Amando M Tetangco, Jr: Building inclusive growth for migrant workers
through multi-sectoral partnerships
Speech by Mr Amando M Tetangco, Jr, Governor of Bangko Sentral ng Pilipinas (BSP, the
central bank of the Philippines), at the Financial Inclusion Summit 2016, Manila, 28 April
2016.
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As host partner, we at the Bangko Sentral ng Pilipinas are pleased to welcome you to the
Financial Inclusion Summit 2016. This summit is yet another milestone in our journey to
improve the lives of our people through financial inclusion, under the collaborative platform of
the National Strategy for Financial Inclusion or NSFI as our roadmap. With this Summit, we
focus on "Building inclusive growth for migrant workers through Multi-Sectoral Partnerships."
SFI: A collaborative platform for financial inclusion
Drafted by 13 government agencies including the Bangko Sentral ng Pilipinas, the NSFI
provides the platform for public and private sectors to work together toward expanding
access to financial services to all Filipinos.
With such partnerships, there is a wealth of complementary experience, expertise and
resources that can be matched to generate alliances that will result in greater financial
inclusion.
Ladies and gentlemen. As we move forward together, let us always keep the NSFI vision in
mind: We aim for a financial system that is accessible and responsive to the needs of
Filipinos.
Among our primary targets are what we now call our modern-day heroes: Overseas Filipinos
(OFs) and their families. Their remittances have been a dependable source of strength for
the Philippine economy. In the last 10 years, from 2005 to 2015, they have sent over $228
billion in remittances (personal and cash) to our country. In 2015, more than 10 million OFs
sent over $28.5 billion in personal remittances, higher by 4.4% than the 2014 figure of over
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$27.3 billion. This is equivalent to roughly 10% (9.8% actually) of our GDP
In fact, sustained increases in family and work-related migration of Filipinos have resulted in
the steady growth in remittance flows into the country.2
As a result, the Philippines has been consistently ranked among the top recipients of
remittances. Early this month, a World Bank report on 2015 remittances said the Philippines
ranks third among the top remittance-receiving countries, next to India and China, both of
which have over a billion in population.
Financial inclusion and remittances
Indeed, there are many challenges - and opportunities - in providing access to financial
services to migrant workers and their families.
The remittances sent home are mostly used for consumption expenditures - 97.3% of OF
households used the remittances to purchase food and other household needs. This helps
drive our economy.
Another positive development, as indicated by a BSP survey (CES), is the rising proportion
of households directing remittances received to savings - from 7.2% in 2007 to 43.4% in the
first quarter this year. This is one of the many reasons why Philippine bank deposits have
been hitting record high levels - it was P8.5 trillion in December 2014 and over P9.2 trillion as
of December 2015.
Nevertheless, the challenge and the opportunity is to encourage more investments by OF
households; it continues to lag way behind savings. As indicated by our survey, households
that allocated part of their remittances for investments, increased from 2.3% in 2007 to only
6.5% in the first quarter this year. That is over a period of nearly nine years!
For institutions, the challenge is to develop and promote products suited to the needs of OFs.
Financial education is essential for OFs to realize the opportunities - as well as possible
pitfalls - in investments. Equally important, financial institutions should consider it their
responsibility to inform OFs of their rights and protection as financial consumers.
The importance of remittances for enhancing the financial stability of OFs and the economic
growth of our country cannot be overemphasized.
As part of the BSP's program to develop a more inclusive financial system, we have put in
place policies and programs to enable the development of a wide range of products that can
cater to the needs of OFs and their beneficiaries. We also continue to implement a
nationwide Economic and Financial Learning Program where we have a special focus on
OFs.
In fact, the BSP won the Global Forum on Remittances and Development Public Sector
Award for 2015 in recognition for what it described as outstanding commitment, innovation
and impact in promoting remittances for social and economic development through our
Economic and Financial Learning Program.
Challenges
However, while we have positives, there are concerns that we need to address.
Foremost is the adverse impact on remittance costs and flows of the closure of accounts of
several money transfer operators (MTOs) by correspondent banks who are limiting their
exposure to possible channels for money laundering and other financial crimes. This is a
derisking strategy largely driven by business decisions of foreign banks, weighing the risks and
benefits of dealing with remittance companies. This has been going on in recent years and
has not been helped by the present money laundering case here.
Since the closures limit the players that can competitively operate in the remittance market,
this has the potential to reverse the steady gains we have made in reducing remittance
costs. De-risking may also result in movement by OFs toward informal remittance channels
and subsequent financial exclusion. In the end, this may exact an even larger toll on the OFs
and their families in terms of deprivation of access to safe and reliable financial services.
We are therefore addressing this issue. As early as 2014, we started raising our concerns on
the adverse impact of de-risking with relevant international institutions. This includes the
Financial Action Task Force, Alliance for Financial Inclusion, the Global Partnership for
Financial Inclusion of the G20, the US Department of Treasury, the Financial Stability Board,
and the World Bank.
In addition, we are gathering data and closely coordinating with concerned stakeholders for a
more evidence-based response. Among others, we have an ongoing National Risk
Assessment (NRA) which is an inter-agency effort to evaluate the country's money
laundering and terrorist financing vulnerabilities and weaknesses. This will enable us to
sharpen our focus in ensuring effective enforcement of international standards against
money laundering and terrorist financing.
On the other hand, there is a silver lining: technological innovations from the market promise
more cost-effective remittance channels. In today's language, these are called "disruptive
innovations", the act of creating new value chains from existing markets or value chains.
The advent of more affordable smart phones has encouraged new players (e.g., financial
technology companies or FinTechs) and new business models to address the problem of
cost. There are now online money transfer services that are linking international remittances
to Facebook.3 Customer acceptance of these developments seems likely. In a recent global
survey that studied 7 remittance corridors including US-Philippines, it was gathered that 83%
of consumers are willing to shift to mobile money for international transfers.4
Indeed, the BSP will continue to create enabling and proportionate policy and regulatory
space for these innovations while balancing inherent operational risks - such as business
interruptions, network vulnerabilities, as well as concerns related to data privacy and
security.
We are also working on the creation of a National Retail Payment System where all
commercial electronic payment channels can effectively inter-operate through appropriate
clearing and settlement arrangements. With this in place, the delivery of remittances to the
beneficiaries will be safe, convenient and affordable.
When such balance of policy objectives is achieved, it is exciting to imagine the acceleration
of global uptake of technology-enabled remittances that can ultimately drive down the cost of
remittance while providing a faster and safer channel.
Conclusion
Ladies and gentlemen. This Summit is a unique opportunity to increase awareness, catalyze
multi-sectoral partnerships, and promote financial inclusion for our migrant workers and their
families. And I congratulate BPI Foundation and ASKI Global for organizing such an
important venue to further our financial inclusion initiatives. I hope therefore that we will
generate practical solutions and tangible steps to address its challenges and to seize its
opportunities.
Together, let us make the lives of our migrant workers and their families better through
multisectoral partnerships to financial inclusion. Let our National Strategy for Financial Inclusion
serve as our roadmap to a better future for all.
Thank you all and Mabuhay!