Are Filipinos bad savers?

Filipinos, it would seem, are the worst savers in Southeast Asia. The numbers show it. Measured as the ratio of gross domestic savings to gross domestic product (the latter being a measure of national income), our saving rate is quite strikingly the lowest among our Asean neighbors. Based on data from the Asian Development Bank, our 15.2-percent domestic saving ratio in 2015 was far lower than Singapore’s 53.2, Thailand’s 35.4, Indonesia’s 33.2, Malaysia’s 32.7, Myanmar’s 31.8, Vietnam’s 25.7, Brunei’s 19.9, and even Cambodia’s 17.3 percent (no data were given for Laos). Judging from these numbers, average income doesn’t appear to explain our low savings, as often cited to be the reason. Are Filipinos really spendthrifts compared to other Southeast Asians?

Looking around, one is tempted to believe so. After all, we have some of the biggest shopping malls around the world. Most Filipino tourists’ idea of tourism abroad seems to be visiting the malls and factory outlets. The average Filipino wage worker seems to spend his/her income even before earning it. We can see it in the “vale” system, where a worker asks for an advance on his/her wage well before payday—a practice that is quite common in the Filipino workplace. Employees commonly borrow from informal lenders off incomes they have yet to earn. Ever have to wait in line at an automatic teller machine behind someone making several transactions with a bunch of ATM cards? Chances are, that person is a so-called “5-6” informal lender withdrawing payments from debtors, who willingly surrender their cards to their friendly neighborhood loan shark as security for regular loans.

Why do Filipinos save so little, compared to their Southeast Asian neighbors? A tempting answer would be that most Filipinos are too poor to save. But from the cited Asean comparisons, lower average incomes can’t be the primary explanation. A friend claims that Filipinos who do save (that is, those with higher incomes) have saving rates even exceeding that of Singaporeans. But given wider income disparity in our society, with the wide majority of Filipino households earning barely enough to support their basic needs, overall savings come out lower. Wider poverty and inequity could be the culprit, then.

But other friends disagree. We may not see it readily, but the poor do save, say those who have actually studied and worked with the poor where they are, and they claim that there remains great potential there for saving. They point to the billions of pesos that flow through the ubiquitous jueteng, the supposedly illegal numbers game that remains widespread nonetheless, primarily patronized by low-income groups. While that’s gambling, not saving, it still suggests that there is great wealth in the poor, and much potential saving out there.

Researchers have documented how poor families especially in rural areas stock up on certain commodities—not necessarily durables like jewelry or appliances, but even just storable groceries—and then sell these off in times of need for cash.  That is saving. I’ve witnessed many a rural household keep a pig tied up in the backyard, fattening it mostly with kitchen refuse collected from neighbors, and an occasional kilo or two of rice bran. The pig is sold or slaughtered in time of need, such as in time for the kids’ school expenses. That is saving.  And then there are the “paluwagan” schemes one seems to find in every poor neighborhood, especially among the women.  Again, that is saving.

Who says the poor don’t save?  They do, except that they save in forms that never find their way into the formal financial system or the official economic statistics.  Chances are, our low officially reported saving rate is substantially understated, given these various unrecorded forms of saving actually undertaken by the poor. What more if we can channel the daily amount many of them stake in jueteng into productive savings schemes instead? The challenge, then, is how to capture the substantial savings coming from lower income groups into the financial pool, and mobilize these for economic growth and development.

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