Only 25% of Filipinos financially literate – S&P

Global survey highlights financial inclusion challenges

Only 25 percent of Filipino adults are financially literate, a Standard & Poor’s (S&P) Ratings Services survey found, highlighting the challenges facing the goal of boosting access to financial services.

An S&P Global Financial Literacy (FinLit) Survey conducted last year found country financial literacy rates ranging from 13 percent to 71 percent among 143 economies, with Yemen at the bottom and Denmark, Sweden and Norway sharing the top spot.

Globally, only one in three adults, or 31 percent, showed an understanding of basic financial concepts such as numeracy, risk diversification, inflation and compound interest (savings and debt.)

“Although financial literacy is higher among the wealthy, well educated, and those who use financial services, it is clear that billions of people are unprepared to deal with rapid changes in the financial landscape,” the survey said.

“Governments are pushing to increase financial inclusion by boosting access to bank accounts and other financial services but, unless people have the necessary financial skills, these opportunities can easily lead to high debt, mortgage defaults, or insolvency,” it added.

“This is especially true for women, the poor, and the less educated—all of whom suffer from low financial literacy and are frequently the target of government programs to expand financial inclusion.”

The survey involved interviews of over 150,000 adults in more than 140 countries.
Data was collected in 2014 as part of the Gallup World Poll and analytical support was provided by researchers at the World Bank and the Global Financial Literacy Excellence Center at George Washington University.

The Philippines accompanied the West Bank and Gaza, Burundi, Vietnam, Bolivia, Turkey, India, Jordan, Honduras, Romania, Macedonia, Uzbekistan, El Salvador, Sierra Leone, Sudan, Iran, Kosovo, Nicaragua, Bangladesh, Kyrgyz Republic, Cambodia, Nepal, Armenia, Haiti, Tajikistan, Angola, Somalia, Afghanistan, Albania and Yemen in the bottom 30 in the survey.

Among the Southeast Asian countries included in the survey, Singapore scored the highest with a financial literacy rate of 59 percent. Cambodia was the lowest at 18 percent and the only other economy to score lower than the Philippines was Vietnam at 24 percent.

A respondent was judged as financially literate if he or she could correctly answer three out of four financial concepts detailed via five multiple-choice questions:

• On risk diversification: “Suppose you have some money. Is it safer to put your money into one business or investment, or to put your money into multiple businesses or investments?’

• On inflation: “Suppose over the next 10 years the prices of the things you buy double. If your income also doubles, will you be able to buy less than you can buy today, the same as you can buy today, or more than you can buy today?”

• On numeracy: “Suppose you need to borrow $100. Which is the lower amount to pay
back: $105 or $100 plus 3 percent?”

• On compound interest: “Suppose you put your money in the bank for 2 years and the bank agrees to add 15 percent per year to your account. Will the bank add more money to your account the second year than it did in the first year, or will it add the same amount of money both years.”

• Also on compound interest: “Suppose you had $100 in a savings account and the bank adds 10 percent per year to the account. How much money would you have in the account after five years if you did not remove money from the account? More than $150, exactly $150, less than $150, don’t know?”

The correct answers, in order, are multiple businesses/investments, the same as you can buy today, $100 plus 3 percent, more money in the second year and more than 150.

Of the region’s economic powers, China scored 28 percent, Japan 43 percent and South Korea 33 percent. The survey also found that younger Asians were more likely to be financially adept than older respondents.

“While the array of financial products available in Asia continues to grow rapidly, S&P’s FinLit Survey suggests that most consumers lack a general understanding of credit, compound interest and other key concepts,” the ratings firm noted.

Citing China, credit card ownership in the country was said to have nearly doubled since 2011 yet less than half of the respondents could not correctly answer the survey questions on interest.

“We are committed to creating stronger financial markets all over the world,” said Courtney Geduldig, executive vice president of Public Affairs at McGraw Hill Financial, parent of S&P Ratings.

“We believe there are correlations between financial literacy, financial access, and the strength of markets. Addressing financial literacy is a key strategy in building stronger, more accessible and sustainable markets around the globe,” he said.

Matthew Bosrock, executive managing director and head of Asia-Pacific for Standard & Poor’s Ratings Services, said: “Understanding concepts like interest, inflation and the importance of savings are at the core of economic development.”

“A lack of basic financial understanding is one of the factors obstructing faster growth in Asia. This survey gives policymakers the tools to identify the gaps in education and also a chance to improve access to financial products,” he added.

source:  Manila Times

SSS won’t go bankrupt with P2,000 pension increase, lawmaker says

Party-list Rep. Neri Colmenares of Bayan Muna on Tuesday said that Sen. Juan Ponce Enrile’s contention that the Social Security System (SSS) will go bankrupt with the P2,000 pension increase is without basis and can easily be debunked.

“The SSS and Sen. Enrile should stop trying to delude the people that it has no funds for the P2,000 pension increase because this is not true. The SSS board in Congress hearings actually admitted several times that it has the funds for the pension increase. The increase will only shorten its fund life to 2029 instead of the current 2042,” he added.

Assuming this is true, he said, 14 years is more than enough time for the government and SSS to find ways to increase its fund life. In 2001 SSS declared that it has a fund life of only five years and, yet, it was able to increase this to 2042 in just 14 years.

“If it previously survived a five-year fund life, then surely it can also survive a 14-year fund life. Truthfully speaking, we are in a better shape than the United Kingdom, which has a fund life of only up to 2027 and Canada, which has a fund life of 2022 or merely seven years,” Colmenares, also senior deputy minority leader, pointed out.

In fact, he said, SSS has P428 billion in investment fund, which generates an investment income of an average of P32 billion per year.

“With this, the net revenue of SSS in 2014 was a huge P44.47 billion. Its assets amount to nearly P500 billion. Ayaw lang talaga dagdagan ng SSS ang pension ng mga pensioners kaya ganun na lang ang kanyang pag-oppose dito. Mas gusto pa ng SSS na pahabain ang buhay ng pondo niya, kesa buhay ng mga miyembro niya,” Colmenares said.

Instead of harping on increasing contributions,  the lawmaker said the SSS should (1) improve its collection efficiency from the employers of its 29 million members, (2) collect the billions in contributions, which delinquent employers failed to remit in the last 10 years, (3) cut down in bonuses and perks given to its board members and collect the more than P200-million retirement package given to SSS board members in 2009, and (4) collect the fines imposed by the courts against employers who violated the SSS law.

“If this is not enough, then Congress can always provide for subsidies as provided under Section 20 of RA [Republic Act] 8282 as amended. There is no way that the SSS will go bankrupt as the SSS wants people to believe. In fact, under Section 21 the Philippine government guarantees the benefits and solvency of SSS,” Colmenares said.

“The SSS pension increase law does not allow for an increase in premium contribution. So it is best for SSS and Sen. Enrile to support the pension increase and, together, with the government look for means to increase its fund life instead of using nonexistent obstacles to the pension increase. SSS is so obsessed with its funds that it has failed to see that it has completely abandoned its mandate to provide genuine social security to the people.” Colmenares said.

source:  Business Mirror

GIR Reaches $81B in October

Preliminary data showed that the country’s gross international reserves (GIR) rose to $81.14 billion as of end-October 2015, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco announced Friday.

This was slightly higher by $0.59 billion than the end-September 2015 level of $80.55 billion due mainly to the National Government’s (NG) net foreign currency deposits, revaluation adjustments on the BSP’s gold holdings as well as its income from investments abroad. 

These were partially offset by payments made by the NG for its maturing foreign exchange obligations.

The end-October 2015 GIR level remains ample as it can cover 10.4 months’ worth of imports of goods and payments of services and income. 

It is also equivalent to 6.1 times the country’s short-term external debt based on original maturity and 4.4 times based on residual maturity. 2

Net international reserves (NIR), which refer to the difference between the BSP’s GIR and total short-term liabilities, increased by $0.59 billion to $81.13 billion as of end-October 2015, compared to the end-September 2015 NIR of $80.54 billion.

source:  Malaya

Study shows top concerns of OFWs

OVERSEAS FILIPINOS tagged emergencies, retirement and education as their top concerns in setting aside savings, a survey commissioned by the Philippine American Life and General Insurance Co. (Philam Life) showed, although most savings are coursed in short-term instruments.

A study on overseas Filipino workers (OFWs) conducted by Taylor Nelson Sofres (TNS) last April bared that migrant workers have long-term goals but most of them don’t have long-term investments.

According to the study, 66% of the respondents said their purpose in saving is emergency; 36% said retirement; 33% cited their children’s education; and 22% said investing in a home.

“[W]hen asked about their readiness to stay home permanently, 82% of the survey respondents said they are not ready to stay home for good for two main reasons: they do not have enough savings; and their goals have not yet been realized,” the study said.

The study also showed that an OFW wants to accumulate an average of P3 million to feel he is ready to come back for good; and that it would take the average OFW up to 18 years to save up that amount.

Philam Life said 97% of OFWs save in short-term instruments like savings accounts, while only 7% save in medium-term instruments like personal insurance, pre-need and investments.

“97% utilize bank accounts for savings, 4% in personal life insurance, 2% for nonlife insurance, 1% for pre-need plans and 0.4% for investment portfolio,” the study said.

Only 52% of OFWs also invest their money, the study said, noting that property, jewelry and business undertakings are the top investments for migrant workers.

Philam Life Chief Marketing Officer Jaime Jose M. Javier, Jr. said 10% of Philam Life’s policyholders are OFWs. Its distribution is majority through agency force of over 9,000 agents, he added.

The respondents in the study were mostly on a two-year contract with an average tenure of six years working abroad and earning an average of P50,000 per month.

Philam Life reported an P18.312 billion in premium income in 2014, the third largest in the industry, although down from the previous year’s P19.966 billion, based on its submitted annual statements to the Insurance Commission.

Philam Life’s total assets stood at P226.8 billion, net income was at P5 billion and net worth of P85.2 billion. It has close to 6,000 policyholders and more than 1.7 million insured group members.

source:  Businessworld

Diaspora shield vs capital flight

IF THE UNITED STATES raises interest rates, emerging nations skittish about potential capital outflows do have one key weapon in their arsenal: remittances from national diaspora.

The World Bank says money sent home by workers abroad to countries including Mexico, the Philippines and India will probably reach $427 billion this year, almost as large as the $443 billion in estimated net portfolio inflows.

Remittances, which are forecast to increase to $471 billion in 2017, are three times larger than official development loans and more stable than portfolio inflows, according to the World Bank.

“Remittances are relatively stable and acyclical: they are stable even during episodes of extreme financial volatility and they can help promote consumption stability,” said Dilip Ratha, lead economist for migration and remittances at the World Bank’s Development Prospects Group.

“The relative importance of remittances as a source of external financing, therefore, is expected to increase further in the medium term.”

Workers seeking better paying jobs abroad have long powered consumption and boosted foreign exchange in their home countries.

The Indian community abroad sends home more money than any other group overseas -- $70.4 billion in 2014, or double what the nation attracted through foreign direct investment.

“Growth in private capital flows to developing countries might well moderate when interest rates begin rising in advanced economies, or if growth in developing economies remains weak,” Mr. Ratha said. -- Bloomberg

Editorial: Trapped in debt

The torrential rains and relentless winds of Typhoon “Lando” mowed down some P8.6 billion worth of agricultural crops and livestock, and pulled farmers ever deeper in the debt hole in which they have been trapped for as long as they can remember.

The most destructive typhoon to slam into the Philippines this year magnified the vicious cycle of debt that has kept farmers in dire straits, constantly in a losing battle with natural calamities, greedy loan sharks and apathetic government agencies.

According to the Philippine Statistics Authority, while agriculture provided a 32-percent share in total employment in 2012, its share of the economy was only 11 percent. Along with fishers, farmers have always had the highest poverty incidence among the basic sectors, figures from the National Statistical Coordination Board indicated. Despite the country’s vaunted economic surge—7.2 percent GDP growth in 2013—the farming sector is still being left behind.

Admittedly, the 20 or so devastating typhoons that yearly come the Philippines’ way play a part in the farmers’ hard lot, with the Food and Agriculture Organization reporting that by the end of 2011, over 600,000 tons of milled rice had been lost due to these weather disturbances that also destroyed some 6 percent of the farmlands. But it is government neglect that keeps the yoke firmly around the farmer’s neck. The agriculture sector remains sorely ignored, except as a milking cow for greedy politicians and operators for whom the confusing layers of bureaucracy in the Department of Agriculture’s multiple attached agencies have become convenient for hiding their thievery.

Who can forget then Agriculture Undersecretary Joc-joc Bolante’s P728-million fertilizer fund scam, the anomalous rice importation, the watered-down land reform program, the billion-peso coconut levy fund that remains out of the farmers’ reach, and the infamous scam in which lawmakers’ pork barrel were cleverly diverted to spurious nongovernment organizations mostly disguised as agriculture-oriented? Doubtless, these crooks consider farmers as meek as their beasts of burden, sufficiently unlettered as to be easily conned, or perhaps desperate enough to sell their signature on a piece of paper for the promise of meager farm inputs.

The situation is particularly galling because it smacks of a patronizing attitude toward farmers, as in the case of Sen. Jinggoy Estrada, who is detained on charges of graft and plunder for allegedly allowing his pork barrel to go to bogus agriculture NGOs run by Janet Napoles.  A special audit report uncovered the nondelivery of farm inputs and implements, falsified certifications for equipment, grossly overpriced and undelivered products, and signatories that could not be verified.  Such brazen misdeeds perpetrated in the farmers’ name!

After Lando, with their potential earnings underwater, along with their initial investments for seeds, fertilizer, irrigation and use of farm implements, farmers are forced to turn to loan sharks who charge interest of as much as 25 percent a month.  With no savings or collateral for bank loans, farmers deem these money lenders their only recourse. According to the Bangko Sentral ng Pilipinas, 604 of the country’s 1,600 cities and towns do not have a bank, denying many residents—especially farmers—access to formal credit.

With no government agency to regulate their operations, the shadow bankers do a flourishing business with farmers, some of whose relatives are forced to surrender their ATM cards to ensure payment.

“The loan sharks only have to deal with delayed payments; they will get their money. But us farmers are condemned to die in debt,” a 37-year-old farmer and father of three told Agence France-Presse.

With their crops and earnings gone, and the prospect of more debts hanging over their heads, most farmers find themselves unable to send their children to school.  Most of the children drop out, anyway, to help their family in farm work. And so begins the next generation of impoverished farmers strapped to their fields.

Yet there is much that the government can do to free farmers from this debt trap. For starters, it can provide better access to credit and farm inputs, agriculture training, land ownership, farm-to-market roads, or technical assistance on crop diversification and cooperatives. But isn’t that what the Department of Agriculture is all about?

Read more: http://opinion.inquirer.net/89880/trapped-in-debt#ixzz3q9KKiftN
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Big plantations create big problems in Mindanao

“In the name of development, the nexus of state and TNCs (transnational corporations) has dispossessed people of their lands, resources and rights, captivating the whole island and enslaving people in TNC-led plantations and mines.  The original masters of the land have become slaves in their own lands, made to work till death and earning a pittance.  The loot is taken out by the TNCs in the form of profits whereas local communities get nothing as they witness their wealth… being plundered beyond repair and bringing them to extreme poverty.”

The above passage is from a solidarity message by the Asia Monitor Resource Center to the National Conference on Mindanao Plantations held at UP Diliman recently. It sums up the alarming consequences, discussed at the conference, of the unbridled expansion of agricultural plantations.

Launched at the conference, the Network Resisting Expansion of Agricultural Plantations in Mindanao, (REAP Mindanao Network) vows to “synthesize efforts and struggles” against the expansion of the plantations and to generate public awareness on the critical issues related to them.

Here’s a rundown of the situation:

• Agricultural plantations, mostly owned by TNCs and primarily geared to export markets, occupy almost 500,000 hectares, or 12% of Mindanao’s agricultural land. They produce rubber, Cavendish bananas, pineapple, palm oil, cacao, and sugarcane. More than half (51.2%) of the plantations are in Northern Mindanao, covering 127,105.7 hectares, and in Socsksargen (South Cotabato, Sultan Kudarat, Sarangani, and Gen. Santos City), 126,170.5 hectares.

• Over 10 years, the plantations expanded by 79%. Rubber plantations, which occupy 43.3% of the lands, increased nearly threefold: from 81,667 hectares in 2005 to 214,313.6 hectares in 2014. Palm oil plantations almost doubled in the same period: from 23,478  to 42,731 hectares.

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• Two banana plantations plan to expand further: American-controlled Dole Philippines, by 12,000 hectares; and Unifrutti (South American), by 2,600 hectares; the sugarcane plantations are to add 256,360 hectares, while cacao producers target 150,000 hectares more by 2020.

• Two state agencies have drawn up “roadmaps” to expand agri-plantations. The DENR’s National Greening Commodity Roadmap plans 116,000 additional hectares for rubber, 87,903 hectares for coffee, and 60,000 hectares for cacao by 2016. The Philippine Palm Oil Development Council Inc. targets 300,000 hectares more for palm oil plantations by 2023.

What are the consequences of these developments?

Land dispossession, labor exploitation, violence including killings, environmental degradation, and health problems characterize the history and development of agricultural plantations in Mindanao. A REAP briefing paper points out the following: 

Del Monte, Dole, and Sumifro plantations encroach on peasant communities and ancestral lands of thelumad (indigenous peoples) in Bukidnon, CompostelaValley, Davao provinces, Sarangani, and South Cotabato. Around 1 million hectares of grasslands in North Cotabato, Sultan Kudarat, and in the Caraga and Northern Mindanao regions are gradually being transformed into palm oil plantations.

The failure of the Comprehensive Agrarian Reform Program (CARP) has impelled agrarian reform beneficiaries to either lease their lands to TNCs or enter into “outgrower” contracts (grow TNC crops on their lands) under disadvantageous terms. Examples: 1) outgrowers are tied down to long-term contracts to supply Cavendish bananas to Dole at a fixed price of US$2.50 per 13-kilogram box; 2) in Caraga, lands are leased to palm oil plantations for 25 years at only P166 per hectare each month.

Most plantations hire only one regular worker per hectare of land. In rubber plantations, it’s only one regular worker per 3 hectares. The TNCs have minimized the number of their regular workers by hiring contractual or seasonal workers via manpower cooperatives. For instance, in Polomolok, South Cotabato, Dole maintains only 4,000 regular workers (1/5) out of a 20,000 workforce. Dole and Sumifro have been accused of union busting and other trade-union rights violations.

Due to their unfair contracts with the TNCs, outgrowers can’t afford to pay decent wages to their workers, often paying only half of the standard daily wage in the area, which ranges from P235 to P307.

Hiring minors is a prevalent practice among palm oil plantations in Caraga, banana plantations in Davao  del Norte, and sugarcane estates in Bukidnon. 

Given these conditions, the state hasn’t been of help. Instead, through the AFP and other security forces, it has practically acted as a partner of the TNCs and big Filipino plantation owners in suppressing mass protests against unjust labor and trade practices.

The AFP and its paramilitary adjuncts have been accused of intimidating, vilifying, harassing, and killing protest leaders.  Example: in October 2012, Higaonon tribal leader Gilbert Paborada was slain allegedly because he vigorously opposed the expansion into Opol, Misamis Oriental, of the Filipino-American palm oil firm, A. Brown Energy and Resources Development Inc.

Mountains are flattened and forests are denuded to give way to plantations, gravely affecting biodiversity and water sources, and causing soil erosion. Worsening the environmental degradation has been the rampant use of pesticides and other chemicals. These have polluted the land, air and water and caused respiratory, skin and other diseases among plantation workers and residents of the nearby communities.

In Surallah and other towns of South Cotabato, the people have publicly protested against aerial spraying of toxic pesticides in Sumifro plantations.  They have organized BATOAN (Ban Aerial Spray of Toxic Chemicals Alliance) to effectively pursue their campaign.

Verily, vital issues related to the plantations – national patrimony, agrarian reform, human rights, social justice, environment, and sustainable development – ought to be scrutinized through public debate.

* * *

Email: satur.ocampo@gmail.com

AT GROUND LEVEL By Satur C. Ocampo (The Philippine Star)