding kiddie/teensaver, best saving mentor andoutstanding school of savers. In2017, the BSP has conducted fiveProject BROs covering 15,129students from a total of 49 schoolsrecommended by DepEd.

Banking on Your FutureOn 7 March 2017, the BSP, BankMarketing Association of thePhilippines (BMAP) and the 17partner banks signed a newMemorandum of Agreement on theBanking on Your Future (BOYF)Kiddie and Teen Account Program(KTAP) which was originally

launched in 2009. Under theupdated program, Filipinos 19years and below can open asavings account with 17participating banks with aminimum deposit of P100.00 andwith no maintaining balancerequired. The program is alignedwith the inclusion of financiallessons of the new K-12curriculum of the DepEd. Partnerbanks include BDO, BPI, BPI FamilySavings Bank, China Bank Savings,DBP, EastWest Bank, Maybank,Metrobank, PNB, PS Bank,Philippine Veterans Bank, RCBC,RCBC Saving Bank, Security Bank,Sterling Bank of Asia, UCPB andUCPB Savings Bank.

Stakeholder AwardThe BSP honors institutionalpartners who have shownconsistent and outstandingsupport to the BSP’s mandatesand advocacy programs, includingfinancial inclusion. For six years ina row (2012-2017), the CARDBanking Group has received theOutstanding Financial InclusionChampion Award for its tangiblegains in providing a wide range ofmicrofinance products andservices, especially to the poorand low-income population. ThePDIC received the 2017Outstanding Financial InclusionPartner Award in recognition of itsactive engagement in the

implementation of the NSFI.

Paeng AwardsThe Paeng Awards, formally knownas the Rafael B. BuenaventuraAwards for MicrofinanceInstitutions, was launched in 2013by the Rafael B. Buenaventura MicroFinance Resource CenterFoundation (RBB Foundation) inpartnership with the BSP as atribute to the legacy of the late BSPGovernor Rafael “Paeng”Buenaventura. The Paeng Awardsare given in recognition of thenotable inroads made bymicrofinance institutions intoimproving client service, outreachand institutional efficienciesthrough innovative programs. In2017, citation awards were given totwo microfinance institutions forachievements in disaster riskreduction management programs,and in financial education.

Recipients of the 2017 Paeng Awards pose with the Board of Judges from the RBB FoundationL –R: Fr. Rev. Fr. Jose Victor E. Lobrigo (Simbagsa Pag-asenso, Inc.), Mr. Angelo Solarte(Taytay sa Kauswagan, Inc.), Gov. Amando M. Tetangco, Jr., Mr. Antonino L. Alindogan, Jr., (RBB Foundation), Mr. Rolando B. Victoria (Alalay sa Kaunlaran, Inc.) and Mr. DeograciasN. Vistan (RBB Foundation)

11

Financial Education and Consumer Protection

12

Financial Education and Consumer Protection

Achieving financial inclusion not only necessitates providing access to financial

products, but also equipping users with the knowledge to empower them as

financial consumers. Financially literate consumers understand what it means

and what it takes to be financially resilient, and seek out the products that can

best serve their needs. As they become empowered to demand better products

and to engage only with providers that demonstrate good market conduct, they

themselves become effective tools and partners for promoting financial inclusion

and good governance in the financial system.

Ensuring good market conduct and upholding consumer protection, on the other

hand, are crucial in building trust in the formal financial services. Trust is a

necessary condition for the clients’ sustained use of financial products that lead

to improved welfare.

PisoLitLaunched on 1 September 2017,PisoLit Facebook page provides adigital and social media-focuseddimension to the BSP’s finlitcampaigns. It targets online Filipinos,particularly millennials aged 18 to 34years. PisoLit is distinct and separatefrom the official BSP FB page,allowing flexibility to utilize stylizedfinancial education and consumerprotection content that fits theposting style of the target audience.Key messages include saving foremergencies and retirement,preventing over-indebtedness andavoiding fraud and scams. PisoLitalso capitalizes on online trends toproliferate financial educationmessages more effectively to Filipinonetizens.

13

Economic and Financial Learning Program(EFLP)

The EFLP brings together the BSP’s key economicand financial learning activities under oneflagship program. It aims to increase the level ofpublic understanding of essential economic andfinancial issues to help them acquire theknowledge and the skills needed to make well-informed economic and financial decisions.

In 2017, the EFLP was comprised of the followingmajor component programs: 1)“Be Up to Speedon BSP” Public Information Campaign (PIC) onthe Role of the BSP in the Economy; 2) FinancialLearning Campaign (FLC) for Overseas Filipinos(OFs) and their Beneficiaries; 3) Users’ Forum(UF) on BSP Produced Statistics; 4) Conferenceon Gearing Up for External Competitiveness(CGEC); 5) Financial Education Expo (Fin-EdExpo); and 6) Financial Learning Seminar for theUnbanked.

Forty two learning sessions were conducted in2017 attended by more than 6,000 participants2.Six areas were covered by the BSP-EFLP —Calapan City (Oriental Mindoro), Taguig City,Maasin City (Southern Leyte), Victorias City(Negros Occidental), Siquijor (Siquijor), and SanFernando City (La Union).

PIC on the Role of the BSP in the Economy, Session for theWorkforce Victorias City, Negros Occidental, 15 August 2017

FLC for OFs and their Beneficiaries, Taguig City, 21 June 2017

The seminar was fun and informative. If this kind of seminar will be conducted nationwide, it will create a big difference. Knowledge is power, and if knowledge will be shared from one person to another, the power that it will create might even surpass the expected level. The seminar did not only teach about investing, budgeting, and saving, it

made the listeners realize what they can contribute in the economy, how they can exercise their rights as financial consumers and how they can handle money wisely.

The next day after the seminar, one student found herself in Allied Savings Bank (PNB Savings Bank) inquiring about a savings account. She was hoping her savings would grow

in the future. The motivation from the seminar was the best part, because that was what she lacked. She enjoyed the seminar and she gained a lot of information about financial

management. I should know, because she was me.

Testimonial of Bunny D. Fabila, a third year student of Romblon State University College of Business Administration who attended the Financial Education Seminar

“

“142From year 2000 to November 2017, more than 480 EFLP programs were conducted reaching more than 62,000 participants.

Consumer AssistanceThe BSP has a dedicated unitunder its Financial ConsumerProtection Department (FCPD)which serves as the public’sprimary point of contact forfinancial consumer complaints,inquiries and requests (CIRs). As ofend November 2017, FCPDreceived 9,556 new CIRs aboutvarious issues, thru emails, lettersand walk-ins. Common concernsare on credit cards (32.36%), e-banking (18.17%), lending(13.86%), deposits/unauthorizedwithdrawals (12.91%), and others(17.81%).

FCPD has referred 4,528 CIRs toBSP supervised financialinstitutions (BSFIs) for properaction.

On the average, BSFIs respondwithin 5.72 banking days fromreceipt of FCPD’s referral of newCIRs and within 11.80 bankingdays for subsequent referrals. Asof November 2017, 83.47% of allCIRs in 2017 are either closed orresolved.

Mystery shoppingIn light of the observed marketgrowth and number of complaintsreceived on motor vehicle loans,the BSP is developing a researchtool using mystery shopping toassess consistency ofimplementation of the FinancialConsumer Protection Framework(Circular No. 857) across all BSFIsoffering said loans. The results ofthis study will serve as input topolicy review and design of futuremarket conduct activities.

Financial Consumer Complaints, Inquiriesand Requests

Wealth Watch Book IILaunched on 06 June 2017,Wealth Watch Book II is acompilation of articles on financialfitness and consumer well-being.Book II expands the lessons in thefirst book published in 2015 andfocuses on prudent consumerspending, investment andentrepreneurship.

Consumer advisoriesThe BSP issued three advisories in 2017 through its website and socialmedia accounts on the following topics: 1) responsible use of credit card;2) bank fees for deposit accounts; and 3) un-dispensed ATM withdrawals.

BSP Governor AmandoM. Tetangco, Jr. (frontrow, center) poses withMonetary BoardMembers (MBM), BSPofficers and the bookauthors during thelaunch of WealthWatch Book II in BSP,City of Manila

15

International Engagement

16

International Engagements

The BSP actively participates in international fora which reinforces its thought

leadership in financial inclusion global discussions and builds a community of

partners supporting the country. Through these engagements, the BSP has been

able to tap external resources for the conduct of valuable deep-dives and

researches, knowledge exchange and technical assistance programs.

Alliance for Financial InclusionAs one of the founding members ofthe AFI, the BSP remains an activemember of the AFI network. AFI is aglobal alliance of financialpolicymakers from developing andemerging countries workingtogether to increase access toappropriate financial services forthe poor. The BSP hasrepresentation in all AFI WorkingGroups looking at the criticalaspects of financial inclusion such asdigital financial services, SMEfinance, consumer protection,

Leadership at the Financial Inclusion Data Working Group(FIDWG) of the Alliance for Financial InclusionFrom September 2016 to September 2017, the Philippineschaired the AFI FIDWG, an international working groupconsisting of 56 member institutions from 52 countries.FIDWG develops a common framework to measure financialinclusion and share lessons on financial inclusion data inareas such as target setting, survey methodologies, dataanalysis, and evidence-based policymaking.

Under the chairmanship of the Philippines, FIDWGcontinued its work on sex-disaggregated data to supportwomen’s financial inclusion and created new work streamson monitoring and evaluation of national financial inclusionstrategies, supply-side data collection, and needs-basedapproach in financial inclusion measurement, in response toemerging trends in financial inclusion data.

Mynard Mojica while facilitating the 16th FIDWG Meeting in SharmEl Sheikh, Egypt on 12 September 2017.

FIDWG members, posed for a group photo during their 15th Meeting in Dushanbe on 24-28 April 2017.

global standards proportionality,national strategy, data andmeasurement.

A delegation from the BSP headedby Governor Nestor A. Espenilla, Jr.represented the Philippines in the2017 Global Policy Forum (GPF) inSharm El Sheikh, Egypt on 13-15September 2017. With the theme“Exploring Diversity, PromotingInclusion,” the 2017 GPF tackledemerging topics on financialinclusion such as financialtechnology (FinTech), informal

sector, gender, forcibly displacedpersons (FDPs), and climate change.

During the AFI Awards Night, BSPGovernor Amando M. Tetangco, Jr.received a Leadership Award asformer Chair of the AFI SteeringCommittee. The BSP won the PeerReview Award in recognition of itscontribution in reviewing thefinancial inclusion policies, nationalstrategies, surveys and reports ofother AFI member countries.

17

ASEANThe BSP is a member of the ASEANWorking Committee on FinancialInclusion (WC-FINC). Created in 2015 as aworking group under the ASEANFinancial Integration track, FINC is taskedto deliberate policy actions andcoordinate initiatives to enhancefinancial inclusion in region. The FINCStrategic Action Plan focuses on fouroutcomes: 1) support national financialinclusion strategies; 2) elevate capacitybuilding of ASEAN member states toadvance inclusive and sustainablegrowth; 3) enhance digital financialinclusion; and 4) increase awareness onfinancial education and consumerprotection. The BSP, together with BankIndonesia, currently co-lead thesubgroup tasked to cover outcomenumber 3.

Global Partnership for Financial Inclusion (GPFI)The GPFI is an inclusive platform for all G20 countries, interested non-G20 countries and relevantstakeholders to carry forward work on financial inclusion, including implementation of the G20Financial Inclusion Action Plan . The Philippines, as one of the non-G20 members of GPFI, activelyparticipates in the Subgroup on Regulation and Standard-Setting Bodies (SSBs).

This Subgroup supports the implementation and promotion of the G20 Principles for InnovativeFinancial Inclusion and works to embed financial inclusion in the work of SSBs, consistent withtheir respective mandates.

Recent workstreams of the GPFI include financial inclusion of forcibly displaced persons, financialconsumer protection and data privacy, and leveraging financial services for SMEs in sustainableglobal value chains. In 2017, the Philippines is featured in the Guidance Note on Building InclusiveDigital Payments Ecosystems which provides guidance to policymakers in expanding financialinclusion through the use of digital payments.

Better Than Cash Alliance (BTCA)The BTCA is a partnership ofgovernments, private sector entities, anddevelopment organizations to supporttransition from cash to digital paymentsto drive inclusive growth. The BSP andthe Department of Budget andManagement (DBM) are the principalagencies representing the Philippinegovernment in the Alliance. BTCA hasconducted several case studies for thePhilippines which have been used toinform our digital financial inclusionsstrategies, particularly the NRPS. In 2017,representatives from the BSP and DBMwere part of the knowledge exchangeprogram held in Brazil on theimplementation design of thegovernment’s conditional cash transferprogram and its role in acceleratingdigital financial inclusion.

18

Consultative Group to Assist thePoor (CGAP)The Consultative Group to Assistthe Poor is a global partnership ofmore than 30 leading organizationswhich aims to promote financialinclusion by providing an evidence-based advocacy platform. In 2017,the CGAP together with the BSPcompleted a research exerciseanalyzing how linkages amongInclusion, Stability, Integrity andProtection (I-SIP Framework) havebeen managed in the case of five(5) policy interventions: mandatedagricultural credit, NationalStrategy for Microfinance, andregulations on micro-bankingoffices (MBOs), electronic money(e-money), and pawnshops.

The Philippines I-SIP researchexercise underscored theimportance of identifying potentiallinkages among I-SIP objectives atthe onset of regulations. It alsoconfirmed that expanding financialinclusion is a long-term endeavorthat requires broad-basedparticipation and sustained andfocused efforts by severalstakeholders.

Insight2impact (i2i)i2i is a resource center that aims tocatalyze the provision and use ofdata by private and public sectorsto improve financial inclusionthrough data-driven policies andclient-centric product design. Ithas developed a new financialinclusion measurement frameworkwhich underscores the clients’financial needs as the primaryreference point. The measurementaims to provide policymakers andservice providers insights on whattriggers first use of a financialproduct or service, what drivessustained usage, and howcustomers deploy differentfinancial products and servicestowards meeting the underlyingneed.

i2i is partnering with the BSP forthe pilot testing of the needs-based approach in financialinclusion measurement in thecountry.

Monetary Authority of Singapore(MAS)The BSP signed a cooperationagreement with the MAS tofacilitate promotion of Fintech-ledinnovations in Singapore and thePhilippines by providing a moredefined referral system for FinTechplayers between each authority.Digital innovations by Fintechs canlead to better and more affordablefinancial services benefittingclients, especially the unbanked..

The Philippines I-SIP research exerciseunderscored the importance ofidentifying potential linkages among I-SIPobjectives at the onset of regulations.

19

Measurement and Monitoring

20

Measurement and Monitoring

Gathering and disseminating financial inclusion data are crucial to understanding

the impact of BSP efforts, the progress made and the areas needing

improvement and focus. The BSP monitors the following financial inclusion

dimensions:

In addition to these dimensions, the BSP assesses the quality of the regulatory

environment against global best practices. The BSP uses a wide range of data

sources, including its own internally generated reports, national surveys and

external benchmarking indices. It leverages on the data initiatives of its

international partners to expand its measurement tools.

Access

Usage Quality & welfare

National Financial Inclusion SurveyThe Financial Inclusion Survey (FIS)is a nationally representativebiennial survey that seeks tomeasure financial inclusion from theperspective of actual and potentialusers of financial products andservices. As a demand-side survey, itcomplements BSP’s supply-side datato provide a more holistic picture offinancial inclusion in the country.

The second run of the financialinclusion survey is currentlyunderway and covers the same keyfinancial inclusion measurementdimensions. The questionnaire hasbeen updated based on thelearnings from the baseline survey

in 2015, and to reflect the needs-based approach and focus ondigital financial inclusion.

Report on the State of FinancialInclusion in the PhilippinesThe report is part of the stock-taking process of the BSP to assessthe levels and trends in financialinclusion in the country. The 2016report, which is the sixth editionsince the maiden release in 2011,serves as an inventory of theprogress made in the past six years(2011-2016) and includes latestavailable information as of first halfof 2017.

21

The report features a scorecard that assessed thecountries across four “dimensions” of financialinclusion: country commitment, mobile capacity,regulatory environment, and the adoption oftraditional and digital financial services. In 2016and 2017, the Philippines placed 4th in the overallscore, garnering a perfect 100% in countrycommitment and regulatory environment. Basedon this report, the Philippines needs to focus itsefforts on improving adoption which gained arating of 42%, the lowest among the 9 countries inthe top 5.

World BankThe World Bank has a number of surveys, studies and publications that the BSP uses for benchmarking and toinform policy and other interventions for financial inclusion.

• Enabling the Business of Agriculture (EBA)Since 2013, the EBA has collected and analysed data onlaws and regulations that impact the enabling businessenvironment for agriculture. In 2017, it presented datathat measure barriers for agriculture businessesoperating in 62 countries and provided quantitativeindicators on regulations for 12 areas including finance.Finance indicators measure the quality of laws andregulations that promote access to financial servicesand support the development of agriculturalenterprises. For finance indicators, Philippines ranked33rd globally (62 countries) and 4th in the region (7countries)

• Enterprise SurveyAn Enterprise Survey is a firm-level survey of arepresentative sample of the country’s private sector. Itcovers a broad range of business environment topicsincluding access to finance which has 13 indicators. Thelatest enterprise survey for the Philippines wasconducted in 2015.

• Brookings InstituteSince 2015, the Brooking Institute has been releasing itsannual Financial and Digital Inclusion Report (FIDP)which examines financial inclusion efforts of variouscountries (26 in 2017).

• FindexThe Global Findex database provides in-depth cross-country data on how individuals save, borrow, makepayments and manage risks. The 2014 Global Findexconsists of over 100 indicators, also shown by gender,income and age. The 2017 Global Findex is expected tobe published in 2018.(Lifted from the Findex website http://datatopics.worldbank.org/financialinclusion)

• Global MicroscopeThe Economist Intelligence Unit Global Microscopeexamines the conditions and enabling environment forfinancial inclusion cross-country. For the last three years(2014-2016), the Philippines has been consistently ratedas the top country in Asia and third in the world withthe most conducive environment for financial inclusion.

22

For more information, please contact Inclusive Finance Advocacy Office

at (+632) 708 7482 or email IFASInfo@bsp.gov.ph