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Philippines April 24 th to May 5 th 2005

Debriefing Philippines Savings Assessment. Philippines April 24 th to May 5 th 2005. Brigit Helms, Rani Deshpande, Isabel Dauner 5 May 2005, Manila. CGAP’s Savings Initiative. Goal: gather, generate, and disseminate knowledge about small-balance savings mobilization

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Philippines April 24 th to May 5 th 2005

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

  2. CGAP’s 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

  3. The Philippines assessment Macro Level Legislation, Regulation, Supervision Meso Level Support Services & Infrastructure Micro Level Financial Service Providers Clients • Methodology • Secondary research • Team of four people • Interviews with 60+ persons • Focus groups with donor agencies and bankers

  4. Do Filipinos save? Clients • 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

  5. Evidence of latent demand Clients

  6. Landscape of deposit takers Micro

  7. Proximity is key, but not enough Micro • 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

  8. Lack of incentives dampens innovation Micro • Consequences • Limited market research • Inappropriate products • “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

  9. 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 Associations/projects bolster capacity Meso

  10. Easy money flooding the market Meso • 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

  11. Incomplete financial infrastructure Meso • 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

  12. Technology revolutionizing access? Meso • 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?

  13. Policy approach favorable but flawed Macro • 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

  14. 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

  15. 9 Suggestions • Encourage specialization of savings & credit cooperatives, consolidation of federations; strengthen supervision @ 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

  16. 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)

  17. Savings Information & Resource Center www.cgap.org/savings

  18. UNCDF Building Inclusive Financial Systems Haraming Salamat Po!

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