MANILA, Philippines - The Economist Intelligence Unit (EIU) has ranked the Philippines as microfinance leader in Asia, and third best globally in a study that covered 55 countries.
Global microfinance leader is Peru, followed by Colombia. In fourth is Chile and fifth is India (second best in Asia).
The Philippines was second best in 2010, and number one globally in 2009, the first time the report was conducted.
The EIU report also noted the Philippines was ranked among the leaders in the regulation and promotion of micro-insurance. The other nations mentioned were Colombia, India and Mexico.
The strength of the top three, according to the report, lies in the presence of a financial-inclusion strategy.
“The Philippine government’s multi-year development plan includes a financial-inclusion strategy with specific commitments, many of which have been implemented, including financial-education initiatives,” EIU said.
The report noted that one of the key strengths of the Philippines is that the Bangko Sentral ng Pilipinas (BSP) is the first monetary regulator to form a body specifically for financial inclusiveness. The National Strategy for Microfinance, formed in 1997, preceded the Inclusive Finance Advocacy Staff.
In close cooperation with other agencies, the BSP also encourages a strategy that offers micro-insurance regulations to facilitate the provision of life, health and other insurance products to low-income populations.
However, the report expressed concern that most of the providers of micro-credit and microinsurance are situated in populous and urbanized areas. Only 26.6 percent of the adult population had deposit accounts, majority of which are also in urbanized areas.
Other major challenges highlighted by the report include the weak and fragile delivery and implementation.
Another stumbling block is the country’s archipelagic situation made up of more than 7,000 islands, where huge financial, security and logistical challenges exist in reaching the poor and unbanked.
The EIU said that in the country’s largest province, Mindanao, coverage for microfinance is negligible. Non-regulated financial institutions, namely, co- operatives, are not well supervised and engage in deceptive practices and charge high interest rates. Over-indebtedness is also an issue with multiple financing,
“Financial literacy continues to be a problem, as many Filipinos do not understand or value the importance of savings,” the report added.
The EIU is an independent business within The Economist Group providing forecasting and advisory services through research and analysis, such as monthly country reports, five-year country economic forecasts, country risk service reports, and industry reports. The group also publishes the prestigious The Economist, a business journal.