Local banks used to dangle high interest rates on their savings deposit to entice more clients. Government in the past also rolled out information campaigns to highlight the importance of saving and convince the public to open a savings account.
But most of today’s banks favor more lucrative high-return products like car financing and home loan rather than luring the public to save.
Currently, banks give an average of 0.10%-interest on a savings deposit, which hardly incentivizes those who keep their money at home to finally park their cash in the bank.
The interest rate for savings deposit has dropped in the last 10 years from a peak of 2%. In 2015, the interest rate for every 1,000 savings deposit was at 0.13%.
From being serious savers back in the 1960s with a 20% savings rate, Filipinos pivoted to becoming spenders that resulted in a 12-15% national savings rate, falling behind many East Asian economies that are averaging at a 25-30% rate.
Our savings rate is way below Singapore’s 53.2%, Thailand’s 35.4%, Indonesia’s 33.2%, Malaysia’s 32.7%, Myanmar’s 31.8%, Vietnam’s 25.7%, Brunei’s 19.9%, and Cambodia’s 17.3% based on data from Asian Development Bank.
‘A culture of saving should be revived, targeting the younger set of Filipinos who are hooked on online shopping.’
The national savings rate measures the income that households, businesses, and governments save and also an indicator of a country’s financial health, which can be a source of funding for public works and infrastructure projects.
Even savings for retirement is a least priority for Filipinos who save around 3.6 months’ worth of their income while their counterparts in Asia save 2.9 years’ worth of income for their retirement.
Experts assert that a low savings rate contributes to slower economic growth and puts pressure on government to resort to more borrowings.
A report of the Bangko Sentral ng Pilipinas (BSP) showed that a significant number of bank account holders or about 78% of them use their accounts for payment-related transactions, higher than those who use their accounts for savings (56%).
This explains why despite the surge in the number of bank account holders to 31% in 2021 from 21% in 2019, our savings rate remains low.
Filipinos use the banking system not to save but as a tool to access an ATM or pay the monthly amortization of their home or car loans.
The BSP report also revealed that there are more bank savers from poverty-stricken Mindanao than in Luzon and the Visayas. It further noted that the percentage of households with loans increased while those with savings decreased in Q2 2023.
One could argue that saving is a function of wealth and that poverty is causing Filipinos to shy away from banks. But if income is a barrier, why is it that the biggest bank savers are lurking in Mindanao, where most of the poorest provinces are located?
Myanmar and Cambodia have more savers than the Philippines when these are not exactly faring well economically.
Sri Lanka, a tiny island nation off the Indian Ocean, is listed as among the top savers with 30.8% while the wealthy US could only boast of a savings rate of 4.8%, according to World Population Review in 2024.
A culture of saving should be revived, targeting the younger set of Filipinos who are hooked on online shopping.
Banks, which are awash with cash, should be mandated or incentivized to offer higher interest rates for savings deposit to induce more Filipinos to see a banker.
American billionaire Warren Buffet aptly captured the primacy of saving when he said: “Do not save what is left after spending but spend what is left after saving.”
