THE Philippine government is seeking a $600-million loan from the World Bank (WB) to support reforms that would help achieve a “resilient, inclusive and sustainable financial sector.”
The World Bank board is expected to approve the Philippines’ second financial development policy financing at its Dec. 20 meeting.
Documents from the World Bank website showed the loan aims to boost the Philippine government’s efforts to strengthen the resilience of the financial sector, expand financial inclusion for individuals and firms, and to support climate, disaster risk and sustainable finance.
“This operation builds on the reform agenda initiated under the first financial sector development policy loan and focuses on the continuity of reform implementation that spans the recent political transition,” the multilateral lender said.
In 2021, the World Bank approved a $400-million loan to help the Philippine financial sector’s recovery from the COVID-19 pandemic.
Among the programs supported by the second loan are the expansion of the Philippine Deposit Insurance Corp.’s deposit insurance coverage; strengthening the prudential supervision of banks and conglomerates, as well as the Bangko Sentral ng Pilipinas’ (BSP) capacity to address banking risks at an early stage.
The loan also supports the expansion of digital financial services through digital banks, developing a financial consumer protection program, and boosting the credit reporting ecosystem.
Reforms will also include the establishment of the Catastrophe Risk Insurance Facility, adoption of BSP requirements on climate risk management, among others.
“Supporting an inclusive economic recovery and addressing climate change risks through promoting a green economy became a priority for the Philippines. The proposed operation will enable the financial sector to play an effective role to achieve this goal,” the World Bank said.
The Department of Finance will be the program’s main implementing agency.
Development policy loans typically support policy and institutional changes needed to create an environment conducive to sustained and equitable growth as defined by borrower-countries’ own development agenda, according to the World Bank.
As of March, the World Bank was the Philippines’ third-largest source of official development assistance, with loans and grants representing 23.38% of the total.
The World Bank is currently supporting 15 ongoing programs and projects worth $4.96 billion, in areas like transport, rural development, disaster risk reduction and management, social protection, Customs modernization, and COVID-19 response. — L.M.J.C. Jocson