Filipinos, by a large, still prefer to approach 5-6 money lenders, paluwagan groups, friends and relatives, and other informal sources of credit, over borrowing from banks and other formal financing institutions, when they find themselves short of cash.
Findings from a survey recently conducted by the World Bank revealed 78 per cent of respondents use informal sources at least some of the time while 56 per cent exclusively use informal credit. On the other hand, 13 per cent approach micro finance institutions while 12 per cent tap both informal and formal credit source.
Urban residents are more likely to use informal credit, the study further revealed, while rural residents account for the majority of users of informal savings products.
The survey also showed Filipinos still use piggy banks and other informal means to save for “the rainy day.”
The World Bank survey, which covered 3,000 adults, also shows aside from borrowing, Filipinos pawn jewelry, use saving, sell possessions, and find extra work.
The World Bank said that mobile technology can significantly help to improve Filipino’s utilization of formal financial services.
As World Bank senior financial sector specialist Nataliya Mylenko pointed out, Filipinos are considered to be among the pioneers of mobile cash technology, with their heavy use of G Cash and Smart Money in transferring funds to loved ones.
He noted, however, a slow uptake in the use of these mobile payment services.
Mylenko recommended allowing money transfers across mobile networks to promote use of mobile money technology.