Banking and Finance in the Philippines

Banking and Finance Sector in the Philippines

• The banking and finance sector is essential for the Philippine economy, as it mobilizes domestic savings and directs funds towards productive investments.
• Investments in capital equipment, property, factories, and inventory contribute to long-term economic growth and job creation.
• The banking sector plays a vital role in encouraging households to save their income, allowing these resources to be channeled into loans for business expansion.

Types of Banks in the Philippines

• Universal and Commercial Banks: These banks dominate the Philippine banking industry, holding the largest share of deposits. They offer a wide range of services, including accepting domestic deposits, providing checking accounts, and engaging in investment banking activities.
• Rural and Cooperative Banks: These banks focus on rural areas, mobilizing savings and extending loans to farmers for agricultural inputs and produce marketing.
• Thrift Banks: This category includes savings and mortgage banks, private development banks, and microfinance thrift banks. They primarily cater to small and medium-sized enterprises by accumulating savings and providing loans for housing, working capital, and medium- to long-term financing.

The Financial System

• The financial system is composed of two main groups: banks and non-bank financial institutions.
• Banking institutions include universal banks, commercial banks, thrift banks, and rural and cooperative banks. They collect savings and time deposits to fund loans and provide credit and payment services.
• Non-bank financial institutions include insurance companies, pension funds, investment banks, financing companies, pawnshops, and mutual fund institutions. They source funds through investments from the public in various financial instruments, such as insurance premiums, pension contributions, and mutual fund shares.

Key Functions of Banks

• Safekeeping money and valuables
• Extending loans and credit
• Providing payment services like checking accounts, money orders, cashier's checks, debit, and credit cards

Key Functions of Non-Bank Financial Institutions

• Provide insurance coverage
• Manage pension funds and retirement savings
• Underwrite investments
• Offer financing solutions through loans and other debt instruments
• Facilitate pawnbroking services
• Manage mutual funds and collective investment schemes