Bridging the Financial Gap: How Innovation is Driving Inclusion

In recent years, fintech has emerged as one of the most heavily invested sectors in the Philippines, accounting for 22% of all deals in the country in 2023. Despite concerns about market saturation, the first half of 2024 has shown a large influx of fintech investments. This continued interest in the sector includes larger investments in late-stage companies such as Home Credit, AsiaLink, and Uno Digital Bank. Although fintech has been heavily funded, interest in the sector has continued to grow. 

Despite the rise of the middle class and the resilience of the Philippine economy in recent years, a significant portion of the population remains underserved, particularly in terms of financial well-being. The banking penetration rate remains low at 56%. Additionally, only 60% of adults with mobile phones and internet access have conducted a digital financial transaction, despite the internet penetration rate being 74.2% at the end of 2023. At Foxmont, we have witnessed that the Philippines’ digitally savvy population, coupled with the heightened focus on inclusive finance, has propelled startups to address major gaps in the financial well-being of Filipinos.

Remittances An average of USD 36.1 Billion in remittances flows into the PH yearly  Traditional banks have not incorporated remittance income into their lending decisions Remittances are big in rural areas, where access to bank accounts, credit histories, and collateral is less common  Typically, there are a lot of fees associated with remittances. On top of that, senders are usually given a minimum sending amount, forcing them to send money less frequently.	Early Wage Access The unbanked and underbanked have difficulty obtaining loans from formal financial institutions 57% of outstanding loans are from informal sources in the Philippines are from informal sources. Many Filipinos live paycheck to paycheck, necessitating access to their salaries on an as-needed basis  EWA startups make earned salaries accessible beyond the customer’s regular pay cycle,  protecting them from late fees that they may encounter while they are waiting for their next paycheck	Microinsurance 58.4% of the Philippine population belongs to low-income households The Philippines continues to have a low insurance penetration rate compared to regional neighbors like Malaysia, Vietnam, and Thailand  Financial shock in low-income households is common due to natural disasters, fires, accidents, sickness, and death  Many Filipinos are hesitant to buy insurance because it is perceived as unaffordable, complicated, and inefficient, leading to the mistaken belief that it is an unnecessary cost.

Startup Spotlight

RuralNet is an InsurTech company with a mission of serving and educating the unbanked Filipino population. RuralNet partners with provincial financial institutions to make insurance more accessible and affordable to Filipinos through sachet-sized prices, and inclusions tailored to the customer’s specific needs.  

TANGGapp has digitized remittances through their remittance transfer app. They cater to Overseas Filipino Workers (OFWs) with a goal of creating a convenient and efficient platform for sending remittances back to the Philippines. TANGGapp focuses on micro remittances, allowing their customers to send remittances as low as 5 USD. This gives senders more control over the amount they send and when they are sending money. 

Advance is a salary on-demand provider, the first of its kind in the Philippines. Advance helps businesses improve the financial wellness of their employees. They are able to offer advances to eligible employees without subjecting them to long tenors or having high minimum loan amounts. 

The growing interest in fintech underscores the necessity of bridging the gap for the underbanked and unbanked. We have continued to see the transformative power of digitization in promoting financial wellness, making it more accessible, affordable, and efficient. 

Sources: Bangko Sentral ng Pilipinas (BSP),  Philippine Institute of Development Studies (PIDS), Government websites, Foxmont analysis