Responsible Finance: The Case of the Philippines

Yesterday I attended a presentation at CGAP on responsible finance, which featured three excellent guest speakers, including Fe de la Cruz, Director of Corporate Affairs, Central Bank of the Philippines (the other guests included a former member of the Brazilian Central Bank, and Daryl Collins, co-author of Portfolios of the Poor). The presenters discussed their interpretations of responsible finance, and outlined how specific government programs are spurring its development.

In essence, responsible finance is driven by three primary actors:

1. Governments, who provide consumer protection and regulation
2. Providers of finance
3. The clients themselves, who need to posses a certain degree of financial literacy

Fe de la Cruz outlined how the Philippine government is actively supporting the responsible finance agenda.

One third of Filipinos live in poverty, and only 30 percent of the total population have formal bank accounts. The government is attempting to address these issues by pushing financial education at an early age. Children in grades 1-6 (ages 6-11) are now given instruction in financial literacy. Because many of the country's poorer children drop out of school once they reach puberty, the government has decided to focus its financial education efforts on the very young. The result is that over 12 million students are given some sort of lesson in financial responsibility.

An interesting externality of these efforts is that the grammar school teachers themselves have expressed interest financial literacy programs. As a result, the Philippine government is aiming to reach other important segments of its adult population.

First, the government is looking to make financial education courses a mandatory component of university curriculum, so that the future generation of college-educated leaders will be conversant in the issues of responsible finance.

Second, educational outreach efforts are being aimed at the country's large overseas worker population, which, at 11 million people, composes over 10 percent of the national population. The government is seeking to educate not only the workers themselves (via roadshows), but also their families. This will lead to more efficient use of remittances, which will in turn give overseas workers greater flexibility in determining when to return home. 

The government has also set up a financial code of conduct among banks and lenders, and has formed a financial and consumer affairs group.

Between the 12 million elementary school children and the 11 million migrants, in addition to teachers, university students, and the families of migrants, the government's financial education efforts are aimed at over 25 percent of the national population. Combined with its other efforts, this is a very good start.