SWIMMING AGAINST THE CURRENT
By DR. JESUS P. ESTANISLAO
More than a few of us now have savings in a bank, but so many more are excluded from even the most basic institutions of banking and finance. The percentages of our people who are un-banked and under-served by our monetary and financial system are still distressingly high.
Moreover, by the normal working of such a system, the savings of millions of small savers get channelled through branch banking into the metropolitan financial centers, where deposits from everywhere else are put together for on-lending, generally to the government or to big enterprises, big, well-known, and economically powerful enough to be able to borrow from banks. That is the way how finance works: transform small savings from millions of depositors to big amounts that can then be on-lent to big borrowers. It works. It delivers good economic results. It turns the economic wheels such that growth—-and hopefully, development as well—-is attained.
Except that economic and social inequality widens. And it is for this reason that our BSP, our central monetary authority, has become a very strong advocate and proponent for inclusive finance.
- Bringing all Filipinos into the inclusive finance net means that all of us should aim to live more disciplined lives such that we are able to save more. Our personal savings rate needs considerable improvement. It should jump up to much higher levels. Outside of raising the income levels of all, this would demand of each of us the self-restraint and prudence to splurge much less in mindless, unnecessary consumption. This does not only sound preachy: it is. But we can get many more of our ordinary citizens to practice what is being preached to them, if we can have as many deposit-taking convenience savings banks as convenience stores. Many more come-ons should be available (such as through educating the general public on personal finance), so many more of us would be induced and attracted to save for the many rainy days that anyway are familiar to all of us.
- All the hype that has been made to favor small and medium-sized enterprises needs to be substantiated and made more effective. Over-all encouragement and support for SMSEs have to be systemic and effective. This cannot be done by setting up still another government agency or by putting up still another special fund that can lend to this sector. In fact, this sector needs comprehensive support, from A to Z, of which financing SMSE projects is just a part, although it is a very important part.
- Socially responsible lending and investing should be taken out of learning notes and speakers’ texts and actually brought to the real world, where the big banks actually get together with the BSP and other regulatory agencies. There is a need for big banks to go beyond their comfort zones, where they are already privileged and properly protected to earn high returns. For instance, instead of simply paying fines for non-compliance with the provision of the Agri-Agra law, they should be pressed and pressured to help organise a more systematic and equally safe route to lending and investing even in “non-traditional banking sectors” such as the Agri-Agra and SMSEs.
For now, the ordinary Filipino citizen is kept at some distance from the world of big banking and big finance. Even though more than a few save, still our personal savings rate at the national level is far too low: and whatever achievement our big banks and big financial institutions have been able to deliver, they have not been of much help to the non-traditional banking sectors. This divide between those that already have and those who are in much need of help and opportunity so they can have more should quickly be removed. And its removal, through various innovative schemes in inclusive finance, should be a key part of the transformation program we need to effect under Dream PH.