What’s in it for us?: Benefits of making public commitments to financial inclusion
The Bangko Sentral ng Pilipinas (BSP) was presented with the Maya Declaration Award during the 2014 Alliance for Financial Inclusion (AFI) Global Policy Forum in Trinidad and Tobago. The Award recognized the tangible financial inclusion gains made by the BSP against the public commitments it made through the Maya Declaration.
The Maya Declaration is the first global set of specific, measurable commitments made by policymakers from developing and emerging countries to unlock the economic and social potential of the poor through financial inclusion.
The BSP has long recognized the importance of bringing financial services to all, especially those that are marginalized and unserved. Our experience in promoting sound microfinance practices in the banking sector has shown us that an enabling environment can catalyze sound and stable institutions to deliver appropriate products and services that can effectively reach market segments which were previously unserved. We have built our financial inclusion framework on this experience. We have been proactive in finding ways in which we can make our banking system not only stronger but also more inclusive. As recently cited by the Economist Intelligence Unit in their Financial Inclusion Global Microscope, the BSP was the first central bank in the world to establish an office dedicated to financial inclusion.
It is no surprise that the BSP was among the first adopters of the Maya Declaration when it was launched in 2009 during the AFI Global Policy Forum (GPF) in Riviera Maya, Mexico. In our commitment, we made public the strategies which we were putting in place—(1) pursuing financial inclusion side by side our mandate to promote financial stability; (2) creating an environment that will allow all adults to have a deposit account; (3) promoting price transparency, risk disclosure, and consumer protection; and, (4) institutionalizing a comprehensive financial inclusion data framework.
In the process of crafting our Maya commitments, we found ourselves asking a fundamental question: is making an official commitment imperative? Apart from having an organized framework, which we may achieve even without making a public commitment, what is in it for BSP to affirm that it is a stronghold of financial inclusion?
Making a public commitment is an act of internalization
It presents us an opportunity to evaluate, think—and rethink—our objectives. It allows us to ruminate and figure out our strategies to achieve our goals. It is a process in which we are pushed to focus, distil and prioritize. By committing, we become more accountable as we allow ourselves and our actions to be monitored. This is essentially why, year after year, AFI publishes a progress report on the Maya Declaration.
By having a public commitment, the BSP made itself cognizant to reduce the gap between its commitments and actions. The BSP recognizes hard truths on financial exclusion: Only 26 percent of adult Filipinos have savings accounts, while only 10.5 percent have access to formal credit, and 36.6 percent of Philippines’ cities and municipalities remain unbanked. Financial services are concentrated in higher income areas, while some of the country’s poorest regions remain largely unbanked.
The BSP, therefore, conscientiously works to increase financial access points and usage of financial services. The BSP issues regulations that effectively expand business opportunities to reach the unbanked in a sound and viable manner. Since September 2011, the reach of the banking system has substantially grown by 13.8 percent, which translates to the establishment of more than 1,200 new banking offices. Alternative financial service providers also effectively augment and complement banking services. The presence of these service providers has significantly decreased the percentage of cities and municipalities that are unserved from 36.6 percent to 13 percent. Usage of formal financial products and services has likewise increased. Innovations in product and delivery channels have taken root. These results are borne out of initiatives that are part of a deliberately and carefully crafted strategy.
Making a public commitment is a means to champion financial inclusion
Our commitment compels us to move beyond our introspection and individual action. It effectively enables us to share our experiences to other stakeholders. As none of us know the holy grail that will financially include all people, knowledge sharing is ultimately beneficial for all.
At the heart of BSP’s work in financial inclusion is the sharing of best practices and experiences with other institutions. In 2014 alone, the BSP hosted knowledge exchanges with 34 delegates from seven countries including Afghanistan, China, Myanmar, Nepal, Rwanda, Tunisia and Yemen. As an active member of AFI, the BSP provided leadership to the Steering Committee, and participated in various AFI working groups through information exchange. Additionally, the BSP partakes in global discussions on financial inclusion as chair of the Basel Consultative Group Workstream on Financial Inclusion; an active member of the G20 Global Partnership for Financial Inclusion; and, as a key resource for a number of United Nations events. The knowledge and information exchanges that BSP undertook allowed the crafting of new regulations on financial inclusion.
Indeed, commitment does not just happen to one person or organization at a point in time. Commitment is a process that starts with one, spilling over to other stakeholders and connecting all of us in the process toward a shared cause.
Making a public commitment is a call for action
It does not stop with making others cognizant of the importance of financially including people. There will be an inevitable changing of mindsets to take on a proactive attitude toward inclusion.
The BSP takes the route to champion financial inclusion and call others to action by spearheading the development of a national strategy. This will provide a framework that will enable the government and the private sectors to take a coordinated, organized and efficient approach toward building an inclusive financial system. The BSP prepared an initial draft of the national strategy for financial inclusion, and is in the process of convening relevant stakeholders to discuss the way forward.
The BSP recognizes that an environment that will foster cooperation and coordination across stakeholders is needed to avoid duplicating efforts, set common direction, and ensure delivery of the action items set forth in the strategy.
We go back to our earlier question: What is in it for us to officially declare that we are a stronghold of financial inclusion? Yes, our commitment permits us to have a careful introspection and causes us to strategically map out our programs. It allows us to champion a cause and foster a spirit of knowledge sharing. It emboldens us to enjoin others into action.
Yet, these are just a means to an end. Our commitments certainly are not about the accolades, the intrinsic rewards or the efficiency that we will be getting when we declare to the international community that we are a bastion of financial inclusion. Neither is it about getting others involved or raising the issue of financial inclusion to a higher ground for everybody to take notice.
Our commitment to financial inclusion is about the 2.5 billion that are still left unbanked around the globe up to this day. Ultimately, our constituents are our bottom line.