Even among those earning more than P50,000 a month, 23 percent state that they run short of money for basic necessities.
A new World Bank survey, “Enhancing Financial Capability and Inclusion in the Philippines – A Demand-side Assessment,” revealed that among the households that report that they run short of money for basic necessities, the use of credit is near universal – 94 percent borrow to cover costs.
Filipinos are more likely to use informal credit and saving services than formal financial services. Only 4 percent of respondents report having a mortgage, 5 percent have a credit card and 10 percent availed credit product from a formal financial institution.
At the same time, more than a third rely on informal savings and credit. Those who are knowledgeable about financial matters are more likely to report that they have money left after paying for basic necessities and less likely to say that they have borrowed beyond their means.
Higher financial literacy scores are strongly correlated with the level of education.
About six of 10 Filipinos say that they plan how they spend the money they earn or receive. Fifty seven percent of those who plan or budget their expenses say that they have money left after paying for basic expenditures, compared to forty two percent of those who do not plan their spending.
These are among the findings of the survey on financial inclusion and capability in the Philippines conducted from February to September 2014. The survey aims to assess people’s financial literacy or capability in managing their day-to-day finances, as well as their access to formal financial institutions like banks.
“It pays to be wise with the way we handle money – that’s what this survey is telling us,” said World Bank Country Director Motoo Konishi. “If people have more knowledge about money matters, this can help them access financial services. Promoting financial literacy is therefore important to achieve greater financial inclusion and boost the growth of micro and small enterprises.”
Financial inclusion refers to the ability of individuals or families to access banking and other formal financial services.
The survey found that about 20 million Filipino adults report that they save money. Of this number, only 10 million have bank accounts.
The most commonly reported obstacles to owning bank accounts are: not having enough money, lack of need for an account, distance, lack of documents, “the bank doesn’t treat people well” and high cost.
“Almost all, 98 percent, of those who save but don’t have bank accounts earn less than P50,000 a month,” said Nataliya Mylenko, World Bank senior financial sector specialist who supervised the survey.
“This suggests that there are significant opportunities for expanding financial inclusion among low- and lower-income groups in the Philippines.”
Survey results indicate the need to develop financial products that meet the needs of consumers, particularly the lower-income groups.
“In July this year, the central bank launched the country’s national financial inclusion strategy,” said Mylenko. “This will be a very important platform for coordinating policy and programs for achieving greater financial inclusion and improving financial education among Filipinos.”