Of course, every one knows that the AFIF (ASEAN Financial Integration Framework) – the equivalent perhaps of the new laws’ IRR (Implementing Rules and Regulations) will be completely done only by the year 2020.
What can be done in the meantime? Will this integration benefit the Filipino poor and the small and medium industries (SMEs) ? Or will this Â just this result in ASEAN businesses lording over the lucrative market of 100 million Â who are experiencing what economists call a “soft spot” in its demographics?
Recall that the ASEAN is such a big beautiful market. It can invite the capitalist attention of the big business players in the Philippines to go out and Â serve more lucrative markets abroad in the 11- nation ASEAN. Will the Filipinos SMEs and the poor enjoy part of the “inclusive growth” because of this integration?
Consider the numbers. ASEAN GDP total is US$2.57 trillion- that is just a bit smaller than the GDP of European industrialized nations like France and Great Britain but bigger than that of Russia, India and Brazil. It is no kidding huge.ASEAN is home to 81 million households -about 600 million people.
It is the part of the role of the BSP that the poor and the SMEs must not only be protected from- but profit from the integration.
At the outset, hoever, allow us to commend the BSP -for anchoring its monetary policies based on containing inflation. Inflation,as we know Â is the Â one Â scourge that lashes at the poor first when they gallop up. Â But the BSP needs to do more than that between now and 2020.
In a capital -starved economy like the Philippines- one can have an abundance of land and labor. Capital it does not normally have. Â This is where bank financing is needed- but it seems there is a general reluctance of banks to lend.
Consider the statistics. Â In 2013 the loan/deposit ratio Â of the banking system was 64% and in 2014 68%. This basically means that the entire banking system lent only 64 cents in loans for every one peso deposit it generated in 2013 and only 68 centavos Â Â in 2014. Every banker will admit that Â the banking system is awash with funds- it has so much liquidity in banking parlance.
Why with-hold this precious source of capital for SMEs who need that to complete the equation to become competitive against incoming ASEAN businesses who are desirous of serving the 100 million Filipino market?
So far the BSP has talked of new financial instruments and insurance protection for these risks. But largely, these are addressed to the interest of the “Big Boys” of the business community.What about the SMEs?
Currently, there are in this country Â 648 banks, 9,700 branches and 15,700 ATMs with 271 offices offering e-banking services. However, only 517 of such offices offer financing for SMEs. That is too little- given the huge liquidity in the banking system.
Moreover, there is an overall lack of “financial literacy” across a wide spectrum of the populace among rich OFWS and even among Â professionals in various fields of endeavor. That needs BSP and concerted community effort to spur business investments.
There is also the issue of over-strictness of banks in credit granting despite the liquidity and the fact that the banking system has a very low “bad loans to total loans” ratio of only 2.3%.
Many ordinary Â individuals and small firms have been locked out of the borrowing side of the banking system due to some past reversals. For instance, their loans or their credit cards may have gone “past due” or unpaid Â many years ago -perhaps due to a sickness in the family or an ordinary business cyclical downturn.
Yet Â today -they are automatically Â turned down by banks 5-10 years down the road when they have obviously already Â recovered from such reversals as shown by their Â current bank statements and good credit behavior thereafter.
There has to be a new set of banks that should concentrate on giving these hard-working, recovering firms and individuals to be taken back into the market.
ASEAN Â bank integration, doubtless, present vasts opportunities here and abroad for businesses. We just have to make sure that such trajectory also includes the Â ordinary Filipinos and the SMEs- Â so as to to make such growth is ” inclusive”- a one characteristic Â that had escaped Pnoy’s administration despite the dramatic macro economic figures.
For comments: email to firstname.lastname@example.org or email@example.com