Read first the fine print

For a change, we stayed out of politics and government issues when we dwelt on the more mundane subject matter in this week’s Kapihan sa Manila Bay breakfast news forum last Wednesday. While financial literacy and financial education sounded so profound, they are actually very close to the home of every Filipino family, especially for many of us who try to make both ends meet.

Lacking basic knowledge on how to handle finances and budgeting the household income, a typical Filipino family of five will be hard-pressed to really cope with the cost of living getting higher in our country. The desired result of financial literacy and financial education is attaining the so-called “financial inclusion” so that every Filipino family across the country will enjoy the fruits of economic growth.

“Financial inclusion” does not necessarily mean the economic gains are spread in equal amounts to all Filipino people all over the country.

Experts and advocates from private and public sector joined us in our Kapihan sa Manila Bay discussions on financial literacy and education. From the public sector, we had Rochelle Tomas from the Center for Learning and inclusion Advocacy of the Bangko Sentral ng Pilipinas (BSP), and Atty. Aileen Amor Bautista, senior vice president for business development and communications of the Credit Insurance Corp. (CIC) of the Philippines.

From the private sector, Franchette Cardona, chief marketing and product officer of the Home Credit Philippines (HCP) talked about their financial literacy advocacy. Dubbed as “Juan, Two, Three Campaign,” the HCP conducts this financial education to far-flung communities as part of its corporate social responsibility. A Prague-based consumer finance provider, the HCP has been operating a lending business for the past five years that cater to small or low-income borrowers.

Currently, the HCP has partnered with the Department of Social Welfare and Development (DSWD) in the implementation of the government’s direct subsidy to poor Filipino families under the Pantawid Pamilyang Pilipino Program (4Ps), or the Conditional Cash Transfer.  

To make financial literacy more interesting, Cardona cited the HCP campaign utilizes games and creative materials like workbooks to educate households from parents to children of 4Ps grantees.

Speaking for the CIC, Bautista described the function of this government agency as data provider to banks, credit card and lending institutions on the debt/credit standing of individual borrowers. Bautista disclosed the CIC provides both the positive and negative history of borrowers’ background information for due diligence that lenders, banks and credit institutions use as basis whether or not loans and up to how much loans can be granted to a borrower.

Latest figures from the 2017 BSP Report showed 77% of adult Filipinos remain unbanked, or they are neither bank depositors nor have any savings account in banks. Of this big segment, 52% are unable to allocate money for savings as primary reason. Of the 52.8 million adults surveyed, 21% do not have formal bank accounts because of their perceived lack of need for them. The same BSP Report for financial inclusion states that 10% do not have proper knowledge of how to open a bank account while 8% have lack of awareness about it.

“This is the first road block that we see when the public is not equipped with the basic knowledge they need to handle their finances. Educating them on the topic is really where we should be starting,” Cardona pointed out. “This is something financial literacy campaign can address,” she stressed.

  This is precisely what the BSP Center for Learning and inclusion Advocacy is doing as part of its mandate, Tomas told us during the Kapihan sa Manila Bay. To date, this specialized BSP department on financial literacy and financial education have tied up their programs with the Department of Education (DepEd); the Armed Forces of the Philippines (AFP); the Civil Service Commission; and the Overseas Workers Welfare Administration (OWWA).

On the DepEd, Tomas explained, they assist the Department in crafting the financial literacy into the K to 12 curriculum from grade school to senior high school to teach students at early ages on how to manage their “baon” or pocket money. The teachers, soldiers and other government worker, she added, also go through financial literacy seminars on budgeting and how to manage their monthly income and expenditures.

According to Tomas, they also ensure overseas Filipino workers (OFWs) are required to undergo a pre-departure seminar on financial literacy. Once they return to the country, OFWs are given another set of financial education seminar to help them manage their income and savings acquired from working abroad.

Although public school teachers and AFP personnel are better compensated now than before, they obviously still need to learn to live within their means and try to avoid indebtedness. This is best demonstrated by the continuing proliferation of “5-6” informal lenders who charge them usurious rates on loans. Although the “Usury Law” has long been suspended by the Central Bank since 1983, Tomas reassured the public the BSP does not tolerate any interest charges that are not within the prevailing cost of money based on market-dictated rates.

Tomas though clarified borrowing per se is not bad, for as long as one is a responsible borrower. She describes a responsible borrower as one who pays back his debts in full and on time. Tomas cited, a responsible borrower must be ready to pay the “compounding interest,” or interest charges for installment and delayed payments.

This is precisely why the BSP has required all credit card and lending companies to print their borrowers’ contract at least 12 font to make them easy to read. Tomas cautioned the public against text messages from unknown individuals who offer loans that are not sanctioned by the BSP.

But the most important reminder to borrowers: Read first the fine print of the loan contract before you agree to the terms of payment.