Press Coverage
The Review Even poor Filipinos do save, says study A study conducted by Paris-based Consultative Group to Assist the Poor ( CGAP ) showed that savings capacity does exist among low-income Filipino families, dispelling widespread belief that poor Filipinos do not save. CGAP has used the Philippines for the second test of its Country Savings Assessment Toolkit that is aimed at helping government agencies, donors and others identify opportunities and constraints in increasing poor people's access to high quality deposit services. "Despite a widespread belief that poor Filipinos do not save, the review team found substantial anecdotal evidence that savings capacity does exist among low-income clients," the study said. The study debunked widespread belief that Filipinos are consumption-oriented, with little desire or capacity to save and Filipinos are thought to use credit for daily needs. The study used a survey by a microenterprise bank in the outskirts of Manila revealing that 75 percent of respondents had savings in commercial banks and that majority of their interaction with banks occurred in the context of saving rather than taking loans. Another survey revealed that Filipino respondents in smaller cities do save. The survey showed that 63.5 percent of the total respondents living in urban areas keep their savings at home, 9.7 percent save in rural banks, 2.2 percent in commercial/thrift banks and 9.4 percent in cooperatives. Bankers interviewed in the survey, however, reported that salary deposits are typically withdrawn immediately to repay credit or pay outstanding bills. They cited that some bank clients are forced to pawn their ATM cards and PIN codes to pawnshops in return for a cash advance. The study revealed that poor and low-income Filipinos save through various mechanisms such as paluwagan or "dajong" or stashing money into alcancia or bamboo poles at home. Some interviewees attributed the lack of financial savings among low-income Filipinos to intimidation or unfamiliarity with financial institutions. The study further noted that there are over 7,600 bank branches in the Philippines operated by 42 universal and commercial banks as well as 87 thrift banks. Banks at the end of 2003 had a total of $48.65 billion in deposits, of which 90.42 percent were held by universal and commercial banks, 7.26 percent by thrift banks and 2.32 percent by rural banks. However, the study showed that banks tend to serve relatively wealthier clients primarily due to their location. There is a huge discrepancy in bank office density (population per bank branch) between rural and urban areas, and within Metro Manila. In Manila, one bank office serves 4,190 persons compared to only one office for over 30,000 people in Eastern Visayas and Zamboanga Peninsula In order to improve small deposit mobilization in the Philippines, CGAP suggested the need to collect more data on clients' savings patterns and preferences; expand financial literacy efforts for residents, leveraging experiences with overseas Filipino workers ; and institutionalize and expand successful technical assistance programs on a sustainable basis. The body added that there is also a need to build on existing monitoring systems and rationalize ratings to enhance transparency and client confidence; evaluate alternative electronic banking and payment services for rural banks and cooperatives to increase poor clients' access to savings accounts and money transfers; and strengthen financial cooperative supervision to better ensure the safety and soundness of poor people's money. Other measures include the reevaluate the need for program loan funds and continue phasing out directed credit programs as part of a strategy of incentives for large-scale small deposit mobilization as well as shift the supervisory framework for banks from operational restrictions toward risk-based supervision to better balance the twin objectives of control and access.
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