The Bangko Sentral ng Pilipinas (BSP) has released yesterday (April 18, 2012) the results of the first-ever Consumer Finance Survey (CFS) in the Philippines. Conducted by the BSP, the Consumer Finance Survey generated data on financial conditions of households covered, including what they own (financial and non-financial assets) as well as from whom and how much they borrow (sources of credit and level of indebtedness). It also generated data on the income, spending and insurance coverage of households. The survey had sample size of 10,520 households from National Capital Region (NCR) and outside NCR (in regions 1, 7 and 11). Reference periods for the data collected were from 2008 to 2010.
Here are some interesting and disturbing findings from the Consumer Finance Survey:
- 8 in 10 Pinoy households (78.5 percent) do not have bank deposit accounts. The main reason cited by 92.8 percent of households respondents for the absence of a bank deposit account is that they did not have enough money to put in the account. The other reasons mentiond by the remaining 7.2 percent of the households were: do not need need a bank/cash deposit account (1.7 percent), cannot manage an account (1.5 percent), minimum balance is too high (1.2 percent), do not like to deal with banks/financial insitutions (1 percent) and others not specified (1.8 percent).
CFS also revealed that a higher percentage of households living in National Capital Region owned a deposit account (28.1 percent), compared to the households from areas outside of the NCR (16.1 percent).
Personally, I do not agree that Pinoy households do not have or earn enough money to save. One realization I have is that we can save at any income level. Our ability to save does not really depend on the size of our income. Regardless of our income, we can save if we will just commit ourselves into it. We can save 1 peso a day, or 10 pesos per week, 100 pesos, 1000 pesos per month or more. The trick is we do save a little amount each time, regularly and consistently. You will be surprised how much money will have accumulated over time!
I am also surprised households did not realize or understand the need to have a savings account and find it difficult to manage a savings account. Still, many households prefer to keep their money at home, rather than in bank or other financial institutions.
However, it is comforting to know that according to the survey, majority of the households still have high inclination to save if they have extra money.
- Only 0.4 percent of households owned securities and investment accounts such as stocks, bonds, mutual funds and unit investment trust funds (UITFs), including government securities. Even in NCR, less than one percent of households had invested in any of these financial instruments. For households outside NCR, the percentage was negligible.
This is a disheartening statistic. Only a small percentage of the population are investing in this kind of assets. It is surprising to me, because even in NCR where households have more access to information, less than 1 percent of the households invested in mutual funds and stocks. A greater majority of our population do not have access to these kinds of financial instruments, and have not been able to ride on with these vehicles to wealth. These investments are affordable and easy to set-up. I think people just need to have more information and education about these instruments as another vehicles where they can put their money in.
However, on a positive side, the survey also showed that a bigger share of the hosueholds had one or more retirement and insurance plans. It showed that:
- 42.7 percent of the households had retirement insurance (mostly in government insurance like Social Security System (SSS) and Government Service Insurance System (GSIS), but only 1.6 percent of households had retirement plans exclusive with private companies.
Even if majority of the population relied on government insurance programs like SSS, GSIS, it is a positive indication that people appreciate the importance of insurance and social protection. Those that have SSS and GSIS were employed and had stable employment. Unfortunately, the share of retirement plans by private insurance was very small. I believe the share of private insurance should be higher than that, so this offers more opportunities for private insurance companies in the country to fill this gap.
There are so much to learn from the results of the first Consumer Finance Survey. It suggests that greater majority of Pinoys need more financial education and literacy. There is pressing need to educate Pinoy households about money management skills in areas of earning, smart spending, savings and investment opportunities and strategies. The survey recognized the need for greater financial education to be given to Pinoy households. Among other things, it recommended to continue to educate Filipino households on the advantages of saving in financial institutions and investing in various forms of financial instruments compared with traditional sources of financing and investment.
I believe there is hope, that we can do a lot more to improve the situation. As one of the financial advisors of Sun Life, I am privileged to be part of the on going efforts and campaign of the company to provide financial education to Filipinos. The mission of Sun Life is to provide financial freedom for all Filipinos. However, my experience so far with Sun Life tells me that it is not easy to educate people about financial planning and money management. Many have negative impression about life insurance and are allergic to it, and have myopic view about handling their personal finances. That is a challenge. But it is also a fulfilling and rewarding experience to be able to help other people put their finances in order.
Please feel free to contact me if you need advice or if you want orientation about life insurance, health protection, savings and investment opportunities in mutual funds like stocks and bonds. I conduct free orientation and financial education.