ADB approves $300 mn loan to boost financial inclusion in Philippines

ADB’s Inclusive Finance Development Program, Subprogram 3, is supporting reforms to expand financial inclusion in the country by improving the country’s financial infrastructure, including widening the digital financing ecosystem. It also supports efforts to increase the capacity of financial service providers, including rural banks and nonbank financial institutions, to offer quality products and services accessible through various delivery channels, ADB said in a press release.

“Through this loan, ADB is expanding its partnership with the Philippines in ensuring all Filipinos will have access to financial products and services, including via digital platforms, to help improve their lives and livelihoods. Considering the significant impact of climate change on the vulnerable segments of the population, the reform actions supported by the loan will ensure government assistance can reach people faster during crises and emergencies; help raise climate resilience of farmers and micro, small, and medium-scale businesses through expanded insurance; and promote improved financial stability,” said ADB senior financial sector specialist Kelly Hattel.

According to the 2021 Global Findex Database, the number of Filipino adults holding an account with a financial institution or mobile money provider has risen from 34 per cent of the population in 2017 to 51 per cent in 2021. Hastened by the COVID-19 pandemic lockdowns, the Philippines nearly doubled the number of financial institutions or mobile money accounts for the bottom 40 per cent of the population by income from 18 per cent in 2017 to 34 per cent in 2021.

The government wants to raise the number of Filipinos holding an account with financial institutions or mobile money providers to 70 per cent by 2024, aided by streamlined requirements with the Philippine Identification System (PhilSys). As of September 1, 2023, the government has registered nearly 88 per cent of the population under PhilSys after launching the programme in 2020 amid the COVID-19 pandemic, as part of efforts to widen financial inclusion in the country.

Key reforms pursued by the government to eliminate barriers to access financial services and mainstream gender across its policies include updating and providing action plans for the National Strategy for Financial Inclusion 2022–2028. The Philippines also passed and implemented key legislation on financial consumer protection under the Financial Products and Services Consumer Protection Act, and rules encouraging digital platforms to provide financing to agriculture value chain members in support of the Agriculture, Fisheries and Rural Development Financing Enhancement Act 2022.

The government also implemented a regulatory sandbox framework for financial solutions to test new business models and facilitate the adoption of innovative technology approaches.

The new loan builds on ADB assistance provided under the Inclusive Finance Development Program Subprogram 1 and Subprogram 2 delivered in October 2018 and August 2020, respectively. Reforms pursued under this loan will complement other ADB programmes in the Philippines, such as the Competitive and Inclusive Agriculture Development Program Subprogram 2 approved in January 2023.

Fibre2Fashion News Desk (NB)