Expanding financial access for every Filipino

Economic uncertainties have pushed more Filipinos to consider financial safety nets, yet achieving long-term security remains a challenge.

A 2024 industry report found that 43% of Filipinos are seeking passive income sources, 39% are prioritizing emergency savings, and 32% are focused on financial freedom after retirement. However, major hurdles remain, with rising healthcare costs at 82%, inflation at 81%, and concerns over economic slowdown and recession at 78% weighing heavily on financial decisions.

Despite the availability of banking services, many Filipinos still prefer keeping their savings in traditional piggy banks, bamboo containers, or old jars. A study published by PANTAO: An International Journal of the Humanities and Social Sciences noted that distrust in banks stems from fears of bankruptcy or inflation eroding their savings.

However, keeping cash at home poses greater risks, including theft, damage, or misplacement.

The study emphasized that banks serve not only as safekeeping institutions but also as tools for emergency preparedness. Experts recommend maintaining at least three to six months’ worth of living expenses in a secure, accessible account to prevent unnecessary debt during financial emergencies. When emergencies arise, those without savings often turn to quick loans, credit cards, or informal borrowing, creating a cycle where a large portion of income goes toward debt repayment rather than wealth-building.

Risk management is another overlooked aspect of personal finance. Many Filipinos see insurance as an unnecessary expense rather than a safeguard against life’s uncertainties. Life insurance, for example, is often dismissed as a luxury for the wealthy, while non-life insurance is viewed as an added cost rather than protection for assets.

While the country’s insurance penetration improved by 0.06 percentage points in the fourth quarter of 2024 to 1.67%, it remains relatively low compared to the global average of 2.9% and 2.2% in emerging Asia.

According to a JP Morgan report, life insurance with cash value can be a valuable financial tool for asset diversification. Permanent life insurance policies, for instance, include savings components that can grow over time, offering additional financial security.

Investment as wealth-building tool

According to the Bangko Sentral ng Pilipinas (BSP), saving is essential for financial security as it provides readily available funds for emergencies and short-term needs. However, these accounts offer minimal returns and often fail to keep pace with inflation.

Investing, on the other hand, involves purchasing assets that can appreciate over time, with the potential to generate higher returns. The BSP stated that income is a person’s most powerful wealth-building tool. Without strategic investing, hard-earned money may not reach its full potential.

While investments carry risks, they also provide opportunities for financial growth, helping Filipinos move beyond mere survival toward true financial independence. Middle-income Filipinos are exploring investment opportunities to grow their wealth, including stocks, mutual funds, real estate, and digital assets.

Such investors are typically investing to prioritize specific life objectives such as homeownership, education funding, or retirement planning. For them, the goal is not just wealth accumulation but securing a future that can withstand economic uncertainties.

Beyond financial gains, focusing on long-term objectives means investors are less likely to make impulsive decisions driven by short-term market fluctuations. This method helps to break away from the traditional approach of a one-size-fits-all investment solution.

However, 75% of Filipinos still do not invest, according to the BSP Financial Inclusion Survey. Many hesitate to enter the investment space due to a lack of knowledge, fear of risk, or unfamiliarity with financial products. The central bank also reported that the lack of financial literacy discourages people from considering investments, as many view them as risky or exclusive to the wealthy.

Journey towards financial inclusion

The BSP said that many Filipinos remain outside the formal financial system, unable to maximize opportunities that could improve their financial standing.

While women in the Philippines have higher financial inclusion rates than men, large segments of the population still struggle to access financial services. Those most affected include low-income earners, senior citizens, migrant workers and their families, persons with disabilities, indigenous peoples, and forcibly displaced persons.

Micro, small, and medium enterprises (MSMEs), along with agriculture-based businesses, also remain largely underserved. These sectors contribute significantly to employment and economic activity yet receive only a small fraction of total bank loans.

Smallholder farmers, fisherfolk, and informal workers, in particular, face limited access to financing that constrain their ability to expand and improve their livelihoods.

The transition to digital transactions has also introduced new challenges, especially in rural areas where internet connectivity is inconsistent and financial literacy is lower. Many Filipinos remain hesitant to fully embrace digital banking due to concerns about affordability, security, and fraud risks.

In response, the central bank is intensifying efforts to educate Filipinos on key financial concepts through its Economic and Financial Learning Office. The Economic and Financial Learning Program regularly holds activities designed to improve public understanding of essential financial matters.

Recognizing the challenges MSMEs and the agriculture sector face in securing financing, the BSP is promoting alternative lending solutions through Agricultural Value Chain Financing model, which connects agribusiness players with banks to facilitate lending opportunities. Through Circular No. 908, the central bank encourages banks to explore value chain financing as a sustainable way to support the agriculture industry.

In addition, the BSP continues to promote the Credit Surety Fund, which provides collateral substitutes to MSMEs, enabling them to access bank loans. Under the Credit Surety Fund (CSF) Cooperative Act, the central bank works closely with cooperatives and the Cooperative Development Authority to strengthen CSFs in various communities.

Meanwhile, the Department of Finance (DoF) has called on the insurance industry to expand market penetration and position insurance as a mainstream financial instrument and basic necessity for Filipinos.

In a statement, Finance Secretary Ralph G. Recto emphasized that insurance is a powerful tool for poverty reduction and long-term financial security, more than just a safety net.

“Risk is a significant driver of poverty, and adequate insurance coverage is among the powerful tools for mitigating this challenge. Therefore, the life insurance industry [must] hold key positions in winning our battle against poverty,” said Mr. Recto.

The Finance secretary also urged industry players to embrace digital innovation, simplify policies, and develop customer-centric, cost-effective solutions. That way, insurance serves as a comprehensive financial product that integrates protection, savings, and investment benefits tailored to different life stages.

Source: Business World

PHL financial system remains resilient but faces ‘moderate’ risks

The country’s financial sector is seen to remain robust and is well-positioned to absorb shocks, the Bangko Sentral ng Pilipinas (BSP) said, but noted external headwinds that pose risk to the sector.

“The Philippine financial system remains resilient but faces moderate risks that warrant close monitoring,” the BSP said in its latest financial stability report.

“The propagation of global uncertainties, including heightened geopolitical tensions, evolving monetary policies in major economies, and potential shifts in the United States following the outcome of the presidential elections could impact the Philippine economy.”

In the report, the BSP said the banking sector growth will be supported by ample buffers and stable financial markets.

“Banks have high capital buffers and ample liquidity, which would allow the financial system to absorb potential losses and/or support economic activity,” it said.

“Financial markets are stable with no signs of asset price misalignments and high share of domestic investor participation.”

The Philippines’ international reserves are also deemed adequate and can cushion the country from shocks, it added.

Latest data showed the country’s dollar reserves rose by 3.3% month on month to $106.65 billion as of end-February. This was also 4.6% higher than $101.99 billion in the same period a year ago.

“On balance, the banking sector remains healthy as characterized by limited endogenous risks or internal weaknesses,” the central bank said.

“Nonbank financial institutions (NBFIs), although small compared with the size of the Philippine banking system, expose banks to common exposure risk through their shared investments and holdings.”

Credit supply is also seen to remain stable amid improved profitability, robust capital base and ample liquidity.

“Although growth is slower than pre-pandemic levels, the banking system is well-positioned to support the domestic economy, with an expansion in its lending portfolio.”

Bank lending jumped by 12.8% to P13.02 trillion in January, its fastest pace in over two years.

INFLATIONARY PRESSURES

However, the BSP flagged global risks such as inflationary pressures and changing economic policies.

It cited the World Uncertainty Index (WUI) and the Global Economic Policy Uncertainty (GEPU) Index, which have been on an upward trend.

“The cost of production materials (especially in the industrial sector) may accelerate due to supply-chain disruptions amid geopolitical instability and lag-effects of global monetary policy easing.”

Primary risk considerations include disruptions in global supply chains and logistics, the BSP said.

Banks also face asset valuation risks, the BSP said, citing elevated nonperforming loans (NPL) and growth in unsecured consumer loans.

The industry’s NPL loan ratio rose to 3.38% in January from 3.27% in December. This was the highest in two months or since the 3.54% in November.

“Recent global uncertainty stems from concerns on geopolitics and economic policies that affect international trade and investment flows.”

“A ‘macro-market disconnect’ — when macroeconomic risks are not properly priced in by market players — could affect asset valuations and may be subject to severe corrections.”

Capital flight is another risk financial markets could face, it added. Foreign investors account for about 46% of trading in the local bourse.

“Portfolio flows reflect investor risk sentiment and translate to FX (foreign exchange) movements. Portfolio investments are vulnerable to outflows.”

Risks also stem from debt servicing and high “maturity walls,” the central bank said.

“Corporate earnings are reverting to pre-pandemic levels. However, increased leverage and sustained funding mismatches especially in large corporates pose vulnerabilities.”

“Significant reliance on bank funding and the degree of interconnectedness among corporates with Domestic Systemically Important Banks (DSIBs) could amplify risks to the financial sector,” it added.

The BSP said the “interconnectedness of large conglomerates to the banking system may expose the financial system to risks coming from the corporate sector given increasing leverage and funding mismatches.”

The sector also faces emerging risks from financial technology such as artificial intelligence adoption.

“While innovations can enhance efficiency and financial inclusion, the increasing influence of technology also introduces new challenges, such as cybersecurity threats, operational risks, system failures or algorithmic errors, and biases that could undermine regulatory compliance.”

Meanwhile, the BSP noted further monetary easing, which would also bolster the financial system’s growth.

“The transition towards an accommodative interest rate environment could encourage investment in capital-intensive projects, business expansion, and household consumption.”

“Looser financing conditions could pave the way for enhanced credit availability for businesses and consumers to ramp up investments and rebuild savings as buffer to shocks.”

The BSP began its easing cycle in August last year, cutting rates by a total of 75 basis points (bps) by end-2024.

Despite delivering a pause last month, the central bank has said it is still on an easing trajectory. BSP Governor Eli M. Remolona, Jr. has signaled the possibility of a 25-bp cut at the Monetary Board’s meeting on April 10.

“Priority measures could enhance the stability and resilience of the Philippine financial system if aligned with monetary policy and banking supervision,” the BSP said.

It also called for the further enhancement and deepening of capital markets; improvement of reporting frameworks; and development and adoption of macroprudential tools.

Source: Business World

From grey list to green light

From being blacklisted in 2000 to greylisted in 2021, the Philippines has made significant strides in its battle against financial crimes. In a remarkable turnaround, the country has now reached a pivotal milestone: removal from the Financial Action Task Force (FATF) monitoring list.

This achievement was announced on Feb. 21, 2025, marking a new chapter in the Philippines' commitment to financial integrity and global security. The country's journey through the FATF listings has been challenging, marked by cycles of blacklisting and grey-listing.

Initially blacklisted in the early 2000s due to the absence of a strong Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) legal framework, the Philippines took its first step toward reform with the pas-sage of Republic Act 9160, also known as the Anti-Money Laundering Act of 2001.

This led to the country's removal from the blacklist in 2005. However, achieving full compliance was still challenging. Between 2008 and 2021, the country's listing status varied, often due to concerns about counter-terrorist financing laws and other regulatory gaps.

Despite these challenges, the Philippines showed resilience. In response to its 2021 greylisting, the country implemented a comprehensive action plan to address key AML/CFT deficiencies. It involved strengthening supervision of designated nonfinancial businesses and professions, cracking down on illegal money transfers, improving law enforcement's access to beneficial ownership information and safeguarding nonprofit organizations from misuse.

The collaborative efforts have led to the Philippines' removal from the greylist, highlighting the country's commitment, through the Anti-Money Laundering Council, to combating financial crimes and strengthening global financial security.

It must be emphasized that the Philippines' removal from the FATF greylist is more than just a symbolic victory. It signifies an exceptional strengthening of the country's financial system. For businesses and financial institutions, this development brings immediate and tangible benefits.

One of the most notable advantages is the reduction in the need for enhanced due diligence on cross-border transactions, which not only lowers operational costs but also streamlines processes. Moreover, the easing of reporting requirements also reduces administrative tasks, allowing entities to use resources more efficiently.

This makes the country's financial system more attractive to international investors, enhancing the Philip-pines' competitiveness. This shift is especially significant given the well-documented negative effects of grey-listing: studies indicate that countries on the FATF greylist often experience a decline in gross domestic product (GDP), reduced foreign direct investment (FDI) inflows and a lower FDI-to-GDP ratio.

For the Philippines, reversing these effects will pave the way for a more resilient and dynamic economy. Moreover, the removal from the greylist will help streamline and reduce the cost of remittance processing, providing direct benefits to overseas Filipino workers (OFWs).

With fewer regulatory hurdles and faster transaction times, OFWs will be able to send more of their hard-earned money back home, further improving their financial well-being. While the Philippines' removal from the FATF greylist is a remarkable feat, it is only the beginning of a long-term commitment to maintaining financial integrity.

To avoid future relisting, the country must keep enforcing strong measures to tackle emerging financial crime trends. Drawing from nearly 25 years of experience in exiting the FATF watch list and learnings from countries with strong, consistent AML/CFT frameworks — such as Australia, Canada and several EU nations — will be crucial.

This includes enacting forward-thinking legislation to stay ahead of emerging threats, reinforcing the enforcement and prosecution of financial crimes and conducting thorough national risk assessments to identify and address specific deficiencies.

Additionally, maintaining risk-based supervision across all sectors and fostering collaboration between the government and private sectors in implementing AML/CFT measures will be essential. Above all, maintaining strong political commitment to AML/CFT as a national priority will be crucial for protecting the country's financial system in the long term.

The key takeaway is that the Philippines' successful exit from the FATF greylist underscores the collective commitment of all stakeholders to maintaining a transparent financial system.

This achievement has boosted investor confidence and contributed to a more dynamic global market. How-ever, maintaining this success will require continuous compliance, proactive measures and the ability to adapt to emerging threats.

By doing so, the Philippines will ensure the long-term stability and resilience of its financial system.

Source: Manila Times