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THE STATE OF FINTECH IN PHILIPPINES: 3 NOTABLE EXAMPLES

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THE STATE OF FINTECH IN PHILIPPINES: 3 NOTABLE EXAMPLES

Philippines is a fascinating market, HSBC predicted that in 2050 Philippines will be the 16th largest economy in the world, 5th largest in Asia and largest in South East Asia ahead of its neighbours like Singapore, Malaysia and Indonesia

state

Yet, despite being projected as a fast growing economy in the region, Philippines is riddled with many fundamental issues within its financial services sector. According to World Bank, 69% of its adult population remains unbanked, that is a staggering number!

All around the world we see trends of fintech firms emerging to serve this largely underserved market.

In October 2015, Bangko Sentral Ng Pilipinas which is the central bank for Philippines announced that they will be closely monitoring the development of fintech. The central bank is currently still taking a very cautious stance

“One of the (banking) challenges we’re looking into right now is the FinTech kind of solutions because it’s a game-changing tool. It changed the business model of banks in payments and trade,” said BSP deputy governor Nestor A. Espenilla Jr.

In 2016 the transaction value of fintech clocked in at 4.9 billion. So is Philippines embracing fintech to resolve this issue? Let’s explore.

Landbank Mobile Loan Saver Programme

Source: Smart PH

Landbank of Philippines ranks amongst the top 5 commercial banks in the country in terms of deposits, assets, loans and capital. It’s a government linked financial institution with a specific  loan portfolio focus of farmers and fishermen, small and medium enterprises and microenterprises, livelihood loans and agribusiness, agri-infrastructure and other agri- and environment-related projects, socialized housing, schools and hospitals

One of the notable examples of partnerships between banks and fintech were between Landbank and Voyager Innovations and Smart Emoney. It is interesting to note that both Voyager Innovation and Smart Emoney are units under PLDT which is short for Philippines Long Distance Telephone Company. PLDT is a local telecommunications provider and internet service provider in Philippines

In their partnership they launched the LMLS which is short for LANDBANK Mobile Loan Saver, which is the country’s first paperless payday loan programme. As of 31st March 2016 the programme processed roughly 1.5 billion USD worth of loans.

With LMLS, loan applicants are not required to visit the branch and go through the painful process of filling up loan application forms. Which is increasingly important in Philippines, because banks are not exactly very accessible for some in the rural areas.

Loan applicants will only need to send a text message from their SMART prepaid card and fill up the application online and it is available 24/7. What’s really interesting is that 20% of the applications were processed outside of banking hours. This is a clear example of an increasingly connected digital market and perhaps a sign for banks to make more of their services available to their customers outside of the typical banking hours.

Lendr

lendr

Source: Lendr

Lendr is full-fledged digital omni-channel platform that is telco and bank-agnostic in which the financial services industry can use to reach consumers planning to avail themselves of loans through a single online “marketplace.”

In late 2015 Lendr secured its first banking partner, China Banking Corporation. Despite being named China Banking Corporation, strictly speaking it is not a bank from China. The bank was set up by a group of top Chinese businessmen in the 1920’s. In fact their operations in China only began in 1925, 5 years after its inception in Manila. It is the top 10 largest banks by assets in Philippines

Much like Land Bank’s LMLS programme, applicants need not show up at a branch, they can simply go through the entire loan application process via Lendr which is accessible easily via mobile

With the partnership, clients of China Bank Savings can now complete the loan application process online, track their loan application and monitor their monthly loan payments, balance and other amortizations.

Following China Banking Corporation’s partnership, several major banks like Union Bank and Philippines National Bank followed suit and signed up to be a part of the online loan marketplace. If this sounds really similar to the LMLS programme, it is because Lendr is also part of PLDT

Lenddo

lenddo

Source: Lenddo

Lenddo is a credit risk and verification technology that uses massive amounts of opt-in alternative data such as Facebook and Linkedin. According to its founder the algorithms are self-learning and it constantly incorporates new data sets to maximize its predictive power. Lenddo set up shop in Philippines in January 2011 and is now present in 15 countries.

One fascinating fact that is not known to many outside of the Philippines and the industry is that there is no centralized credit scoring agency in the country. Only in 2008 did the government set up the Credit Information Corporation and said that that they will have 80% of the relevant data ready by 2016 which they only announced back in 2014!  This made Lenddo’s solution that much more relevant for the Filipino market.

A solution like Lenddo would be very well suited to be used by the plethora of fintech companies who are involved with P2P lending and online loan market places, to help them better manage their credit risk.

While the banks in Philippines have not reacted as swiftly nor as aggressively compared to many of its ASEAN neighbours there are some interesting fintech startups emerging from this country. The Philippines space will definitely be an interesting one to watch in the years to come.

It appears that telco players like PLDT are especially dominant in comparison to banks in Philippines, every corner you turn in the fintech space within Philippines, you’re bound to run into an innovation from Voyager. It is no wonder that its Vice President and Head of Fintech, Lito Villanueva is named as one of the top 100 Fintech Innovators.

Lito Villanueva can be found be speaking at the 8th BankTech Asia 2016 that will be happening on the 24th – 25th May 2016 at Dusit Thani, Manila.

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Teed off: As COVID fuels S. Africa’s housing crisis, golf courses feel the heat

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Teed off: As COVID fuels S. Africa's housing crisis, golf courses feel the heat 1

By Kim Harrisberg

JOHANNESBURG (Thomson Reuters Foundation) – It sounds like a developer’s dream: A greenfield site in the heart of Cape Town, close to the best schools, hospitals and transport links and big enough to build more than 1,400 affordable new homes. The only hitch – it’s a golf course.

The 46-hectare (114-acre) Rondebosch Golf Club is one of hundreds of golf courses in South Africa facing scrutiny by land rights campaigners as a surge in evictions during the COVID-19 pandemic exposes an acute shortage of low-cost housing.

Rondebosch had its lease renewed by the city government late last year despite the presentation of some 1,830 objections by local housing rights group Ndifuna Ukwazi, which says turning golf courses over for homes is a way to tackle deep inequality.

“Using this land for the benefit of a few wealthy individuals at the expense of those in dire need of affordable housing is inefficient, unequal and unjust,” said Michael Clark, head of research and advocacy at Ndifuna Ukwazi.

Warnings by city officials that eviction is on the cards for occupiers of abandoned buildings, just months after Rondebosch’s lease was extended, have roused activists and sparked calls for cities to prioritise land use according to need.

“Golf courses occupy expansive tracts of land in well-located areas across cities,” said Edward Molopi, a researcher with the Socio-Economic Rights Institute of South Africa (SERI), which uses litigation and advocacy to support human rights.

“South African cities face an acute need for affordable housing and this land can be used to address the problem,” Molopi told the Thomson Reuters Foundation, adding that he knows of hundreds of housing evictions since lockdown began.

Nearly three decades after the end of white minority rule, South Africa remains one of the most unequal countries in the world, according to the World Bank, with urban areas still starkly divided along racial and class lines.

In other countries too, from South Korea to the United States, the swathes of green space needed for a round of golf have stirred debate around alternative uses for the land, whether apartment blocks, public parks or even vineyards.

‘NOT THE ONLY LAND’

But in South Africa, where tracts of land, including golf courses, were used as physical barriers to separate different racial groups during the apartheid regime, campaigners say repurposing such areas is key to achieving a fairer society.

Golf lovers have a choice of about 450 courses in South Africa, according to independent golf course ranking platform Top 100 Golf Courses.

They are easy to spot on a Google Maps view of the nation’s cities, many in close proximity to other golf courses, and also poorer neighbourhoods or townships.

But officials say finding space for affordable homes is more complex than repurposing golf courses.

Not all of the courses are publicly owned or suitable for residential use, said officials from the cities of Cape Town, Johannesburg and Durban. The sport also draws tourists and creates jobs, they added.

“Densification, diversification and inclusionary housing requirements in well-located parts of our cities is a more realistic approach,” said Nthatisi Modingoane, a spokesman for the city of Johannesburg.

‘SPATIAL JUSTICE’

Johannesburg’s Observatory golf course lies less than five kilometres (three miles) from Hillbrow, an inner-city suburb notorious for derelict, overcrowded buildings and crime.

People unable to afford rent end up there in “dark buildings” – properties seized by rogue landlords that offer crowded but cheap rooms, often without electricity.

“Since COVID, people need cheap rent, but if you don’t pay the landlords you get kicked out or … they kill you,” said Ethel Musonza, a housing activist who used to live in a dark building.

“There is a big need for people to be resettled in a safe place they can afford,” she added.

But the Observatory course sits on the site of an old ash dump, making it a poor site for residential construction, said club captain Simon Leventhorp.

“There is need for affordable houses but golf courses aren’t the only land available,” he said, adding that the club had a lower membership fee that other courses, making it a more inclusive space.

Some courses – like Rondebosch in Cape Town – do fit the bill for affordable housing, said Clark.

Golfers at the course can still enjoy views of the city’s famous Table Mountain from the greens, but authorities did add a two-year cancellation clause to the club’s lease if an alternative use of the land is identified.

Land used for community and recreational use, including golf courses, is currently being reviewed for possible residential sites, the city added.

In the meantime, land campaigners will continue to put pressure on state and city governments to “proactively intervene in housing markets”, said Molopi from SERI.

“This will be central to dismantling the ‘apartheid city’ and moving towards urban spatial justice,” Molopi said.

(Reporting by Kim Harrisberg @KimHarrisberg; Editing by Helen Popper. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org)

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UK might need negative rates if recovery disappoints – BoE’s Vlieghe

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UK might need negative rates if recovery disappoints - BoE's Vlieghe 2

By David Milliken and William Schomberg

LONDON (Reuters) – The Bank of England might need to cut interest rates below zero later this year or in 2022 if a recovery in the economy disappoints, especially if there is persistent unemployment, policymaker Gertjan Vlieghe said on Friday.

Vlieghe said he thought the likeliest scenario was that the economy would recover strongly as forecast by the central bank earlier this month, meaning a further loosening of monetary policy would not be needed.

Data published on Friday suggested the economy had stabilised after a new COVID-19 lockdown hit retailers last month, while businesses and consumers are hopeful a fast vaccination campaign will spur a recovery.

Vlieghe said in a speech published by the BoE that there was a risk of lasting job market weakness hurting wages and prices.

“In such a scenario, I judge more monetary stimulus would be appropriate, and I would favour a negative Bank Rate as the tool to implement the stimulus,” he said.

“The time to implement it would be whenever the data, or the balance of risks around it, suggest that the recovery is falling short of fully eliminating economic slack, which might be later this year or into next year,” he added.

Vlieghe’s comments are similar to those of fellow policymaker Michael Saunders, who said on Thursday negative rates could be the BoE’s best tool in future.

Earlier this month the BoE gave British financial institutions six months to get ready for the possible introduction of negative interest rates, though it stressed that no decision had been taken on whether to implement them.

Investors saw the move as reducing the likelihood of the BoE following other central banks and adopting negative rates.

Some senior BoE policymakers, such as Deputy Governor Dave Ramsden, believe that adding to the central bank’s 875 billion pounds ($1.22 trillion) of government bond purchases remains the best way of boosting the economy if needed.

Vlieghe underscored the scale of the hit to Britain’s economy and said it was clear the country was not experiencing a V-shaped recovery, adding it was more like “something between a swoosh-shaped recovery and a W-shaped recovery.”

“I want to emphasise how far we still have to travel in this recovery,” he said, adding that it was “highly uncertain” how much of the pent-up savings amassed by households during the lockdowns would be spent.

By contrast, last week the BoE’s chief economist, Andy Haldane, likened the economy to a “coiled spring.”

Vlieghe also warned against raising interest rates if the economy appeared to be outperforming expectations.

“It is perfectly possible that we have a short period of pent up demand, after which demand eases back again,” he said.

Higher interest rates were unlikely to be appropriate until 2023 or 2024, he said.

($1 = 0.7146 pounds)

(Reporting by David Milliken; Editing by William Schomberg)

 

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UK economy shows signs of stabilisation after new lockdown hit

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UK economy shows signs of stabilisation after new lockdown hit 3

By William Schomberg and David Milliken

LONDON (Reuters) – Britain’s economy has stabilised after a new COVID-19 lockdown last month hit retailers, and business and consumers are hopeful the vaccination campaign will spur a recovery, data showed on Friday.

The IHS Markit/CIPS flash composite Purchasing Managers’ Index, a survey of businesses, suggested the economy was barely shrinking in the first half of February as companies adjusted to the latest restrictions.

A separate survey of households showed consumers at their most confident since the pandemic began.

Britain’s economy had its biggest slump in 300 years in 2020, when it contracted by 10%, and will shrink by 4% in the first three months of 2021, the Bank of England predicts.

The central bank expects a strong subsequent recovery because of the COVID-19 vaccination programme – though policymaker Gertjan Vlieghe said in a speech on Friday that the BoE could need to cut interest rates below zero later this year if unemployment stayed high.

Prime Minister Boris Johnson is due on Monday to announce the next steps in England’s lockdown but has said any easing of restrictions will be gradual.

Official data for January underscored the impact of the latest lockdown on retailers.

Retail sales volumes slumped by 8.2% from December, a much bigger fall than the 2.5% decrease forecast in a Reuters poll of economists, and the second largest on record.

“The only good thing about the current lockdown is that it’s no way near as bad for the economy as the first one,” Paul Dales, an economist at Capital Economics, said.

The smaller fall in retail sales than last April’s 18% plunge reflected growth in online shopping.

BORROWING SURGE SLOWED IN JANUARY

There was some better news for finance minister Rishi Sunak as he prepares to announce Britain’s next annual budget on March 3.

Though public sector borrowing of 8.8 billion pounds ($12.3 billion) was the first January deficit in a decade, it was much less than the 24.5 billion pounds forecast in a Reuters poll.

That took borrowing since the start of the financial year in April to 270.6 billion pounds, reflecting a surge in spending and tax cuts ordered by Sunak.

The figure does not count losses on government-backed loans which could add 30 billion pounds to the shortfall this year, but the deficit is likely to be smaller than official forecasts, the Institute for Fiscal Studies think tank said.

Sunak is expected to extend a costly wage subsidy programme, at least for the hardest-hit sectors, but he said the time for a reckoning would come.

“It’s right that once our economy begins to recover, we should look to return the public finances to a more sustainable footing and I’ll always be honest with the British people about how we will do this,” he said.

Some economists expect higher taxes sooner rather than later.

“Big tax rises eventually will have to be announced, with 2022 likely to be the worst year, so that they will be far from voters’ minds by the time of the next general election in May 2024,” Samuel Tombs, at Pantheon Macroeconomics, said.

Public debt rose to 2.115 trillion pounds, or 97.9% of gross domestic product – a percentage not seen since the early 1960s.

The PMI survey and a separate measure of manufacturing from the Confederation of British Industry, showing factory orders suffering the smallest hit in a year, gave Sunak some cause for optimism.

IHS Markit’s chief business economist, Chris Williamson, said the improvement in business expectations suggested the economy was “poised for recovery.”

However the PMI survey showed factory output in February grew at its slowest rate in nine months. Many firms reported extra costs and disruption to supply chains from new post-Brexit barriers to trade with the European Union since Jan. 1.

Vlieghe warned against over-interpreting any early signs of growth. “It is perfectly possible that we have a short period of pent up demand, after which demand eases back again,” he said.

“We are experiencing something between a swoosh-shaped recovery and a W-shaped recovery. We are clearly not experiencing a V-shaped recovery.”

($1 = 0.7160 pounds)

(Editing by Angus MacSwan and Timothy Heritage)

 

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