THE Philippines secured a new Development Policy Loan (DPL) from the Washington-based World Bank Group to finance the government’s efforts to increase digitalization and help transform the country into a cashless society.
In a statement, the World Bank said its Board of Executive Directors approved US$600 million for the Philippines’ First Digital Transformation DPL.
The DPL aims to promote the digital transformation of government and digital infrastructure policies, expand financial inclusion through digital finance, and stimulate the growth of digital services.
“Greater adoption of digital technology can improve the efficiency and transparency of government services, empowering individuals who were previously far away from decision-making centers,” said Ndiamé Diop, World Bank Country Director for Brunei, Malaysia, the Philippines, and Thailand.
“Digitalization can also drive productivity growth, by reducing operating costs for firms and enhancing their resilience and preparedness for future crises,” he added.
The loan will help the government digitize government operations and service delivery, foster competition in the digital infrastructure markets, and encourage the adoption of digital payments and financial services.
It will also facilitate reforms to promote e-commerce, enhance competition and value-added activities in digital services markets, and strengthen skills development in the industry.
Widespread adoption of digital payments in the Philippines is essential for the development of a digital economy, benefiting millions of citizens and small businesses.
Currently, cash is the dominant form of payment for over-the-counter purchases in grocery stores at 95 percent; government service payments such as driver’s licenses or birth certificate issuance, 97 percent; and government fees and penalties like traffic violation tickets, 88 percent.
“Transitioning to a cashless economy would provide various benefits, especially during climate-related and natural disasters, enabling the government and the private sector to respond swiftly and efficiently,” said Smita Kuriakose, Lead Economist in the World Bank’s Finance, Competitiveness, and Innovation Global Practice.
“With digital transactions, affected individuals can receive government assistance or insurance payouts promptly, facilitating their recovery and rebuilding efforts,” she said.
To help address these concerns, this operation will support reforms that aim to enhance competition and invest in broadband services to reduce the cost and improve the quality of services and increase access.
To extend financial inclusion more widely among individuals and businesses, this DPL will support reforms that promote broader acceptance of digital payments, strengthen trust in digital financial services, and enhance competition in digital financial infrastructure.
Internet use in the Philippines has experienced rapid growth in recent years. However, the country has not fully capitalized on the advantages of digital technology, and the high cost of Internet access poses challenges for small businesses in utilizing digital technology and expanding their operations.
As a result, only a small percentage of small businesses have been able to fully embrace digitalization. Approximately one in three adults still doesn’t have a transaction account with a financial institution.
Globally, economies that rely heavily on cash payments can incur costs of up to 0.1 percent of general government revenues for handling cash.
Additionally, there are indirect costs associated with cash transactions, including a higher risk of fraud and corruption, delays in delivering frontline services, and increased business expenses.