THE World Bank has approved a $600-million loan to make the Philippine financial sector more resilient against shocks and boost the economic recovery.
“Policy actions that strengthen the stability of the financial sector — including banks and insurance companies — will help Filipino families, businesses, and investors withstand financial shocks and enhance their resilience by ensuring that problems in these financial institutions are detected at an early stage without severe disruptions to the economy,” World Bank Country Director for the Philippines Ndiamé Diop said in a statement on Tuesday.
According to the World Bank website, the loan is geared towards strengthening financial sector stability; expanding financial inclusion especially for micro, small, and medium enterprises; and to develop climate and disaster risk finance.
This is the country’s second financial sector reform policy loan. The first was a $400-million loan approved in 2021.
According to the World Bank, only 51% of Filipinos aged 15 years old and up have accounts with financial institutions, which is well below the East Asia and Pacific average of 80%.
In the bottom 40% of the population, only 34% of adults have an account, it added.
Mr. Diop said that financial inclusion can speed up poverty reduction and strengthen recovery from the pandemic.
“Filipinos who have accounts with financial institutions like banks will have opportunities to use other financial services, such as credit and insurance, to start and expand businesses, invest in education or the health of their children, manage risk, and weather financial shocks, which can improve the overall quality of their lives,” he said.
Mr. Diop added that the new program is also developing the catastrophe insurance market to prevent individuals from falling into poverty due to natural disasters.
Mr. Diop said the rising use of catastrophe insurance will allow the government to focus its fiscal resources on post-disaster cash transfers and subsidizing insurance premiums for the most vulnerable parts of the population.
The program will also support reforms that promote innovative financial services.
“Under its strengthening financial sector stability, integrity, and resilience pillar, this DPL (development policy loan) series supports reforms aiming to strengthen the legal and institutional framework to improve financial sector oversight and integrity, enhance crisis management and resolution framework in the sector and improve the availability of long-term finance,” the World Bank said.
“Finally, this DPL also supports the financial sector resilience to climate-related shocks by integrating climate and environmental risks in financial institutions’ risk management frameworks and mobilizing private sector financing for green investments by encouraging banks to incorporate sustainability principles into their investment activities,” it added.
DPLs support countries undertaking reforms, typically during times of policy and institutional transition to create an environment conducive to equitable growth.
As of March 2022, the World Bank was the Philippines’ third-largest official development assistance (ODA) partner, with loans and grants amounting to around 23.38% of total ODA. In 2021, its share of ODA was 24%, according to the National Economic and Development Authority.
The World Bank is currently supporting 15 ongoing Philippine programs and projects worth $4.96 billion.
For 2023, the National Government expects to obtain around $19.1 billion worth of ODA — $9.2 billion worth of loans from multilateral development partners and $9.8 billion in loans from bilateral lenders. — Keisha B. Ta-asan