FINANCIAL INCLUSION IN THE
PHILIPPINES: A REGIONAL ASSESSMENTTAT U M B L A I S E TA N

FINANCIAL INCLUSION IN THE
PHILIPPINES“Financial inclusion aims at drawing the “unbanked” population
into the formal financial system so that they have the opportunity
to access financial services ranging from savings, payments, andtransfers to credit and insurance.”(Hannig and Jansen 2010)• Eight out of ten households are unbanked… In terms ofcredit, among the respondents who borrowed, banks
were not among the main sources of financing. –Consumer Finance Survey, BSP, 2009
• The Philippines consistently fell under the low IFI category
in two separate studies covering the years 2004 to 2010. –Cross-country research by Sarma (2008 and 2012)

MOTIVATION OF THE STUDY

The study intends to delve deeper in explaining therelatively weak state of financial inclusion in thePhilippines by providing a more empiricalregional-wise analysis on the issue and identifying
the socio-economic factors that could shed lighton the financial inclusion gap across the different
regions.

ADOPTING THE RESEARCH DESIGNSARMA (2012)
Dimension(Bank%penetration%%

Notation(Indicator(*(Pi%Number%of%bank%accounts%per%1000%adult%
population%
Availability%
of%
ABSi%
Number%of%banking%offices%per%1000%adult%
banking%services%
population%%
Number%of%ATM%per%1000%adult%population%
Number% of% alternative% financial% service%providers%per%1000%adult%population%
Usage%Ui%
Outstanding% loans% and% deposits% as% proportion%of%the%region’s%GDP%

The formula for the IFI becomes:

1!"!! =2!

!! ! + !"#! ! +! !! !
3+ 1 −!

!! ! + 1 − !"#! ! +! 1 − !! !
3!

PRESENTATION OF RESULTS
Regions	  Banking	  Penetra/on	  Availability	  of	  Banking	  Services	  Usage	  IFI	  	   Na/onal	  Capital	  Region	  0.992	  	  1.000	  	  1.000	  	  0.997	  	  Cordillera	  Administra/ve	  Region	  0.137	  	  0.457	  	  0.798	  	  0.468	  	  I-­‐	   Ilocos	  0.065	  	  0.127	  	  0.125	  	  0.108	  	  II-­‐	   Cagayan	  Valley	  0.000	  	  0.362	  	  0.341	  	  0.252	  	  III-­‐	   Central	  Luzon	  	  1.000	  	  0.809	  	  0.675	  	  0.810	  	  IV-­‐A	   Calabarzon	  1.000	  	  1.000	  	  0.748	  	  0.889	  	  IV-­‐B	   MIMAROPA	  0.007	  	  0.428	  	  0.000	  	  0.185	  	  V-­‐	   Bicol	  0.090	  	  0.213	  	  0.063	  	  0.129	  	  VI-­‐	   Western	  Visayas	  	  0.462	  	  0.346	  	  0.434	  	  0.414	  	  VII-­‐	   Central	  Visayas	  0.695	  	  0.908	  	  1.000	  	  0.847	  	  	  PRELIMINARY RESULTS (CONT.)
Regions	  Banking	  Penetra/on	  Availability	  of	  Banking	  Services	  Usage	  IFI	  VIII-­‐	   Eastern	  Visayas	  0.085	  	  0.153	  	  0.000	  	  0.089	  	  IX-­‐	   Zamboanga	  Peninsula	  0.087	  	  0.101	  	  0.172	  	  0.123	  	  X-­‐	   Northern	  Mindanao	  0.229	  	  0.533	  	  0.379	  	  0.384	  	  XI-­‐	   Davao	  Region	  	  0.562	  	  0.608	  	  0.654	  	  0.608	  	  XII-­‐	   SOCOSKSARGEN	  	  0.470	  	  0.224	  	  0.160	  	  0.293	  	  XIII-­‐	   CARAGA	  0.024	  	  0.292	  	  0.170	  	  0.175	  	  Autonomous	  Region	  of	  Muslim	  Mindanao	  0.000	  	  0.000	  	  0.000	  	  0.000	  	  Average	  0.347	  	  0.445	  	  0.395	  	  0.398	  	  	  Legend: Red font – High IFI region (0.6 to 1)
Black font – Medium IFI region (0.3 to < 0.6)
Blue Font – Low IFI region (below 0.3)

LOW IFI REGIONSCORRELATION WITH SELECTEDSOCIO-ECONOMIC INDICATORSINDICATOR I: GDP PER CAPITA, BY REGION(HIGH VS. LOW IFI REGIONS), 2012
350,000“Financial inclusion and income levels tend tomove in the same direction.” – Sarma (2012)

300,000
250,000
200,000
150,000
100,000
50,000Calabarzon

Central Visayas

Davao Region

IlocosCagayan Valley

Mimaropa

Bicol

Eastern Visayas

Zamboanga Peninsula

SOCOSKSARGENCARAGA

III

IV-AVII

XII

II

IV-B

V

VIII

IX

XII

XIII

Source:	  National	  Statistical	  Coordination	  Board		

ARMM

Central Luzon

NCR

0INDICATOR II: POVERTY INCIDENCE
AND SUBSISTENCE INCIDENCE, 201260

Poverty Incidence

In percent

50

Subsistence incidence

403020

Cagayan Valley

Central Luzon

Calabarzon

Mimaropa

Bicol

Western Visayas

Central Visayas

Eastern Visayas

Zamboanga Peninsula

Northern Mindanao

Davao Region

SOCOSKSARGENCARAGA

I-

II-

III-

IV-A IV-B

V-

VI-

VII-

VIII-

IX-

X-

XI-

XII-

XIII-

Source:	  Poverty	  Statistics,	  National	  Statistics	  Of9ice	  ARMM

IlocosCAR

0NCR

10INDICATOR III: LEVEL OF
URBANIZATION
120
100

10080
60

51.6

40

59.7
34.7

26.3

33.9

27.5

11.6

Calabarzon

Mimaropa

Bicol

Western Visayas

Central Visayas

Eastern Visayas

Zamboanga Peninsula

Northern Mindanao

Davao Region

SOCOSKSARGENCARAGA

13.7

12.7

Central Luzon

15.3

46.5

41.3

Cagayan Valley

22.3

43.7

Ilocos2059.3

IIIIII

IV-A IV-B

V

VI

VII

VIII

IX

X

XI

XII

XIII

8.7

Source:	  National	  Statistics	  Of2ice		

ARMM

CAR

NCR0INDICATOR IV: FUNCTIONAL LITERACY
RATE, 2008

Cagayan Valley

Central Luzon

Calabarzon

Mimaropa

Bicol

Western Visayas

Central Visayas

Eastern Visayas

Zamboanga Peninsula

Northern Mindanao

Davao Region

SOCOSKSARGENCARAGA

I

II

III

IV-A

IV-B

V

VI

VII

VIII

IX

X

XI

XII

XIII

Notes:	  1)	  Includes	  10-­‐64	  years	  old		  	  	  	  	  	  	  	  	  	  	  	  	  	  2)	  The	  national	  literacy	  rate	  is	  86.4.	

Source:	  National	  Statistics	  Of9ice	

ARMM

IlocosCAR

NCR

1009080706050403020100INDICATOR V: MAIN SOURCE OF INCOME(ENTREPRENEURIAL ACTIVITIES)
Share of Microenterprises, 2012
100%

6%

95%

5%
4%

90%

3%

85%

2%

Central Luzon

Calabarzon

Mimaropa

Bicol

Western Visayas

Central Visayas

Eastern Visayas

Zamboanga Peninsula

Northern Mindanao

Davao Region

SOCOSKSARGENCARAGA

I-

II-

III-

IV-A

IV-B

V-

VI-

VII-

VIII-

IX-

X-

XI-

XII-

XIII-

Share of Microenterprises to Total Number of Establishments (LHS)
Share of Microenterprise loans to Total Loans (RHS)
Sources: Bangko Sentral ng Pilipinas and Department of Trade and Industry

ARMM

Cagayan Valley0%

Ilocos

75%

CAR

1%
NCR

80%

INDICATOR VI: SHARE OF AGRICULTURE
IN TOTAL EMPLOYMENT, 2012
80%
70%
60%
50%
40%
30%
20%
10%
Cagayan Valley

Central Luzon

Calabarzon

Mimaropa

Bicol

Western Visayas

Central Visayas

Eastern Visayas

Zamboanga Peninsula

Northern Mindanao

Davao Region

SOCOSKSARGENCARAGA

I-

II-

III-

IV-A

IV-B

V-

VI-

VII-

VIII-

IX-

X-

XI-

XII-

XIII-

ARMM

Ilocos

CAR

NCR

0%

Legend: Yellow columns – High IFI region; Gray – Medium IFI Region, and Orange – Low IFI region
Source: Bureau of Agricultural Statistics

CONCLUSION AND
RECOMMENDATION• Regional-wise results comport with the findings ofcross-country studies (income, poverty incidence,and literacy rates)• On a more distinct note, Low IFI regions in the study
appear to have:• extrication between the availability of financial services andits actual utilization.
• predominance of entrepreneurial activity as the main
source of income and high share of employment toagriculture.

CONCLUSION AND
RECOMMENDATION• Promote financial literacy• Strengthen the institutional presence and develop
of innovative financial instruments• Decentralization of development• Support Islamic banking

REFERENCES• Hannig, A. and Jansen, S. (December 2010). “Financial Inclusion andFinancial Stability: Current Policy Issues,” Asian Development Bank
Working Paper No. 259.
http://www.adbi.org/working-paper/
2010/12/21/4272.financial.inclusion.stability.policy.issues/
what.is.financial.inclusion/#sthash.ydJ70IqH.dpuf• Sarma, M. (June 2008). “Index of Financial Inclusion,” Indian Council For
Research On International Economic Relations, Working Paper No. 215.
http://www.icrier.org/pdf/Working_Paper_215.pdf• Sarma, M. (July 2012). “Index of Financial Inclusion- A Measure of Sector
Inclusiveness,” Berlin Working Papers on Money, Finance, Trade andDevelopment, Working Paper No. 07/2012.
http://finance-and-trade.htw-berlin.de/fileadmin/working_paper_series/
wp_07_2012_Sarma_Index-of-Financial-Inclusion.pdf• Bangko Sentral ng Pilipinas (BSP) (2009). “Consumer Finance Survey(CFS).”
http://www.bsp.gov.ph/publications/media.asp?id=2854

THANK YOU