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> Posted by Akhand Tiwari, Bhavana Srivastava, and Vijay Ravi, MicroSave

Loyalty Programs

In today’s world, loyalty programs are a dime a dozen, with everyone from retail stores to luxury hotels offering membership for even the smallest of transactions. A publication from Smith School of Business suggests that the average Canadian household is enrolled in no less than eight loyalty programs. In this context, it is pertinent to examine if loyalty programs actually serve their intended purpose. If yes, how specifically do they impact a company’s business?

The premise of all loyalty programs is that they promote continued patronage. In a world where there is often little variation between competitors’ offerings, a well-designed loyalty program could make all the difference for your business. After all, a good loyalty program could very well decide which airline you choose for your next business trip!

We make an important distinction here – between loyalty programs and rewards. While loyalty programs aim to instill continuous engagement, the focus of rewards is on pushing specific action. Rewards are target-oriented and last only for a limited period. To illustrate this, think of offers, such as zero-processing fees, which are designed to increase adoption of a credit product, and higher interest rates on term deposits, which promote savings.

Based on MicroSave’s experience on how low-income households exhibit loyalty towards their financial service providers – we have some useful insights.

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> Posted by Kelsey Truman, HBS-Accion Program Coordinator, CFI

Domestic abuse and violence against women (VAW) are pervasive and shocking. According to the World Bank, 38 percent of murders of women globally are committed through intimate partner violence. Globally, one-third of all women have experienced domestic or intimate partner violence. The World Health Organization even went so far as to call VAW a “global health problem of epidemic proportions.” Could financial services possibly play a role in improving this situation?

One of the largest hurdles in combating VAW around the world is women’s inability or unwillingness to seek help when they find themselves in abusive situations. In conjunction with fear, one important reason many women don’t seek help rests on their degree of financial dependency. That is, they don’t have enough money or economic resources necessary to establish themselves independently, much less pay for legal fees and so forth. Furthermore, women’s vulnerability to violence has been shown to increase with their relative level of poverty. If women are given options to easily and discreetly pursue financial options and open bank accounts independently of their husbands and other male family members, it could very well save their lives one day.

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> Posted by Virginia Moore, Communications Director, CFI

dialogue-on-business-clients-india-1-1024x683

For the last 10 years, the Global Microscope on Financial Inclusion has systematically reported what it takes to create an enabling environment for financial inclusion. The good news is that the global financial inclusion community increasingly understands what works and is designing essential reforms. But the rate of progress is gradual and uneven, and in some areas, still lacking. The latest Global Microscope takes a closer look at what it takes to create an inclusive financial sector—and where intensive effort is most needed.

The Leaderboard

Tying for first place in the global rankings are Peru and Colombia, scoring 89 (out of 100). Second place is also a tie, with two Asian countries, India and the Philippines, each scoring 78. Pakistan earns third place with a score of 63. The spreads between first, second and third place are wider than they are between any other consecutive rungs in the index, but the top-ranking countries are in fact the same as last year. Peru, Colombia, the Philippines, India and Pakistan are longtime financial inclusion institutional and regulatory leaders.

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> Posted by Bruce MacDonald, Vice President, Communications and Operations, CFI

The following post was originally published on NextBillion.

In part one of this post, Bruce discussed the potential impact of ASEAN Integration on banks in the Philippines, informed by his recent visit to the country. In part two below, he continues exploring the challenges and opportunities facing one of these institutions, 1st Valley Bank in Cagayan de Oro, Mindanao. 

Though national bank liberalization has led commercial Philippine banks to acquire more rural and thrift banks, potentially increasing competition for 1st Valley, it has also provided the bank with a unique advantage. A 2013 amendment to the Rural Banking Act allowed foreign investment in Philippine banks which, in turn, permitted a new company called Bridge, led by American Paul Kocourek and Englishman Gus Poston, to invest in 1st Valley. Kocourek and Poston, both with deep regional banking experience, founded Bridge in order to help build a strong network of provincial Philippine banks committed to social impact. Identifying rural finance as the “missing component of inclusive banking,” their aim is to provide critical capital for growth, but also assistance in product design, risk management and more. 

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> Posted by Jeffrey Riecke, Senior Associate, CFI

Embed from Getty Images

Typhoon Haiyan, one of the strongest tropical cyclones ever recorded, struck Southeast Asia in early November 2013, creating unspeakable devastation. In the Philippines alone, where the typhoon’s wrath was concentrated, over six thousand people lost their lives. One microfinance institution, ASA Philippines, sprang into action only a day after the typhoon hit, demonstrating not just microfinance’s social mission, but also how providers in the industry are evolving to support their clients through more than just credit.

Typhoon Haiyan affected 16 provinces where ASA Philippines had operations, spanning 72 branches and 104,708 active borrowers amounting to a loan portfolio of roughly 365 million Philippine Pesos (~US$7.5 million). Fast forward to the present, about two years later, ASA Philippines has almost a 99 percent collections rate and the institution is thriving. How did the institution manage this crisis? Hint: It wasn’t because of merciless collections practices.

The day after Haiyan hit, ASA Philippines’ president traveled to Tacloban, a city that was largely destroyed by the typhoon, to visit the local ASA Philippines office. For the staff, the president’s presence underlined the ambitious and important relief work ahead of them. Under normal operating circumstances, ASA Philippines’ offices are open 24/7, reflecting the institution’s motto of BWYC: Be with Your Clients. ASA Philippines works towards a culture of immediate response, during the typical day-to-day operations, and during times of tragedy. I recently spoke with a few ASA Philippines staff members and they drew a link between support for clients and client trust. Clients will remember the first person that helps them, I was told. This connection fosters trust and connection, which in turn supports efforts to repay loans.

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> Posted by Rafe Mazer, Financial Sector Specialist, CGAP

CGAP recently launched a Mystery Shopping Technical Guide, based on our experiences sending lower-income consumers to seek financial products in markets as diverse as Ghana, Kenya, Malaysia, Mexico, Peru, and the Philippines.

The method of training actual consumers to conduct mystery shopping has proven helpful to understand the challenges they face in achieving financial access and receiving quality product advice. In several markets we found that sales staff often restrict information on fees and charges and do not provide consumers with the lowest cost product option that matches their needs. For example, in Mexico and Peru we saw sales staff who neglected to offer low-fee savings products available at their institution, while in Ghana sales staff never mentioned the APR of a loan, as they are required by law to do. In Malaysia, insurance sales staff did not use the mandatory Customer Fact Find Form which helps assess customers’ needs and product suitability.

These findings are not surprising to those who study client protection and financial advice, and studies in markets such as the U.S. and India have found similar issues with sales staff. All of this raises a fairly important question of “Can we fix financial advice from frontline bank staff?” Or is the incentive to mis-sell too great and monitoring a sufficient number of individual sales practices too burdensome? This is a discussion I have had with regulators. How do you use policy to drive behavior change in a market? The short answer is that it’s not easy; the long answer is that behaviorally-informed policies, product regulation, and market monitoring tools can help.

But what about the committed leadership of organizations that have signed on to the Smart Campaign (which include providers we have visited during these mystery shopping exercises)? If mystery shopping shows that sales staff do not always keep the customer’s best interests in mind, can we fix this with provider or industry-level changes in sales practices or perhaps through sales staff training? I would like to take advantage of this forum to hear from providers who have implemented policies to fix sales staff misconduct so we can start to document good practices for monitoring sales staff behavior. To help kick things off, here are a few ideas from my side, based on our mystery shopping work:

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> Posted by the Smart Campaign

Today we’re excited to announce that Alalay Sa Kaunlaran (ASKI) is the first financial institution in the Philippines to be certified by the Smart Campaign. Clients of financial services can face risks. They can get into too much debt, be taken advantage of, or sold the wrong services. Financial institutions can minimize harm to clients by implementing the Client Protection Principles, a common, global framework for client protection. By becoming Smart Certified, an institution demonstrates that it puts the principles into practice.

The non-profit institution earned its Smart Certification in late July following a mission conducted by Microfinanza Rating, and is being publicly recognized today in conjunction with the Asia-Pacific Financial Inclusion Summit 2015, in Manila.

Established in 1987 in central Luzon to serve and empower the poor through microenterprise development, ASKI today serves more than 136,000 clients through 72 branches and 7,794 solidarity groups in 234 cities and towns.

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> Posted by Susy Cheston, Senior Advisor, CFI

Visitors to our FI2020 Progress Report on Client Protection will have noted our poor math skills. (This is the section of the report that assesses global progress to date in advancing fair treatment for lower-income financial services clients.) We rated regulators a 6 on consumer protection and providers a 3—and somehow averaged those out to a 5. Our averaging skills make even less sense when you consider the three legs of the client protection stool—providers, regulators, and consumers—and realize that consumers are not even on the radar, rightfully earning a 1 at best in terms of their capacity to advocate on their own behalf. So why the optimism?

We were certainly swayed by the impressive momentum among a range of actors at the global level—including policy and private sector initiatives—toward improved consumer protection. But it’s what happens at the national level that really counts. The World Bank’s 2014 Global Survey on Consumer Protection and Financial Literacy reports that some form of legal framework for financial consumer protection is in place in 112 out of 114 economies surveyed. We are not so Pollyannaish as to think that having a legal framework is equivalent to having a regulatory and supervisory system that protects consumers well, but we do think it’s a good step in the right direction.

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> Posted by Center Staff

We may be in the heart of the summer season here in the United States, but the world of financial inclusion is hardly slowing down. Released today, the fourth issue of the Financial Inclusion 2020 News Feed shares the big news in banking the unbanked. Among its stories are recent findings on the financial performance of impact investing, an appeal from the United Nations to commit to the cooperative business model, and the launch of a national financial inclusion strategy in the Philippines. Here are a few details:

  • Comprehensive analysis conducted by Cambridge Associates and the GIIN found that private impact investment funds recorded financial returns in-line with a comparative group of non-impact investing funds.
  • In celebration of the International Day of Cooperatives, on Saturday United Nations Secretary General Ban Ki-moon asserted the importance of cooperatives for financial inclusion and sustainable development.
  • The Bangko Sentral ng Pilipinas (BSP) signed a memorandum of understanding on a national financial inclusion strategy last week, which provides a framework for the government and private sector to take action.

For more information on these and other stories, read the fourth issue of the FI2020 News Feed here, and make sure to subscribe to the weekly online magazine by entering your email address in the right-hand menu so you can be notified when the latest issue comes out.

Have you come across a story or initiative you think we should cover? Email your ideas to us at ezuehlke@accion.org.

> Posted by Leora Klapper, Lead Economist, Development Research Group, the World Bank

Eroll Asuncion runs a grocery store on the remote Philippine island of Rapu-Rapu. It’s a three-hour boat ride to the nearest bank. Fortunately, that’s no longer a problem – thanks to the mobile phone revolution and new regulations that make it easier for people to open and use an account.

Eroll’s customers now pay bills and send and receive remittances through a mobile money account they access via mobile phones. Eroll’s SuperStore has become something of a bank for islanders using these mobile accounts, allowing them to send and receive cash at the store.

“My husband sends (me) money twice a month, on the 15th and 30th,” Yolanda, a customer, explains.

Hundreds of millions of others like Yolanda are opening new accounts through their phone or at a bank or similar institution. It’s part of a financial revolution that’s sweeping the developing world. Since 2011, 245 million more people in East Asia and the Pacific have become part of the formal financial system by opening an account.

The World Bank has just released our much-anticipated second edition of the Global Findex, the world’s only comprehensive gauge of global progress on “financial inclusion”—how people save, borrow, make payments, and manage risk. The data give us insight into account ownership around the world, and how people are using – or not using – those accounts.

The Global Findex offers good news. As of 2014, 62 percent of adults around the world had access to a bank account. Put another way, the number of people who are “unbanked” has tumbled to 2.0 billion from 2.5 billion in 2011, when the Global Findex was first released.

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