FILIPINOS are now increasingly adopting mobile and digital technologies for salary loan applications and disbursements. This changing behavior corresponds to the digital shift of consumers and improving confidence in using digital financial services.
“We’re seeing a positive shift to mobile and digital for the consumer loan market as they provide convenience and easier access to financial services. Our successful experience with the LandBank Mobile Loan Saver in less than a year is reflective of this progress and we are seeing this accelerate in the coming months,” said Orlando B. Vea, president and CEO of Voyager Innovations, the digital innovations arm of PLDT and Smart Communications, Inc. (Smart), who will be speaking at the Asia Pacific Financial Inclusion Summit in Makati Shangri-la.
Voyager Innovations and the Land Bank of the Philippines reported that uptake for the LandBank Mobile Loan Saver, the country’s first electronic salary loan program, has been steadily increasing, with more than P4 billion disbursed to almost 28,000 government employees since its commercial launch in January this year.
To date, some 27,800 borrowers from more than 610 participating national government agencies, government owned and controlled corporations, and local government units, have availed of the facility. However, the current program does not yet include teachers, military and police personnel. Average loan per borrower stood at approximately P144,000.
“This program has started making a significant impact in the government’s efforts to promote electronic transactions for transparency, cost efficiency, security, affordability, accessibility, and convenience. Leveraging on mobile technology is a must for any service oriented institution to have wider reach in providing broader financial access to its customers. We are extending this program to the private employees early next year,” said Gilda E. Pico, president and CEO of LandBank.
“The Bangko Sentral ng Pilipinas (BSP) welcomes digital innovations that would further promote electronic transactions and this is in accord with the government’s roadmap towards the realization of the National Retail Payments System and the National Strategy for Financial Inclusion,” said BSP Deputy Governor Nestor A. Espenilla, Jr.
In the recently published “Enhancing Financial Capability and Inclusion in the Philippines - A Demand-side Assessment” from World Bank, it acknowledged that “the Philippines has made positive progress towards achieving its financial inclusion priorities in recent years.”
The study cited certain initiatives that have contributed to the financial inclusion goals of the BSP. Among these efforts are the “establishment of microdeposit accounts,” “flexible regulatory approach for mobile financial services, which has facilitated a range of bank-led and telco-led products,” and “the approval of a general consumer protection framework to safeguard consumers of financial services from abusive practices.”
According to the study, 49 percent of Filipinos have borrowed money across formal and informal systems. However, only around 11 percent exclusively borrow from formal credit channels. About 22 percent still rely on borrowing from informal sources such as family, friends or money lenders. Approximately 16 percent makes use of both formal and informal sources of credit.
What is striking is that more than half or about 53 percent of informal borrowers have bank accounts and the World Bank study infers that the “prevalence of informal borrowing is driven both by ineligibility and lack of physical access.”
“The LandBank Mobile Loan Saver addresses both barriers. Using the mobile phone, we are able to help expand the reach of traditional banking services like salary loans to the grassroots, with about 15 percent of the borrowers coming from 3rd to 6th class municipalities all over the country. With the surge in volume especially leading towards the holiday season, we are expecting to end the year with over P5 billion in total loans released through this digital facility,” said Lito Villanueva, vice president and Head of Fintech, Digital Inclusion, and Alliances at Voyager Innovations.
Based on demographics, roughly 55 percent of the LandBank Mobile Loan Saver borrowers are from Metro Manila; 22 percent from Luzon; 12 percent from Mindanao; and 11 percent from Visayas.
Through the service, government employees can easily apply and inquire about their LandBank salary loan via mobile and get a fast response regarding their loan approval.
In barely a year, the LandBank Mobile LoanSaver has received five global awards and recognitions in 2015. These include the Best Innovation in Retail Banking by the International Banker awarded at the London Stock Exchange, Best in Core Banking and Best in Mobile Banking Initiative from the Asian Banking & Finance in Singapore, Process Excellence in Loans Origination from the Retail Banking International also in Singapore, and Consumer First award by Meffys in London. (PR)