The World Bank has granted approval for a $600-million loan aimed at bolstering the Philippines’ digital technology reforms and the adoption of digital processes within government operations and services.
According to a statement released on September 30th (Washington time), the World Bank’s Board of Executive Directors has given the green light for the Philippines’ first Digital Transformation Development Policy Loan (DPL). This loan is designed to facilitate the digital transformation of government functions and digital infrastructure policies. It also seeks to expand financial inclusion through digital finance initiatives and stimulate the growth of digital services.
As of the end of 2022, data from the Bangko Sentral ng Pilipinas (BSP) reveals that around 42.1 percent of payment transactions have shifted to e-payment methods, up from 30.3 percent in 2021. The BSP’s Digital Payments Transformation Roadmap aims to achieve 50 percent digitization of payments by volume by the end of 2023.
Despite these advancements, a significant portion of over-the-counter payments in grocery stores (95 percent) and government service payments (97 percent) still rely on cash. Furthermore, approximately 88 percent of payments for government fees and penalties, including traffic violations, are conducted in cash. This overreliance on cash transactions results in added costs, including handling expenses and indirect costs related to issues like fraud, corruption, service delays, and increased business overheads. *
The World Bank’s loan will support the digitalization of government operations and service delivery, encourage competition within digital infrastructure markets, and promote the adoption of digital payments and financial services. It also aims to facilitate reforms in the field of e-commerce. The overarching goal is to improve competition, expand broadband services, and enhance accessibility to digital financial services, especially for underserved and unbanked populations, including women.
The funding is expected to drive growth in digital services and e-commerce while fostering competition within digital services markets. Additionally, it is anticipated that digitalization will enhance productivity and preparedness for future crises by reducing operational costs for businesses and facilitating swift responses during disasters.
In addition, the transition to a cashless economy is expected to bring several advantages, including improved responses to climate-related and natural disasters. Digital transactions can facilitate the prompt delivery of government assistance and insurance payouts, aiding in post-disaster recovery and rebuilding efforts.