National Strategy for Financial Inclusion 2022-2028 Notes

The National Strategy for Financial Inclusion 2022-2028

NSFI 2022-2028 Overview

• A six-year plan to promote financial inclusion for broad-based growth and financial resilience.
• Defines four desired outcomes as pathways and performance measures.
• Pursues four strategic objectives, considering key enablers.
• Key beliefs and assumptions:
  • Financial inclusion is a means to improve financial health, resilience, and livelihood opportunities.
  • Financial exclusion affects specific groups disproportionately; market-based solutions and government safety nets are both important.
  • Financial inclusion is multi-dimensional, needing conducive regulations, digital infrastructure, and financial literacy.
• NSFI 2022-2028 adopts a six-year timeframe with specific interventions, outcome measures, and targets.
• Serves as a roadmap and communication tool for financial inclusion goals and stakeholder commitment.

Vision

• Financial inclusion aims for inclusive growth and financial resilience.
• Aims for all Filipinos to be financially included to build resilience and maximize opportunities.
• Financial inclusion supports self-employment, household consumption, economic activity, and reduces inequality.
• Lessons from the COVID-19 pandemic highlight the need for resilience.
• Resilience encompasses the ability to reduce risks, cope with shocks, and recover from life events, minimizing reductions in consumption or well-being.

Desired Outcomes

1. Reduced disparities in financial inclusion

   • Aims to reduce disparities based on demographics like income, location, age, and gender.
   • Addresses vulnerabilities exacerbated by digitalization.
   • Gender inclusion is a global concern, with the Philippines generally favoring women in indicators.

2. Improved financial health and resilience

   • Increases access to financial services and tools that help individuals, especially the vulnerable, improve financial health.
   • Ensures Filipinos can safely save, get insured, and build assets to meet needs and goals.
   • Government programs (cash assistance, social insurance, pension) are crucial for the poor and informal workers.
   • Successful implementation of these programs enhances and is strengthened by financial inclusion.

3. More financially capable and empowered consumers

   • Consumers need to make informed decisions, use appropriate services, and seek resolution if wronged.
   • An empowered consumer base promotes good market conduct and improves financial services.

4. Increased access to finance for MSMEs and the agriculture sector

   • MSMEs generated 63% of the country’s total employment in 2020.
   • The agriculture sector employs 24.5% of the total workforce as of November 2021.
   • Financial inclusion in these sectors drives inclusive economic growth.
   • Improving access to financing helps them grow and generate employment.
   • Lack of access to finance is a top challenge for MSMEs.

Strategic Objectives

1. Promote inclusive digital finance

   • Digital technologies enable cost-efficient delivery of financial services to the low-income market and small enterprises.
   • Requires a conducive regulatory environment and digital infrastructure.
   • Digital innovations should improve customer experience, affordability, and availability of financial services beyond accounts and payments.

2. Strengthen financial education and consumer protection

   • Consumers need the right financial knowledge, skills, and behavior.
   • Comprehensive digital financial literacy programs are crucial.
   • An appropriate regulatory environment is needed to strengthen market conduct.

3. Enhance access to risk protection and social safety nets

   • Public and private mechanisms like cash assistance, insurance, and pension promote financial inclusion and resilience.
   • Strategic interventions should support the development of these mechanisms.
   • Financial inclusion enhances the efficiency and coverage of these programs through digital finance.

4. Enhance agriculture and MSME financing ecosystem

   • A sustainable ecosystem enables diverse players to serve agriculture and MSME clients.
   • Requires financial infrastructure (credit guarantees, information registry) and legal frameworks (secured transactions) to reduce risks and costs.
   • Government assistance programs should increase income potential and bankability.
   • Financial institutions should invest in specialized skills and tools for this market.

Priority Initiatives

• Guided by strategic objectives with responsible entities and timelines.
• Promote Inclusive Digital Finance:
  • Promote adoption of PhilSys in the financial sector (2022-2023).
  • Expand digital payment use cases (2022-2023).
  • Enable digital payments for community markets and local transportation (2022-2023).
  • Develop a regulatory framework for MFI NGO and cooperatives in payment systems (2022-2023).
  • Promote an industry sandbox for digital finance innovations (2022-2024).
  • Promote the adoption of insurtech (2022-2024).
  • Support digital transformation of rural financial institutions (2022-2024).
  • Push for reforms to fast-track digital connectivity (2022-2024).
  • Promote shared agent network framework (2023-2026).
  • Promote use of alternative data for credit evaluation (2022-2026).
  • Promote interoperable offline digital payment solutions (2022-2026).
  • Expand open finance use cases (2022-2028).
• Strengthen Financial Education and Consumer Protection:
  • Develop a common framework for financial literacy programs (2022-2023).
  • Institutionalize an annual financial education stakeholder conference (2022-2023).
  • Support passage of the Financial Consumer Protection Act (2022-2023).
  • Strengthen prudential regulation and market conduct capabilities (2022-2024).
  • Develop innovative platforms for financial literacy training (2023-2026).
  • Explore expansion of deposit insurance for nonbank financial institutions (2023-2026).
• Enhance Access to Risk Protection and Social Safety Nets:
  • Convert limited-purpose cash card accounts into full-service transaction accounts (2022).
  • Leverage PhilSys to improve registration and payment of social welfare beneficiaries (2022-2024).
  • Adopt digital solutions for social safety net programs (2022-2023).
  • Strengthen social safety net programs and explore a pension program for the informal sector (2023-2024).
  • Promote the development of microinsurance products for disaster risk (2022-2025).
  • Scale up delivery of social housing finance (2023-2028).
  • Develop the pension market and establish a regulatory framework (2023-2028).
• Enhance Agriculture and MSME Financing Ecosystem:
  • Expand PhilGuarantee’s MSME Credit Guarantee Program (2022-2023).
  • Fast track implementation of the Innovative Startup Act (2022-2023).
  • Expand agriculture insurance through private sector participation (2022-2023).
  • Develop and promote credit risk information support (2022-2023).
  • Strengthen the Credit Surety Fund (CSF) (2022-2023).
  • Ensure effective implementation of the Personal Property Security Act (2022-2024).
  • Strengthen capabilities of rural financial institutions (2022-2024).
  • Revisit and develop a regulatory framework for development financial institutions (2022-2026).
  • Promote agriculture value chain and supply chain financing (2022-2026).
  • Promote Islamic financing (2022-2026).
  • Increase SME access to capital markets through the SME Board (2022-2028).
  • Promote green and sustainable finance (2023-2028).
  • Develop framework and tools for collecting and sharing agriculture and MSME data (2024-2028).

Key Performance Indicators (KPIs) and Targets

• NSFI 2022-2028 will be evaluated based on core indicators and targets.

1. Reduced disparities in financial inclusion

• Percentage of adults with transaction accounts: Baseline (2019) 29%, Target (2028) 90%
• Number of BDAs (millions): Baseline (2021) 7.4, Target (2028) 20
• Gap in account ownership (Income class ABC vs. E): Baseline 0.38, Target >0.75
• Percentage of borrowers who obtained their loan from formal sources: Baseline 56%, Target 75%
• Gap in access to formal credit (Men- vs. women-owned/led SMEs): Target TBD
• Gap in ownership of insurance policies (Income class ABC vs. E): Baseline 0.61, Target >0.75
• Gap in ownership of investment products (Men vs. Women): Baseline 0.63, Target >0.75
• Gap in ownership of investment products (Urban vs. rural): Baseline 0.47, Target >0.75
• Gap in use of DFS (Income class ABC vs. E): Baseline 0.42, Target >0.75

2. Improved financial health and resilience

• Financial health index: Target TBD
• Number of accounts with at least PHP 10,000: Target TBD
• Percentage of adults with savings in formal financial institutions: Baseline 22%, Target 50%
• Percentage of adults contributing to a pension scheme: Baseline 16%, Target TBD
• Percentage share of SSS members to total adult population: Baseline 74%, Target TBD
• Number of PERA contributors: Baseline 4,237, Target 5 million
• Number of microinsurance policy owners: Baseline 50 million, Target TBD
• Number of lives covered (millions): Baseline 45 million, Target TBD
• Percentage of adults with investment in financial assets: Baseline 25%, Target 50%
• Number of Mutual Funds and Unit Investment Trust Fund (UITF) accounts: Target TBD

3. More financially capable and empowered consumers

• Percentage of internet/mobile phone users who use DFS: Baseline 11.5%, Target 50%
• Number of registered online or mobile banking users: Target TBD
• Percentage of adults with acceptable level of financial literacy: Baseline 35%, Target TBD
• Percentage of adults who have attended a financial literacy seminar or webinar: Target TBD
• Percentage of financial consumers with complaints who reported the issue or problem to the concerned financial institution: Baseline 0.6%, Target TBD
• Average turnaround time: Baseline 24, Target 7

4. Increased access to finance for MSMEs, including startups, and the agriculture sector

• Percentage of MSMEs with outstanding loan or line of credit: Baseline 24%, Target TBD
• Percentage of smallholder farmers with outstanding loan or line of credit: Baseline 65%, Target TBD
• Percentage of women-owned MSMEs with outstanding loan or line of credit: Baseline 28%
• Percentage of MSMEs with insurance: Baseline 15%, Target 40%
• Percentage of smallholder farmers and their cooperatives with insurance: Baseline 26.7%, Target 40%
• Percentage share of MSME loans with loan guarantee/surety: Baseline 1%, Target 10%
• Percentage share of agriculture loans with loan guarantee/surety: Baseline 1%, Target 10%
• Percentage share of secured SME bank loans to total SME bank loans outstanding: Target TBD
• Percentage of MSMEs with digital payment capabilities: Baseline 46%, Target TBD
• Number of merchant accounts: Target TBD
• Venture capital investment as a percentage of GDP: Target TBD