Graphic from THEPHILBIZNEWS
By Alithea De Jesus
Given the current situation wherein social distancing is in place due to pandemic, the need for efficient transactions becomes a necessity rather than a luxury as e-commerce and gig economy continues to grow in the Philippines.
The telecommuting resulted for other companies to adapt to the new work setup and outsource some works through independent contractors on a project basis. This also paved the way to grow the gig economy in the country as many enjoy working in the nontraditional workplace setup. This is also evident in the phenomenal growth of co-working spaces across the key provincial cities in the Philippines.
Interestingly, the Philippines ranked sixth in the world as the fastest-growing market for the gig industry, with a 35 percent growth in freelance earnings. This gig economy has been a big contributor to the economic resilience of our country even before the pandemic.
With this reality, the Bangko Sentral ng Pilipinas (BSP) is supporting the financial inclusion of all Filipinos, including micro, small and medium enterprises (MSMEs) and agricultural workers, as COVID-19 accelerates the adoption of digital finance.
Ellen Joyce Suficiencia, director of the Financial Inclusion Group of BSP’s Center for Learning and Inclusion Advocacy, said the central bank is strongly advocating the financial inclusion of every Filipino, as she noted how the global health crisis and lockdowns have hastened the uptake of digital transactions in the country.
Suficiencia noted that financial inclusion means providing all Filipinos access to a wide range of financial services, not only savings but also credit and investment, among others.
Financial inclusion promotes a strong economy and a high quality of life for everyone. It enables individuals and businesses to use financial services to seize economic opportunities, build wealth, manage risks and recover from downturns, she explained.
“And when the broad swathe of the population has access to welfare-enhancing services, the economy and the financial system become more resilient and sustainable,” she added.
She noted that COVID-19 has fast-tracked the shift to digital payments, pointing to data showing how cash withdrawals and check transactions have gone down a lot during the enhanced community quarantine even as electronic fund transfers have increased tremendously.
“The shift really was rapid and we believe this will continue,” said Suficiencia. “It just shows that digital payment is no longer becoming just an option but a necessity driven by movement restrictions and health risk considerations.”
She also urged employers to provide their workers with the necessary tools to access digital payments to enable them to thrive in the digital economy.
She added that even microfinance institutions (MFIs) are recognizing the urgency of adopting digital payments, which is a notable development since MFIs have an outsized reach in the low-income sector and the rural-based clients.
But Suficiencia also warned of the risk of financial exclusion even as the new normal makes going digital imperative.
“The pandemic has thrust upon us this opportunity to shape a new economy powered by digital, but if we’re not careful and deliberate the benefits of this transition to digital could be uneven. Certain segments of the population may be further excluded,” she said.
Among these are the MSME and agriculture sectors. This is why BSP is also focusing on supporting both segments, given their critical role in inclusive economic growth. “They are the predominant source of jobs and income for the majority of Filipinos,” Suficiencia said.
She said the BSP’s thrust is to promote bank lending to MSMEs and agribusinesses by making sure lending risks become more manageable.
BSP initiatives to ensure financial inclusion of MSMEs and agricultural workers include supporting the credit surety fund program and establishing a credit risk database to wean banks from depending on the use of collateral in credit evaluation.
Digital payments for merchants are also promoted to help them transition to the new economy and to support e-commerce.
BSP is now also firming up a roadmap on supply chain finance (SCF) market development and planning to promote agri value chain financing. The official said SCF and agri value chain financing is an innovative financing approach that can help smaller enterprises access better financing.
“We’re hoping to promote this in the banking sector through various initiatives.” she said. Priority agricultural value chain financing projects will be calamansi in Luzon; sweet coco water in the Visayas; and abaca, cacao, lakatan, cardava and coffee in Mindanao.
Currently, the Philippines has three big fintech companies namely DiskarTech, GCash and PayMaya that provide financial inclusion to our entrepreneurs and farmers even in the country side.