Philippines April 24th to May 5th 2005

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PhilippinesApril 24th to May 5th 2005
DebriefingPhilippines Savings Assessment
Brigit Helms, Rani Deshpande, Isabel Dauner 5 May
2005, Manila
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CGAPs Savings Initiative

• Goal gather, generate, and disseminate knowledge
  about small-balance savings mobilization
• Client-level impact research
• Work with institutions
• Case studies
• Analysis of constraints and opportunities at
  country level
• Savings Information and Resource Center

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The Philippines assessment

• Methodology
• Secondary research
• Team of four people
• Interviews with 60 persons
• Focus groups with donor agencies and bankers

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Do Filipinos save?

• Skepticism about savings culture
• Consumption orientation
• Use of credit
• Unfamiliarity/intimidation re financial services
  and institutions
• YET
• Evidence of savings capacity among low-income
  people
• Limited market surveys research
• Informal savings mechanisms
• Numbers games
• Remittances

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Evidence of latent demand
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Landscape of deposit takers
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Proximity is key, but not enough

• Regulated FIs have better coverage in wealthier
  areas
• WHILE
• More accessible institutions often weaker
• Insufficient regulation coops and NGOs
• Uneven governance and management C/N
• Rural banks, coops, and NGOs not networked

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Lack of incentives dampens innovation

• Liquidity squeeze
• Plenty of deposits through low
• hanging fruit
• Credit lines easier to access than small savings
• Limited investment options

• Perceived high cost
• of mobilizing small savings
• But little evidence of systematic product
  costing

• Consequences
• Limited market research
• Inappropriate products

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Associations/projects bolster capacity

• Associations/projects
• AIMS
• BAP
• CUES
• MABS
• MCP
• NATCCO
• PFCC
• RBAP
• Chamber of Thrift Banks

• Activities
• Coaching
• Monitoring
• Training
• Networking
• Liquidity management
• Rating benchmarking
• Technical support
• Delinquency management
• New product development
• Financial management

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Easy money flooding the market

• Progress on directed credit program (DCP)
  rationalization,
• BUT
• Reports of 37 government agencies implementing 90
  subsidized credit lines
• Difficult to understand full range of programs,
  terms
• Program loans have close to market rates,
• BUT
• May not fulfill intended purpose
• May not be necessary

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Incomplete financial infrastructure

• For rural banks coops
• Liquidity management
• Mechanisms missing
• Exceptions include NATCCO Central Fund, lending
  between rural banks
• Liquidity placements subject to SBL
• Increases complexity, cost
• No direct links to payment system
• Cannot capture remittances and internal transfers
• Clients access limited to certain geographical
  area

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Technology revolutionizing access?

• ATMs
• More than 5,500 nationwide
• Increase by over 650 units in 2nd half of 2004
• Plans for expansion among rural banks
• Cell phones
• Could they bypass traditional payments system
  altogether?

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Policy approach favorable but flawed

• Policy endorsement and tiered banking structure
  encourage commercial microfinance
• BUT
• Regulatory void for institutions closest to
  clients
• Operational restrictions may limit access and
  encourage evasion
• Branching moratorium
• Off-site deposit taking
• Bureaucracy slows entry into new markets
• AML/Know Your Customer rules exclude poor
  clients

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9 Suggestions

• Collect more data on client savings patterns
  preferences
• Expand financial literacy efforts for residents,
  leveraging OFW experience
• Institutionalize expand successful technical
  assistance programs on a sustainable basis
• Evaluate alternative e-payments options (ATMs,
  cell phones, EPCS, etc.)
• Build on and rationalize rating systems to
  enhance performance and client confidence
• PESOS, FOCCUS, FIRM, ACCESS, EAGLE

For RBs coops
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9 Suggestions

• Encourage specialization of savings credit
  cooperatives, consolidation of federations
  strengthen supervision _at_ CDA and/or delegated
  models
• Continue phasing out DCPs determine whether
  program loans fulfill purpose and are necessary
• Shift regulatory framework from operational
  controls towards risk-based supervision
• Update national microfinance policy to reconfirm
  commitment to market-based approach and offer
  guidance on other financial services, including
  savings

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Next steps

• Draft report circulate for comments early June
• Final report circulate by early July
• Further tests Benin (July) and Bosnia
  (September)
• Mini-tests Bangladesh, South Africa, Uganda
• Country Savings Assessment Tool early 2006
• ?All information housed on Savings Information
  Resource Center (SIRC)

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Savings Information Resource Center
www.cgap.org/savings
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Building Inclusive Financial Systems Haraming
Salamat Po!