Challenge to the new BSP governor

It has become a tradition for Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. to deliver his annual “risks and challenges” report on the first Tuesday of each new year in the past 12 years. However, due to previous engagement, Tetangco’s annual “risks and challenges” report came a week later.

Thus, Tetangco apologized to us last week at the Tuesday Club in Edsa Shangri-la in Pasig City for his belated annual address to our breakfast forum. For 2017 that marks the end of his tenure this July 2 as BSP Governor, it was already a pre-terminal report by Tetangco.

It is actually Tetangco’s second term already as BSP Governor after his tour of duty was extended for another six years by former President Benigno “Noy” Aquino III. This early, admirers and supporters of Tetangco were egging President Rodrigo Duterte to consider another term extension for the 64-year-old Tetangco as BSP Governor. While he commended the stewardship of the BSP under Tetangco, President Duterte is apparently inclined to consider another worthy replacement to take over as the country’s new monetary authority chief.

During his watch as BSP Governor, Tetangco swore he tried his best to keep the independence of the monetary body, making sure the fiscal and economic well-being of the country will be resilient against any internal pressures and external shocks that crop up every now and then. “What allowed the Philippines to continue to be resilient, despite the surprises of 2016? Well, we did our homework and kept our house in order,” Tetangco declared.

Citing 2016 as example, Tetangco noted with satisfaction the Philippine economy creditably did well to absorb four major events that happened last year. He listed as follows: the so-called “Brexit,” or short for the British exit from the European Union; the victory of American business mogul Donald Trump in the US presidential elections; the victory of populist parties in the Austrian and Italian referenda; and, an OPEC (Organization of Petroleum Exporting Countries) agreement on cutting production that has yet to be enforced.

Ostensibly, Tetangco did not include the election into the presidency of former Davao City Mayor in his list. So I asked him why, Tetangco retorted: “Well, we can include that.” Further asking why the Bangladesh Central Bank money that found its way last year into the Philippines through a money-laundering scam using our local casinos here was not included in his list, the BSP Governor retorted: “You can include that, too.”

Tetangco repeatedly implored us though in media and communications “to discern political noise from facts” to minimize the effects of the volatile environment within which economies like ours operate. The BSP chief did not go into details what “political noises” he was referring to.

Obviously, he merely echoed the resulting reactions from the sound bytes coming from tough-talking President Duterte. Official pronouncements from President Duterte, laced with cuss words most of the time, generated critical reactions that sent shock waves not just here but across the globe.

Well, perhaps the outgoing BSP Governor does not want to stir controversy in his few remaining months in office.

While he talked about a lot of technocratic matters in his speech, the BSP Governor obliged me with answers on gut issues that plagued common Filipinos like us have to live with. I reminded him about his pet program on BSP’s National Strategy on Financial Inclusion (NSFI) in relation to the directive of President Duterte to put a stop to the “5-6” lending schemes.

The presidential directive was issued during the Cabinet meeting last Monday at Malacanang after Agriculture Sec. Emmanuel Piñol reported about farmers and fisherfolk and other financially hard-up Filipinos fall prey to “5-6” lenders. Unfortunately, the President’s directive zeroed in only on Indian nationals engaged into this lucrative “5-6” lending business without paying taxes and permit to the Philippine government.

For one, Tetangco pointed out, the Anti-Usury Law of the country has long been suspended and it’s now market forces that dictate the interest rates or cost of borrowing. This is precisely, he stressed, what the BSP’s financial inclusion program seeks to address by expanding alternative access points for farmers, fisherfolk and other small borrowers from e-money agents, pawnshops, remittance agents, and money changers in areas of the country that have no banking institutions.

As of latest figures, he noted, the percentage of cities/municipalities that remain un-served by banks has gone down to 12.6% from a high of 37% at end of 2012. In the latest survey done by the BSP, however, they found out the number of Filipino households without bank accounts has risen through the years.

In the 2014 Consumer Finance Survey (CFS) by BSP, 86 percent of households don’t keep money in banks. This was up from 78.5 percent in 2009 in this BSP survey conducted every four years. “Not having enough money” was the top reason for not keeping a bank account, cited by 92.3 percent in the 2014 survey, from 92.8 percent in 2009, data showed. Other reasons include seeing no need for a bank account; living far from a bank; being unable to manage an account; and refusal to pay transaction charges.

Savings is a function of income. If most Filipinos earn barely enough to meet their daily needs for food, shelter etc., how can they even have savings? Worse, they end up borrowing to help make both ends meet.

This was validated by the same BSP survey that showed nearly two-thirds of Filipino borrowers use their automated teller machine (ATM) cards as collateral for loans. Data showed the “sangla ATM” scheme was the most used collateral for loans of 39.9 percent of Filipinos. From 2014 to 2015, according to this BSP survey, other popular collaterals used for loans – whether personal, salary, multipurpose, business, education, or emergency – were land at 22.5 percent, appliances at 11.7 percent, vehicles at 7.7 percent, and harvest at 6.0 percent.

So the challenge is how to wean the public away from shadow lenders like “5-6” which offer no collateral nor require borrowers to submit income tax returns and other documents to qualify for bank loans. Whoever becomes the new BSP Governor would hopefully rise to this challenge.