As the third-largest economy in Southeast Asia, the Philippines is emerging as a promising investment hub in the region. With its agriculture-based economy transitioning to one based on service and manufacturing, the Philippines has ample leverage points for digital technologies such as blockchain.
In a report commissioned by Asia-based philanthropy the Hinrich Foundation with the support of Google, the Philippines’ digital economy is projected to have a market value of US$36.5 billion in a decade (i.e. by 2030).
Nonetheless, the development of the digital economy, as well as blockchain, depends upon there being adequate support for information and communications technology (ICT) infrastructure. It is therefore imperative that the Philippines enhances its internet connectivity, which continues to lag behind regional peers.
Since 2017, the Department of Information and Communications Technology (DICT) has been tasked with implementing the National Broadband Plan (NBP) to enhance the availability, affordability, and quality of broadband internet access for citizens by improving the nation’s ICT infrastructure. The successful implementation of the NBP is critical to supporting the growth of the Philippines’ digital economy, and in turn, the development of blockchain use cases in the country.
For the Philippines’ digital economy to achieve the growth projections laid out in the Hinrich Foundation report, the country must improve access to financial services — it must ‘bank the unbanked’. A report released in 2017 by the Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, revealed that only 22.6% of adult Filipinos have bank accounts, of which only 11.5% are in the formal banking sector.
In a country where 55% of the population lives in rural areas, the key to banking the unbanked in the Philippines lies in connecting the 400 regulated rural banks in the country to its central financial network.
Realizing the potential of blockchain to promote financial inclusion in the Philippines, the BSP had in May 2018 endorsed the UnionBank’s Project i2i — “Island-to-Island, Institution-to-Institution, Individual-to-Individual” — to use ConsenSys’ Kaleido blockchain platform to connect rural banks with the country’s main financial network.
Once the rural banks in the Philippines have been linked to its central financial network, the next step would be to accommodate the use of cryptocurrencies as part of the network to support the country’s substantial remittance industry.
International remittances play a major role in supporting the Philippines’ economy. The Philippines is the third-highest country in the world by remittance inflows, with a staggering US$33 billion sent in 2017 by over 10 million Filipinos overseas workers. That year, remittances contributed 10.5% to the country’s gross domestic product (GDP). With more than 50 registered crypto exchanges in the Philippines, cryptocurrency is a natural fit in terms of facilitating borderless transactions.
Acknowledging the situation, Western Union had in April this year announced its collaboration with major local cryptocurrency exchange Coins.ph to enable payments made through Western Union’s network to be deposited directly into Coins.ph wallets.
More recently, in September this year, mobile crypto wallet service provider Abra announced that its fiat-crypto conversion facilities will be made available at more than 6,000 retail outlets throughout the Philippines, including all 7-Eleven convenience stores nationwide, making it even more convenient for Filipinos to use cryptocurrencies for remittance purposes.
With more than 30% of local organizations in the Philippines projected to be digitally determined by 2020, the country’s digital transformation is right on track. If the Philippines can effectively leverage blockchain to promote financial inclusion and the development of its remittance industry, it may soon give regional peers Indonesia and Thailand — the first- and second-largest economies in SEA, respectively — a run for their money.
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