BSP: Digitizing microfinance services will boost financial inclusion in Philippines

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Digitizing microfinance institutions could promote further financial inclusion in the country as borrowers from the unserved and underserved segments of the population will be able to access a wider range of financial services.

During the launch of the third Digital Financial Inclusion Awards (DFIA), Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. said more Filipinos would have better reach and better quality of services if microfinance institutions continue to adopt digital transformation.

'Digitalization serves as a bridge that connects the financially underserved segments of the population to providers of formal financial services. It does so in a manner that allows greater efficiency of financial transactions that fuel and accelerate economic growth,' Remolona said.

He said that financial inclusion, under the National Strategy for Financial Inclusion (NSFI) 2022-2028, is the state where everyone, especially the vulnerable, has access to a wide range of financial services.

'To us, microfinance remains integral to the initiatives and programs in the NSFI,' the BSP chief added.

Microfinance institutions serve a diverse clientele, which includes small entrepreneurs, microbusiness owners, low-income households, agricultural workers and informal sector workers, among others.

Remolona also noted that aside from lending, microfinance also provides Filipinos easy access to savings, investments and insurance.

'These tools will enable the vulnerable to manage their resources even better and protect themselves against certain risks,' he said.

Based on central bank data, 138 banks engaged in microfinance served around 1.9 million borrowers as of the third quarter of 2023.

Non-banked microfinance institutions, such as cooperatives, supported 9.7 million members by the end of 2021. Meanwhile, microfinance non-government organizations catered to 6.6 million clients as of 2022.

Meanwhile, the BSP chief said the DFIA program recognizes outstanding microfinance institutions and microentrepreneurs who have adopted digitalization in their operations.

'By encouraging innovation in microfinance, we hope to inspire more organizations to do the same,' he added.

The National Selection Committee will select four microfinance institutions and 15 microentrepreneur winners for the third DFIA, with the awarding ceremony set on Nov. 8.

The program was made possible by Citi Foundation, in partnership with the Microfinance Council of the Philippines Inc. (MCPI) and supported by the BSP.

'Citi Foundation invests in efforts that increase financial inclusion, economic opportunities for the youth, and develop community solutions because it leads to economic empowerment and opportunities for low-income communities and individuals around the world,' Citi Philippines CEO Paul Favila said.

'We hope that this will serve as inspiration for the microfinance industry and MSME sector to continue innovating their services for Filipinos and help transform the country into a more financially inclusive and resilient society,' Favila said.

MCPI chairperson Gilbert Maramba said the impact of digitalization is seen everywhere.

'This transformation not only allowed MFIs to help clients thrive, especially during crucial times, but most importantly, it has helped the institution in bringing more transformative change to businesses and help them succeed in today's challenging business world,' Maramba said.