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Access to credit and knowledge

One of the strategies to help the country reach upper-middle income status is improved financial inclusion, which includes fixing the perception and knowledge of credit products offered by formal channels, especially among unbanked Filipinos, especially as a recent survey showed that only 54 percent of that population are knowledgeable on the concept of credit, such as credit cards, housing, and personal loans.

According to the 2024 Credit Perception Index (CPI) published by global information and insights company TransUnion, that rate is lower compared to the 70 percent of the general population who said they are knowledgeable on credit. The results yielded a 2024 CPI score of 39 percent for the country’s unbanked population, which is significantly lower than the 53 percent recorded for the same segment in 2023.

Such findings not only showed a deterioration of credit perception and knowledge, but also indicated that knowledge gaps still exist between the unbanked population and the rest of the nation.

The report increased the need to intensify state efforts to onboard more Filipinos to the formal financial system, in line with the goal to lift the Philippines to the upper-middle income group before the end of the term of President Ferdinand Marcos Jr.

According to the Bank of International Settlements (BIS), a wider adoption of digital payments could also translate to greater access to credit, which can be helpful to the unbanked sector who have been relying on the informal credit sector that is filled with loan sharks that offer easy access but astronomical interest rates.

The formal financial system may be a bit more tedious than the neighborhood loan shark, but it comes with legal protections for both parties, and better interest rates. The focus on the advantages of credit products offered by formal channels, especially among the unbanked Filipinos, can help a lot of those who let their ignorance make the wrong financial decisions, gain access to more reasonable loans that may be convenient, but usually end up burying them in debt.

Improving credit perception and knowledge, and educating the unbanked population on the advantages and protections that come with banking formally, especially now that banks are more accessible because of digitization, can benefit millions of Filipinos whose struggle with finances and poverty is compounded by dealings with loan sharks that are usually out of reach of government regulations and protections.*

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February 2025
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