Perhaps it’s because of the improving economy, rising household incomes or fewer borrowing options in light of the government’s crackdown on informal lending schemes.
Whatever the reason, the proportion of Filipino adults with outstanding loans more than halved from 2015 to 2017, according to the Bangko Sentral ng Pilipinas (BSP)’s latest report on financial inclusion.
Based on a survey of 1,200 adult respondents from December 2017 to February 2018, the BSP found that the ratio of Filipino adults who have outstanding loans stood only at 22.3 percent in 2017 compared to 47.1 percent in 2015.
The percentage of respondents who said they borrowed from informal lenders such as “five-six” and other usurious schemes went down to only 1.6 percent in 2017 from 4.8 percent in 2015, the BSP noted.
That followed a general decline in the proportion of respondents saying they borrowed from family, friends and relatives from 29.2 percent in 2015 to only 7.3 percent in 2017.
However, the decline in the incidence of loans from informal sources wasn’t accompanied by an increase in proportion of borrowers getting loans from formal sources. In fact, the percentage of borrowers from banks, cooperatives, and financing companies, fell from 2017 to 2015.
The only formal lending channel that saw an increase in the proportion of borrowers were microfinance NGOs, which lent to 7.6 percent of survey respondents last year, up from 4.7 percent in 2015.
This seems odd considering that both private and public sector entities have launched projects to wean Filipinos away from relying on loan sharks by offering easier and more accessible ways to borrow money. Several fintech players offer microloan services through mobile apps or even neighborhood sari-sari stores, while the Department of Trade and Industry launched the Pondo sa Pagbabago at Pag Asenso or P3 Program for micro-business loans last year.
One possible explanation could be the difficulties in dealing with formal financial institutions. The BSP found that around 36 percent of Filipino adults found it difficult to borrow money from formal institutions. The BSP cited “documentary requirements, lack of collateral and lack of necessary ID” as the main reasons for the difficulty.
The 2017 Financial Inclusion Survey was conducted from December 2017 to February 2018, and it obtained responses from 1,200 Filipino adults with varying demographics. Aside from loans, the survey also looked into financial activity concerning savings, payments, remittances, insurances and investments.
Nearly 33 million Filipino adults, or 48 percent of the total adult population, had some form of savings in 2017, according to the BSP. That’s an improvement from 43 percent in 2015, as cited by the BSP in its recently published 2017 Financial Inclusion Survey.
Lorenzo Kyle Subido is a staff writer of Entrepreneur PH