Unbanked

Listening to Chief Justice Renato Corona denying having 82 dollar bank accounts and talking about how he amassed savings through a frugal life reminded me to go back to the first Consumer Finance Survey conducted by the Bangko Sentral ng Pilipinas (BSP) from November 2009 to January 2010 and released only last April.

The survey shows how Filipinos use (or don’t use) the banks, and more, the information coming out of more than 10,000 households in the National Capital Region and Regions 1, 7 and 11 (Ilocos, Central Visayas and Davao region) to reflect the richest and poorest areas in the country. While the National Statistics Office has its regular Family Income and Expenditure Surveys, this BSP survey is the first to probe, in-depth, into household finances, all the way up to the use of banks, credit cards, investments and loans, even health insurance.

Inequity

The survey offers glimpses into the changes going on in Filipino culture and society. For example, 54 percent of households now have motorcycles. Ownership of cars, utility vehicles and vans was lower at 32 percent while 19 percent had tricycles and 2 percent had kuliglig(multifunctional two-wheeled tractors with a trailer, used in rural areas).

Readers may be interested to know some of the appliances owned: 91 percent of households have TV sets (and I was more surprised to know there were still households without TV), 66 percent had cell phones or land line phones, 59 percent had VCD/DVD players.

What struck me most after reading the survey, especially after listening to Corona’s soliloquy, was a picture of tremendous income inequity that characterizes the Philippines. Note that the survey did not break down consumer behavior by income group but even then, statistics like averages paint a stark picture of poverty in the country.

The most striking is that the majority of Filipinos are “unbanked,” a term that actually exists and is used by the World Bank and other international organizations. Fact: Only 21 percent of the households had bank deposit accounts. Fact: Of the households without bank accounts, 93 percent gave a simple reason of not having enough money for deposits. Fact: Of those with bank deposits, 71 percent had one account, 21 percent had two, and 8 percent, which presumably includes the Chief Justice, had three or more. Fact: The average amount in bank deposits was P105,927 and the median was P6,875.

The World Bank recently released a “Little Data Book on Financial Inclusion,” which has more data on the unbanked, by country. For the Philippines, they report 26 percent of adults having an account at a formal financial institution (read: bank), with more women (34 percent) having accounts than men (19 percent). Only 20 percent of adults in rural areas have bank accounts, and 37 percent in urban areas.

Should it be surprising to learn, later in the BSP survey, that 38 percent of households had no cash on hand for emergencies, and that for those who did have some money set aside for those emergencies, the average amount was P1,681?

The figures on income and expenditures show almost hand-to-mouth survival. Average annual household income was only P188,350, or about P15,000 a month. Main expenditures were for food consumed at home (39 percent), rent (19 percent), transportation (11 percent), utilities (7 percent) and food consumed outside the home (7 percent).

It’s easy to see why so few Filipino households have bank deposits. This BSP survey found that only 5 percent of households had expenditures lower than income, while 52 percent said they spent more or less what they earned.

Even without this survey, I’ve long suspected banks are so marginal in the economic life of most Filipinos. Go through an affluent neighborhood in Metro Manila and you’ll find ATM machines every few meters (or, sometimes, right next to each other). In a low-income neighborhood, you’d be hard pressed to find an ATM except in banks.

Conversations over upper-class dinners and at family reunions inevitably go into the best interest rates for time deposits, the best performing stocks and mutual funds. The upper classes use credit heavily, sharing information on which banks to go to for the lowest interest rates on loans, and on transferring debts from one credit card to another. Money flows without the handling of actual cash, the funds remitted and transferred from one account to another through electronic means.

In contrast, whenever I advise household help and drivers to ask their relatives in the provinces to open a bank account so they can send money through direct deposits, usually with no or low charges, they give me a blank look: It’s not just a matter of their relatives not having bank accounts but that there are no banks in their area. So in the end, money is sent through commercial money transfer agents that charge an arm and a leg for the transaction.

Banks are important, too, for loans to be used for family emergencies, buying a home, starting a business.  The World Bank’s “Little Data Book” notes that 11 percent of adults in the Philippines borrowed money from a formal financing institution in the past year, compared to 39 percent borrowing from family or friends and 13 percent from informal money lenders, which could mean high interest rates.

The reasons for being unbanked are not just geographic but also social in nature. For example, you need a certain degree of functional literacy to be able to fill out forms and carry out banking transactions.

Karaoke, ‘kuliglig’

Personal savings are important for economies to grow, and many of our neighboring countries realized this early enough, encouraging citizens, even children, to open bank accounts, no matter how small. Many of our neighboring countries had postal banks, meaning you could open a deposit account with post offices, which were found in every town, no matter how remote. The post offices were also used to remit money. We have this remittance service with our local post offices in the form of money orders, but it has never been popular.

We just haven’t been doing enough to make the banks more accessible to the poor and the middle class for savings and for investments. At the same time, we’ve pushed a consumerist culture that urges people to spend on nonessential goods that function more as status symbols (for example, fancy cell phones).

I get exasperated, too, with the one-day millionaires (a term I learned from the urban poor to describe themselves—money in, money out in a day), but can also understand when the poor argue that life is short, and difficult, so why not enjoy what you have, now na. No wonder more households have videoke/karaoke (16 percent) rather than desktop computers, oven toasters or gas ranges. Sing away your problems, or go off on your kuliglig for a bit of formula racing. I’m not kidding: Google “formula racing Inquirer kuliglig” for an Inquirer report. No low blood sugar here or, I hope, neck injuries that will require treatment overseas.

(Email: mtan@inquirer.com.ph)