“KAPA” financial inclusion and literacy
I was in the officers’ table during our second quarter Chamber of Thrift banks meeting last month, and our executive director asked me to suggest a good speaker for the next quarter’s meeting. I half-jokingly said that maybe we should invite KAPA founder/President Apolinario to be the speaker in line with the financial inclusion and literacy campaign of the Bangko Sentral ng Pilipinas (BSP) and all the banks. I said half-jokingly because, if it’s true KAPA had five million investors and the rest of the other copycat pyramiding scam companies another five million victims, then they have just reduced the financially unbanked/excluded population to 55% from 65%, if we assume their investors were previously outside the system.
BSP statistics show that only 20% of Filipinos maintain a deposit account with banks and only 35% have dealings with banks. This includes the Overseas Filipino Workers who deal with the banks for their dollar inward remittances, so 70 million Filipinos are still out of the financial system. The objective of the government through the BSP is to increase financial inclusion to up to 70% of the population as the economy grows, to have a more effective and efficient fiscal and monetary management. This is also in line with the target of reducing the population below the poverty level to less than 20%, as there is a direct correlation between per capita disposable income and bank deposits. The more developed economies like Singapore, Japan, Taiwan, and European countries with higher per capita incomes have a higher percentage of financial inclusion than the Philippines. The more developed economies in Asia like Thailand and Malaysia rates higher than us and booming Vietnam also beats us on this measure. The higher the per capita income, the higher the “marginal propensity to save”, so they have more bank depositors.
From available information, KAPA and other pyramid scam investors are from the middle class, particularly from the provinces. They are from the lower/middle to middle/middle class with income from P20,000 to P50,000 a month. While half of them may not be considered as unbanked as they had deposit accounts from where they withdraw money to invest in KAPA and others, they obviously were financially illiterate. This sector includes a lot of the military and police people especially with the recent increase in their take-home pay, and self-employed business people in the informal sector. Even with the advances in information technology, when access to relevant information can be done through the cellphone, this group of people is financially uninformed and uneducated. In a sampling survey of the BSP in this sector, only 2% passed/answered correctly 10 questions on interest computations and banking. So, it is understandable why KAPA and others were able to scam billions of pesos.
The BSP has a financial inclusion and literacy program that started last year. It encourages banks to simplify bank account opening and reducing the minimum required balances. It also made it easier for banks to open micro-branches, reduce remittance fees, and championed a simplified payment system from banks to stores. BSP has also been very accommodating to FINTECH companies that lend to individuals and small companies, and even allow them to deposit, withdraw, remit, and buy micro-insurance from pawnshops and convenient stores. Check out what financial services, M. Lhullier, Cebuana Lhuillier, and 7/11 stores will do for you.
While the government is in the right direction in this financial inclusion and literacy program, it will need more push in the formal education sector and in social media. Financial literacy should be included in the Senior High School curriculum, and there should be an easily accessible default website of the BSP to give instant answers to the public about banking and investments.
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