Insights on financial literacy and inclusion from PES 54 - Eaglewatch by Ser Percival K. Peña-Reyes

December 02, 2016
With the theme “Ramping up Towards Philippines 2040”, the Philippine Economic Society (PES) held its 54th annual meeting at Novotel Manila, Araneta Center, on November 8. The theme alluded to “AmBisyon Natin 2040”, a long-term vision for the country that is now being translated into a socioeconomic development plan. The event served as an appropriate venue for the nation’s top economists to participate in the discourse.

Coincidentally, this year also marks the first time the country observes the Economic and Financial Literacy Week, as declared by Republic Act (RA) 10922 (The Economic and Financial Literacy Act of 2015). Indeed, economic and financial literacy will play a crucial role in achieving the “matatag, maginhawa at panatag na buhay” that describes the collective aspirations of ordinary Filipinos; thus, the event’s plenary session was devoted to this discussion.
One of the breakout sessions kept with the theme of financial literacy. Invited to speak were Alvin Ang of Ateneo de Manila University, Mark Julius Eusebio of the University of the Philippines Los Baños and Dennis Mapa of the University of the Philippines Diliman. Moderating the discussion was Emilio Neri Jr. of Bank of the Philippine Islands (BPI), which sponsored the panel. The discussion yielded many useful insights, so this column attempts to share some of them for everyone’s benefit. 
One insight is that the physical presence of banks doesn’t immediately guarantee people’s utilization of such facilities, especially if people don’t appreciate their value. That’s why merely forcing banks to expand into new geographic markets might only prove unprofitable, and the goal of financial inclusion will not be met.


Perhaps, this explains some interesting trends. On a granular level (cities and municipalities), 591 out of 1,634 local government units (LGUs) nationwide still did not have bank offices as of end-December 2015, according to the Status Report on the Philippine Financial System published by the Bangko Sentral ng Pilipinas (BSP).
On a broader level (regions), the distribution of banking resources bears a strong resemblance to the spatial pattern of economic activity in the Philippines. Last year the National Capital Region, Region 4A and Region 3, taken together, accounted for 62.95 percent of national output, 79.33 percent of deposit liabilities, 89.57 percent of outstanding loans, 56.84 percent of bank offices and 64.87 percent of automated teller machines (ATMs). Indeed, banking resources have been heavily skewed toward these top 3 income-generating regions, where businesses are likely to be profitable.
So, another insight emerges. Promoting financial inclusion is not simply about ensuring the physical availability of banking facilities. Rather, the solution lies in economic and financial literacy, which influences how people think and behave regarding finances. Such behavior modification will take time to realize, so there must be a large-scale, coordinated effort to sustain the campaign.
This is where the significance of RA 10922 becomes evident. The law mandates all government agencies and LGUs to work closely to increase economic and financial awareness. The National Economic and Development Authority (Neda) will take charge of the planning, initiating and executing of knowledge-expanding activities for government agencies and their instrumentalities.



The Philippine Information Agency (PIA) is mandated to allot airtime for programs and printed materials on economic and financial-literacy awareness and enhancement. Likewise, the Department of Education (DepEd) and all higher-education institutions are mandated to conduct activities to enhance consciousness among the youth in public and private schools, at both elementary and secondary levels. For its part, the PES will encourage the active participation of the private sector and civil society.
Through RA 10922, it is hoped that people’s improved awareness of economics and finance will lead to their greater financial security, which, in turn, will redound to society’s greater benefit through the stimulation of efficient markets and competition in the country. Indeed, saving and investing should be seen as not only self-securing acts, but also patriotic acts, since surplus funds are channeled and used to strengthen the nation by creating more businesses, roads, buildings, bridges and the like.
While Filipinos should be thankful for overseas remittances and business-process outsourcing (BPO) revenues that have kept the economy afloat all these years, largely by fuelling domestic consumption, these funds have also fostered a culture of dependency, which tends to lull people into a false sense of complacency. With game-changing events happening abroad (Brexit, Trump presidency), there’s a lot of uncertainty surrounding the future inflow of such funds. Thus, these resources should increasingly be channeled into investments to expand domestic productive capacity. Moreover, economic and financial literacy could break this culture of dependency and empower people to build a genuinely secure society.
Ser Percival K. Peña-Reyes is a faculty member of the Economics Department under the School of Social Sciences of Ateneo de Manila University.