Studies Show That Filipinos Need to Enhance Their Financial Literacy

Latest studies by TransUnion show that many Filipinos lack credit knowledge and likewise need to enhance their financial literacy, especially with credit products and services.

According to statistics, there are around 8.4 million Filipinos who still remain unbanked. Though being unbanked means having one’s money on hand, this also means that these people don’t get to access the various services offered by banks. It also suggests that activities like cashing checks and paying bills may also take longer than usual. 

TransUnion—a global information and insights company as well as a private credit reference agency—conducted a study to further analyze how Filipinos perceive credits, including the factors that contribute to how they view them. The results of the study are then analyzed so that it will be easier to pinpoint which aspects of credit literacy need to be emphasized. 

So far, statistics have also shown that many Filipinos are “credit hungry” but the chances to apply for one are often hampered by the negative perception that comes with the word “utang”, debt”, or “loan”. Here’s what the study results show.

Statistical Results of the Study

Among the data that TransUnion produced is the Credit Perception Index (CPI) where the Philippines stands at 65 out of 100. This rate was achieved by taking into consideration several factors about how Filipinos perceive credits across different dimensions that include current attitudes, knowledge, trust, favorability, and future receptivity.

According to the data they have gathered, about 69% of the surveyed Filipinos surveyed have a general understanding of the concept behind credit. Across credit products, they tend to be most knowledgeable about credit card installment payments (83%), followed by personal loans (77%), credit cards (71%), and Buy Now Pay Later (69%). In contrast, they are far less familiar with mortgages (58%), auto loans (54%), and overdraft protection (25%).

Trustworthiness in different credit products also follows a similar pattern, with credit card installment payments (81%) and personal loans (78%) seen as being more trustworthy, and overdraft protection (42%) being less trusted among Filipinos surveyed. This suggests a likely correlation between knowledge and trust—the more knowledgeable a consumer is about a credit product, the more trustworthy the consumer would find the product.

Aside from that, data also shows that Filipinos tend to favor using cash and e-wallets over credit cards and Buy Now Pay Later services. Also, 85% of the respondents said that they own e-wallets, compared to the 25% that admittedly own credit cards—despite the fact that they have existed longer in the country. 

Improving Filipino Knowledge of Credit and Beating Negative Stigma 

“Improving financial literacy among our fellow Filipinos is a major step in fostering a more inclusive financial ecosystem in the country. We are passionate about the work we do every day to help wider consumers understand more about credit and enable them to access credit opportunities to achieve their life goals,” says Pia Arellano, the President and CEO of TransUnion Philippines. 

“By harnessing both traditional and alternative data to generate insights on an individual’s creditworthiness, it becomes possible for more consumers to be seen and included in the formal financial system, especially unbanked Filipinos constrained by the lack of available credit information on them,” she adds.

Part of the gathered data showed that more than half of the unbanked population understand the general concept of credit while the rest of them are clueless about it while lack trust and favorability over it.

The results from the respondents also prove that the negative stigma around credit still revolves around the idea that it correlates to debt, overspending, and irresponsibility. Many Filipinos also believe that owning a credit card puts them at risk of landing into a bigger debt or being jailed in case they fail to settle their dues. 

With the lack of knowledge of bank credits, most Filipinos—especially the unbanked ones—tend to go for unofficial credit options such as borrowing money from friends or family. Meanwhile, those who tend to be knowledgeable about the said matter shared that they knew about the concept of credit through banks and financial institutions, their family and friends, as well as their financial advisors. 

Financial Literacy for Filipinos

There are advantages that come with understanding how credit works, especially credit cards. According to Investopedia, these include bonuses, cashback, enhanced safety, and how it gives users ample time to pay. 

“Responsible credit use empowers consumers to realize their aspirations, whether that be starting a business, pursuing further education, or building a home. On a national scale, it also serves as a catalyst for economic growth, as proven by a great many economies around the world,” concludes Arellano.

By studying the Filipinos’ financial literacy on credit systems, it becomes easier to point out which factors need to be heavily addressed. When people start to understand how using credit can be useful, more people can start signing up for it. And when there are more people who use it, more businesses in the country may also start incorporating it into their accepted payment methods as well. 

Aside from the fact that it benefits the economy in such a way that people become more progressive with it, preparing the Filipinos for a wise usage of credit lines will also make them more adaptable.

Why? It’s because more than 100 countries around the world have strong credit card penetration, and giving Filipinos better knowledge about it will work in such a way that equips them to be globally prepared.