May 15, 2023

How can rural banks in the Philippines improve financial inclusion?

The Philippines is a fast-growing economy. However, there is still a significant gap between those with access to bank accounts and almost 50% of the population who are excluded.

Survey results showed that Filipino bank account ownership surged to 56% in 2021, up from 29% in 2019. This increase is the highest two-year growth since the survey began a few years ago. The expansion was spurred by the covid-19 pandemic, accelerating the use of digital payments, national ID rollout and increase in mobile phone usage.

However, almost 44 to 50% or 34.3 to 36 million Filipino adults remain unbanked as of 2022, as per the Bangko Sentral ng Pilipinas (BSP) – the Country’s central bank. Many of the unbanked live in rural and remote areas and have no access to banking services, such as savings accounts, credit cards, loans, and other forms of digital payments.

It's important to understand that, unlike other countries, the Philippines is not a single large continuous land mass. It consists of 7,641 islands. Most of its 109 million population (and banks) are spread over these islands, with about 51.2% living in urban areas. That leaves almost 50% of Filipinos living in rural areas, making it a crucial part of the economy, yet largely unbanked. To add to this, nearly 18% live in poverty. On the other hand, rural branches reduced to 476,000 units in 2018 from an all-time high of 1,040,000 units in 1981.

This creates a vast imbalance impeding the country's growth. Hence enhancing financial inclusion for rural areas, underserved and remote locations is a critical objective for Filipino banks.

Digital banking solutions from Bankingly can rapidly bridge this gap by making financial services more accessible.

The Benefits

More minor regional rural banks, microfinance institutions, and cooperatives can offer numerous consumer and business benefits with digital banking. It eliminates the need for physical visits to banks or ATMs, which can be time-consuming and inconvenient for many customers. Additionally, digital banking services are typically more cost-effective than traditional methods since they require fewer personnel and other overheads, such as real estate rental or travel expenses associated with visiting brick-and-mortar locations.