Pandemic accelerated adoption of digital services

It was interesting to read the findings of the 2021 Consumer Finance Survey (CFS) conducted by the Bangko Sentral ng Pilipinas (BSP) from March 31, 2022 to Dec. 11, 2022, which were released last Friday, March 14.

The survey results gave a glimpse into how Filipino households managed their finances during the pandemic years and the resulting adoption of digital services.

According to the BSP, non-financial assets continued to form the foundation of Filipino household wealth portfolios. Home appliances and equipment remained the most commonly owned assets (96.6 percent), followed by residential properties (69.9 percent) and vehicles (35.3 percent).

Among vehicles, motorcycles (61.7 percent) continued to be the most commonly owned, which I believe also contributed to the shift to a digital economy through the delivery of goods purchased online but also contributed to traffic congestion.

A notable shift occurred in homeownership trends, with more families choosing rental accommodations (11.3 percent) compared to the previous survey round (10.2 percent). Within the appliance category, mobile phones (92.8 percent) continued to surpass televisions (81.1 percent) as the most common household item since the 2018 survey, highlighting the increasing importance of digital connectivity, especially during times of crisis. This finding is also significant to the decline of cable television as more people depend on their phones to get the news or watch online movies and content.

The composition of financial assets revealed interesting patterns of financial behavior. Deposit accounts recorded the highest ownership rates at 35.3 percent, followed by traditional cash savings kept at home (28.7 percent) and the rapidly growing category of e-money accounts (24.3 percent). After the pandemic, more people now have e-wallets for everyday small purchases or payments.

The post-pandemic recovery period witnessed substantial growth across financial asset categories, particularly in formal banking relationships and digital financial products. Financial institutions played a pivotal role in this transition by accelerating the development of user-friendly digital services. These services addressed the evolving needs of consumers who increasingly required remote access to financial resources during lockdown periods.

The pandemic, according to the BSP findings, prompted a significant reorientation of Filipino households’ approach to debt and savings. Faced with economic uncertainty, households increased their precautionary savings to protect against the risks of job losses and falling incomes.

Government-imposed restrictions on movement and business operations severely limited traditional spending opportunities such as travel, dining and entertainment. However, these restrictions inadvertently increased savings, which offered households some respite during the crisis. Furthermore, households benefited from government financial assistance programs.

Households were more reluctant to take on additional debt during this uncertain period, resulting in a significant decline in overall debt levels. The survey data indicated that only 29.3 percent of households carried any form of debt during this period, representing a substantial decrease from 40.4 percent in the 2018 survey. The composition of these liabilities primarily consisted of household bills (16.4 percent) and outstanding loans (15.2 percent). Only 0.7 percent of households had outstanding credit card debt, most of which was incurred for the purchase of basic goods.

Wages remained the leading source of income among households in 2021. The percentage of households receiving wage income rose to 91.5 percent, up from 73.7 percent in 2018. Government employment initiatives implemented to counteract pandemic-related job losses largely drove this increase. About 9.8 percent of households received income from businesses, primarily sole proprietorships in retail or food service, while 55.6 percent relied on other sources, mainly government pandemic assistance or ayuda. These ayuda included cash subsidies and food packs that played a crucial role during the COVID-19 pandemic, providing essential financial support to many households facing economic hardships due to lockdowns and job losses.

Spending patterns of households in 2021 revealed that food and beverages consumed at home accounted for the largest expenditure share at 55.4 percent, consistent with findings from previous survey rounds. For non-food items, housing and utilities accounted for 10.6 percent, while transportation took up 7.2 percent of the budget. This spending distribution, the BSP cited, underscores the importance of government price management for essential goods and services.

Meanwhile, non-essential items, including miscellaneous expenses, alcoholic beverages, tobacco, narcotics and recreation and culture, made up 8.6 percent of total expenditure, with miscellaneous expenses such as personal care, celebrations and gifts having the highest share at 4.8 percent.

According to the BSP, the country’s relatively young and healthy population presents the potential for a demographic dividend. The average household consisted of four members, with about half of them under 28 years of age, and an almost equal distribution of males and females. Furthermore, about 37.1 percent of household members aged three years and over were currently studying, while 49.8 percent of those not attending school were at least high school graduates.

Most household members (92 percent) reported good self-assessed health status. To capitalize on this demographic advantage, investing in high-quality education and robust health services is crucial to ensure a well-educated, healthy and productive young workforce that can drive higher economic growth.

The CFS is a nationwide survey of the BSP on the financial condition of Filipino households, considering their assets, liabilities, income and expenditure. Patterned after the United States’ Survey of Consumer Finances (SCF) of the Federal Reserve Board, the CFS was developed in 2008 to address data gaps on household wealth and indebtedness in the Philippines. It complements the existing household surveys of the Philippine Statistics Authority, namely the Family Income and Expenditure Survey and the Annual Poverty Indicators Survey. Data for the 2021 CFS were gathered from 16,212 respondent households (90.1 percent of the targeted 18,000 sample households) nationwide from March 31, 2022, to Dec. 11, 2022. Employment, income and expenditure data covered the calendar year 2021, while all other information, such as the household profile, assets and liabilities, was based on the date of the interview.