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Financial Inclusion and the Role of Financial Literacy in the Philippines

Author

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  • Jared Martin U. Desello
  • Mary Grace R. Agner

Abstract

Financial inclusion is increasingly seen as a key enabler of various development objectives. While not explicitly one of the UN Sustainable Development Goals (SDGs), financial inclusion is recognized as an important enabler for them. The Philippine central bank—the Bangko Sentral ng Pilipinas (BSP)—has even identified financial inclusion as a “national development agenda” that requires a conscious effort by various sectors to accelerate and enable its societal benefits. This paper studies the relationship between financial literacy and financial inclusion in the Philippines using data gathered from the 2019 Financial Inclusion Survey (FIS). We apply ownership of financial account and use of financial services as indicators of financial inclusion. Based on the results, financial literacy is a positive driver of financial inclusion. We calculated that a one-standard-deviation increase in financial literacy scores increased the likelihood of holding at least one account by 3.7 to 4.2 percentage points. On the other hand, a one-point increase in financial literacy scores improved the likelihood of availing of a financial service by 4.9 to 6.0 percentage points. The other drivers of owning at least one formal account and availing of financial services are age, gender, employment status, awareness of BSP’s programs, income above 40,000 PHP, and being the main household financial decision-maker. This paper aims to promote BSP’s agenda to bridge the financial inclusion gap and raise financial literacy levels in the country. With this study, the authors second BSP’s advocacy that financial inclusion is one of the instruments to attain sustainable and equitable development in the Philippines.

Suggested Citation

  • Jared Martin U. Desello & Mary Grace R. Agner, 2023. "Financial Inclusion and the Role of Financial Literacy in the Philippines," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 15(6), pages 1-27, June.
    • Handle: RePEc:ibn:ijefaa:v:15:y:2023:i:6:p:27
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    References listed on IDEAS

    as
    1. Naoyuki Yoshino & Peter J. Morgan, 2016. "Overview of Financial Inclusion, Regulation, and Education," ADBI Working Papers 591, Asian Development Bank Institute.
    2. Sondra G. Beverly & Marianne A. Hilgert & Jeanne M. Hogarth, 2003. "Household financial management: the connection between knowledge and behavior," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jul, pages 309-322.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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