Today, a significant number of Filipinos still get easily swindled from their hard-earned money through various elaborate scams.
According to Ms. Johanna Margaret Ratilla, a marketing services specialist, there are a number of reasons why Filipinos get scammed. These include getting enticed by high returns, wanting to earn money the easy way, and wanting to get rich quickly. There is also the fear of missing out and the scarcity mindset wherein words like “limited slots only” can easily make people decide to pour their hard-earned money into unreliable “investment” opportunities.
In all these, financial literacy is key.
“Schools and universities teach the basics, but we rarely get lessons about financial literacy,” says Ratilla. “This lack of financial knowledge is one of the reasons why lots of people bite into scammy offers. Putting your money on high-risk investments isn’t bad. Just make sure that you know and understand what you’re getting into to protect yourself from scammers.”
Empowering people, sustaining the economy
Unfortunately, financial literacy in the Philippines is still an almost foreign concept. Studies and surveys have shown that a large majority of Filipinos still have no concrete grasp of financial management.
In one of its most recent surveys, S&P, an international credit rating agency that puts together financial research, reported that the Philippines ranks in the bottom 30 of 144 countries surveyed. It also found that only 25 percent of Filipino adults were literate on the basics of finance.
It noted that those most likely to be financially illiterate are women, the poor, and the less educated. Men were likewise found to be more literate (35 percent) than women (30 percent).
According to the researchers, “This is generally alarming since financial literacy plays an integral part in ensuring the sustainability of the Philippine economy. Without financial literacy, the people cannot make important decisions regarding investment, savings, borrowing, and most certainly about insurance.”
Interestingly, the study found that those availing themselves of financial services, such as those of banks and credit card companies, were more likely to have higher financial literacy regardless of their wealth or educational attainment.
Another astonishing finding is that financial literacy improves from general proficiency in mathematics.
Nonetheless, the study concluded that generally, the rich have much better financial skills than the poor. Financial literacy also increases as income increases and educational attainment goes higher.
The S&P survey was conducted by interviewing 150,000 adults throughout 144 countries on four basic financial concepts: numeracy (interest), risk diversification, inflation, and compound interest.
Financial literacy and better banking accessibility
This lack of grasp of financial management is also evident in the prevalence of formal savings in Filipino households.
According to Statista Research Department, only 30.2% of households surveyed in the Philippines in the first quarter of 2019 up to the fourth quarter of 2021 had savings. The number of households with savings was lowest during the third quarter of 2020 because of the COVID-19 pandemic.
The survey also noted that only a dismal 40% of Filipino adults save. Of those who save, 68% keep their saved money at home, 21.9% keep their money in formal financial institutions, 7.5% save money through cooperatives, and the remaining 2.6% keep their money in group savings (paluwagan).
However, the blame should not be put entirely on the Filipino population since access to banks and other formal financial institutions are scarce in some areas of the Philippines.
As of the latest available data from the Bangko Sentral ng Pilipinas (BSP), 595 municipalities in the country still have no banks. This is out of a total of 1,490 municipalities in the country.
So, while financial knowledge may be easily disseminated throughout the Filipino population, a significant percentage of the population will still be unable to effectively use the best practices in financial literacy in the Philippines.
This only goes to show that financial literacy needs to co-exist with better banking accessibility for it to be practiced in full.