REACTION PAPER ABOUT FINANCIAL SYSTEM OF THE PHILIPPINES

INTRODUCTION
Financial System is a set of institutions, such as banks, insurance companies,and stock
exchanges that permit the exchange of funds. Financial systems exist onfirm, regional, and global
levels. Borrowers, lenders, and investors exchange currentfunds to finance projects, either for
consumption or productive investments, and topursue a return on their financial assets. The
financial system also includes sets of rulesand practices that borrowers and lenders use to decide
which projects get financed who finances projects, and terms of financial deals. There will always
be those who have surplus resources and others will have deficit. Financial System is crucial
to the allocation of these resources.

Financial System plays the key role in the economy by stimulatingeconomic growth,
influencing economic performance of the actors, affecting economicwelfare. This is achieved by
financial infrastructure, in which entities with funds allocatethose funds to those who have
potentially more productive ways to invest those funds. Afinancial system makes it possible a more
efficient transfer of funds. As one party of thetransaction may possess superior information than the
other party, it can lead to theinformation asymmetry problem and inefficient allocations of
financial resources. Byovercoming the information asymmetry problem the financial system
facilitates balancebetween those with funds to invest and those needing funds.
In the Philippines the financial system is a set of arrangements / conventions embracing
the lending and borrowing of funds bynon-financial economic units and the intermediation of
this function by financial intermediaries in order to facilitate the transfer of funds, to create
additional money when required, and to create markets in debt and equity instruments (and
their derivatives) so that the price and allocation of funds are determined efficiently.
BODY
A financial system consists of a series of global, regional, or firm-specific
institutions and practices used to facilitate the exchange of funds. It can be structured based
on market values, central planning, or the combination of both (Chappelow, 2020). Through
finance, we can solve the problem from the economy which is to find out how to get money
from people who want to invest and from people who want to borrow. Almost all economic
transactions are conducted byone or more of these financial institutions. From an economic
point of view, the financial system is responsible for a significant part of the distribution of
capital worldwide. It decides which investments are to be financed and which do not. This
makes it very necessary and strong (What is the Financial System, 2017). The financial
system receives money from people who keep it idle and distributes it among those who use
it to earn income and produce wealth in the country. It aims at the effective distribution of
financial capital by channelling funds between net savers and net spenders. The financial
sector has an important role to play in managing risk by the diversification of funds across a
vast number of individuals (Nature and Role of Financial System, 2020). Considering the
economy as a body, whereas the heart is finance. According to Manilyn Dr. Nataba, the
financial system is like the heart of human beings, if it stops working, then the individual is
dead in the same way that if the financial system stops working, the economy will collapse.
For example, something happened with financial markets like crashing without any reason,
and the economy feels like a heart attack. If the money stops flowing through the economy,
anything that relies on that money is in trouble.
The financial system in the Philippines is primarily bank-based rather than capital-
based. The banking sector, whose total assets accounted for more than 80 % of the total
financial system and GDP resources in 2010, plays a primary role in financial intermediation
and is the main source of credit in the economy. Is the provision of financial services to low-
income clients, including consumers and self-employed individuals, who traditionally lack
access to banking and related services. More generally, it is a movement whose object is a
world in which as many poor and near-poor households as possible have permanent access
to an appropriate range of high-quality financial services, including not only credit but also
savings, insurance, and fund transfers. Those who support microfinance generally believe
that such access will help poor people out of poverty. An institution that accepts deposits,
makes business loans and provides related services. Commercial banks also provide for a
variety of deposit accounts, such as checks, savings, and time deposits. These institutions
are run for profit and are owned by a group of individuals, some of whom may be members
of the Federal Reserve System (Structure of the Philippine Financial System, 2015). The
Financial System in the Philippines is made of banking institutions and non-
bank financial intermediaries, including commercial banks, specialized
government financial institutions, thrift banks, and rural banks.The Bangko Sentral ng
Pilipinas (BSP) is the Central bank of the Republic of the Philippines.
CONLCLUSION
Thus, properly functioning financial system helps generate more employment
opportunities within the economy. The financial system helps provide funds to the
growing business houses and industries, which results in an increase in production
  To attain economic development, financial systems are important since they induce
people to save by offering attractive interest rates. These savings are then channelized by
lending to various business concerns which are involved in production and distribution. It
helps in monitor corporate performance. It links savers and investors. This process is known
as capital formation. It helps in lowering the transaction cost and increase returns which will
motivate people to save more.It helps the government in deciding monetary policy
Understanding the financial system is important for both business and individual
finances. Financial institutions and markets play a significant role in how money flows
through the economy. People with extra funds can deposit money while those in need of
funds can borrow money. Businesses and individuals in need of funds can utilize financial
institutions to deposit or borrow money from, with low risk involved. Investing can also be
done through securities such as stocks and bonds which allow for long term investment. The
primary and secondary markets allow for companies to create funds through investors, and
allow for investors to build funds for themselves as well by selling the securities originally
purchased. Another area of importance in the financial system is understanding capital and
money markets. Both provide investment opportunities, but through different methods.
Understanding these concepts can help individuals and businesses make the decisions that
will help them to be successful with their Finances.
Lists of citations and resources
 https://www.estartindia.com/knowledge-hub/blog/meaning-of-financial-system
 https://accountlearning.com/role-of-financial-system-in-economic-
development-of-a-country/
 https://www.coursehero.com/file/68416364/Philippine-Financial-systemdocx/
 https://www.google.com/search?client=ms-opera-
mobile&channel=new&espv=1&sxsrf=ALeKk00KQ7dOBIr3U3aMSogEisCqnY7x
tQ:1623290182666&q=Conclusion+of+financial+system&sa=X&ved=2ahUKEwi
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 https://www.google.com/search?client=ms-opera-
mobile&channel=new&espv=1&sxsrf=ALeKk00KQ7dOBIr3U3aMSogEisCqnY7x
tQ:1623290182666&q=Conclusion+of+financial+system&sa=X&ved=2ahUKEwi
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 https://www.google.com/search?client=ms-opera-
mobile&channel=new&espv=1&sxsrf=ALeKk00KQ7dOBIr3U3aMSogEisCqnY7x
tQ:1623290182666&q=Conclusion+of+financial+system&sa=X&ved=2ahUKEwi
ex9GV-
4vxAhWpwosBHY89CW0Q1QIwD3oECA4QAQ&biw=360&bih=687&dpr=2