"Assessing the Impact of RA No.

11055 Challenges on the BSP's NSFI Program

and Microfinance Landscape in the Philippines”

Submitted by:

Sheena Paula A.Barbosa

Submitted to:

Carmencita Briones

PLM Business School, Department of Entrepreneurship

Pamantasan ng Lungsod ng Maynila (PLM).

Gen.Luna Corner Muralla St. Intramuros Manila, Philippines 1002.

January 13, 2024

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Abstract:

This research commentary explores the complex nature of the challenges involved in

fully implementing Republic Act No. 11055 (RA No. 11055) and the possible

consequences for the Bangko Sentral ng Pilipinas' (BSP) National Strategy for Financial

Inclusion (NSFI) Program for 2028. The investigation includes the researcher's

viewpoint about the influence of these obstacles on the NSFI Program, notably

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emphasizing Key Performance Indicator #1. This indicator attempts to increase the

proportion of people possessing transaction accounts. The researcher evaluates

whether the impact of these challenges is unfavorable, positive, or neutral. Moreover,

the study investigates the subsequent ramifications of these difficulties and their
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influence on the microfinance sector in the Philippines. This analysis seeks to provide

significant insights into the intricate relationship between challenges in implementing

legislation, objectives of financial inclusion, and the dynamics of the microfinance sector

in the context of the Philippines.

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Keywords:

Republic Act No. 11055, National Strategy for Financial Inclusion, Bangko Sentral ng
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Pilipinas, Financial Inclusion, Key Performance Indicator, Microfinance Industry,

Implementation Challenges, Philippines, Legislative Impact, Crossroads Analysis,

Economic Inclusion, Philippine Banking Sector.

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I. Introduction

The Philippines has experienced notable advancements in its efforts to promote

financial inclusion, characterized by implementing Republic Act No. 11055 and creating

the BSP's National Strategy for Financial Inclusion Program. RA No. 11055, enacted in

2018, seeks to develop a comprehensive national identity system, while the NSFI

Program sets an objective for enhanced financial inclusivity by 2028. This study focuses

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on the obstacles hindering the complete execution of RA No. 11055 and assesses its

potential repercussions on the BSP's NSFI Program and the microfinance sector in the

Philippines. With this investigation, researchers aim to understand the numerous factors

that influence financial inclusion in the nation while offering valuable perspectives to
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ongoing discussions over how it will evolve.

II. Overview of Republic Act No. 11055 and NSFI Program

a. A Brief Overview of Republic Act No. 11055:

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Former president Rodrigo Roa Duterte signed Republic Act No. 11055,

commonly referred to as the Philippine Identification System Act, into law on August 6,
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2018. The primary purpose of this act is to create a cohesive and comprehensive

national identity system. The system aims to provide legitimate identity verification for

Filipino nationals and resident immigrants in the Philippines. The objective is to optimize

and improve government services, foster effectiveness, and bolster national security by

ensuring precise identification.

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b. Summary of BSP's NSFI Program for 2028:

The National Strategy for Financial Inclusion program for 2028 is an extensive

initiative undertaken by the Bangko Sentral ng Pilipinas to promote financial inclusion

throughout the nation. The program emphasizes crucial objectives and defines precise

Key Performance Indicators to evaluate effectiveness. The NSFI program seeks to

enable individuals, especially those who are unbanked or underbanked, to have equal

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access to financial services and actively engage in the formal financial system.

III. Challenges in RA No. 11055 Implementation

Implementing Republic Act No. 11055 (RA No. 11055) encounters numerous
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logistical and technical challenges. The logistical challenges arise from the setup of

registration facilities, the delivery of identification cards, and the need for coordination

among government bodies. The effective acquisition, authentication, and retention of

personal data may need to be improved. From a technical point of view, developing and
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sustaining a secure system that can effectively handle an extensive database is

naturally challenging for our government. It requires constant investments in technology,

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cybersecurity, and system interoperability.

Nevertheless, these issues are heightened by financial constraints within the

government. According to GMA News, the Philippine Identification System has a budget

of about 30 billion pesos in 2020. However, it is stated in the article of NewsTV 5 that

the manufacturing of National IDs was delayed because there was a scarcity of printing

machinery. Budget constraints prevent the prompt development of crucial infrastructure,

impeding the timely provision of services and could compromise the effectiveness of the
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implementation. The logistical challenges that are already complex could get even more

complicated if there are delays in obtaining the required technology and equipment and

not enough resources.

Financial limitations may also jeopardize the integrity and security of the system.

Limited financial resources limit the government's ability to invest in advanced

technology and robust cybersecurity procedures, thus compromising the system's

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overall security.

In addition, the absence of essential resources, such as ID cards and biometric

capture devices, due to procurement challenges or unforeseen circumstances presents

further hardship. The need for more resources inhibits the effective implementation of
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the procedure, resulting in delays in the issuance of identification, as stated in the article

of Inquirer.net (Ramos, 2023). As reported, Filipinos are facing an extended waiting

period to receive their plastic IDs this year. The delay is attributed to the private supplier

of the Bangko Sentral ng Pilipinas failing to meet the ID production schedule. The
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sudden surge in the number of people registering for the National ID is the primary

cause of this setback. This delay in issuing National IDs has the potential to hinder
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individuals from promptly acquiring a valid identification. Instead of using their national

ID for bank registrations, people might face prolonged delays as the distribution of IDs

has not been completed.

The challenges transcend beyond logistical and technical issues to encompass

regulatory requirements, specifically the Banks and Sim Registration Act, which

mandates providing a valid identification card throughout the registration procedure.

This is a significant problem for those who need valid identification, limiting their
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capacity to set up bank accounts and activate SIM cards. The rigorous identification

requirements implemented by financial institutions and telecommunication businesses,

as emphasized in multiple news pieces and Arvin Razon's research, result in the

marginalization of vulnerable individuals from developed banking systems.

Wide-ranging effects result from this exclusion, which exacerbates already-existing

social injustices. Vulnerable populations are deprived of resources for economic

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engagement due to restricted mobile communication and lack of access to banking

services. Therefore, people with limited opportunities encounter challenges in acquiring

fundamental banking services, limiting their capacity to accumulate savings, obtain

credit, and actively engage in economic activities. This limitation worsens the financial
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gap and constrains the economic mobility of vulnerable groups.

IV. Possible solutions suggested by the researcher

The difficulties encountered in carrying out Republic Act No. 11055 (RA No.
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11055) emphasize the importance of proactive measures to guarantee the achievement

of the Philippine Identification System. In order to overcome the financial limits, it is

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necessary to reallocate funds and establish a transparent budgetary structure

strategically. The government should allocate resources to prioritize investments in

essential technology, printing machines, and infrastructure to optimize the identification

process. Engaging in partnerships with private sector entities might offer opportunities

for securing extra financial resources and specialized knowledge.

Furthermore, to address logistical difficulties, the government must establish

effective coordination procedures among the many organizations responsible for

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implementation. This entails enhancing communication channels and establishing a

centralized platform for data sharing to optimize the system's overall effectiveness.

Implementing a sequential strategy for issuing ID cards and establishing registration

centers effectively handles the workload and avoids any delays.

To address the difficulties in acquiring goods and the limited availability of

resources, the government should consider forming alliances with reliable

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manufacturers and allocating resources to develop local production capabilities. By

cultivating a solid procurement ecosystem, the system can effectively address

challenges associated with the accessibility of vital resources.

An advanced approach is necessary to overcome the regulatory obstacles

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presented by the Banks and Sim Registration Act. The government should investigate

alternative options for individuals who need more conventional proof of identity while

ensuring the integrity of the identifying process. This may involve using technology,

such as mobile-based identity systems or biometric authentication, to create accessible

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and inclusive opportunities for citizens to participate.

In order to address the extensive impacts of exclusion, it is essential to focus on

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initiatives that promote financial literacy and engage with the community. These efforts

can provide vulnerable populations with the information and resources they need to

understand and manage the financial system, promoting economic inclusion and ending

the cycle of disadvantage. A comprehensive and collaborative strategy is crucial to

effectively address the complex problems and ensure the success of the Philippine

Identification System.
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V. Effects of these challenges on the microfinance industry in the Philippines

The challenges encountered in enacting Republic Act No. 11055 (RA No. 11055)

and the potential consequences for the BSP's National Strategy for Financial Inclusion

(NSFI) Program may significantly impact the microfinance sector in the Philippines. If

there are continuing challenges with establishing a complete national identification

system and the NSFI Program faces difficulties in meeting essential performance

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targets, specifically in increasing the proportion of adults with transaction accounts, the

microfinance industry could experience adverse effects. Firstly, challenges in

implementing the national identification system may hinder the incorporation of

individuals into the formal financial sector, hence decreasing the client base for
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microfinance firms. Therefore, this hinders the industry's capacity to access

economically marginalized communities. Furthermore, suppose the NSFI Program fails

to meet its financial inclusion goals. In that case, the microfinance sector can achieve its

aim of offering readily available financial services to individuals who are not part of the
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traditional banking system or have limited access to it. Microfinance institutions might

encounter sustainability issues due to their dependence on favorable regulatory

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frameworks and expanding customer networks for their performance. On the bright side,

if the identification system is put into place correctly and the NSFI Program goals are

met, it could open up possibilities for the microfinance industry by growing its market

and letting it make strategic changes and progress. In the end, the future of the

microfinance sector depends on successfully addressing obstacles and achieving the

objectives outlined in RA No. 11055 and the NSFI Program.

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VI. Opinion about the challenges facing the full implementation of RA no. 11055

The NSFI Program of the BSP will be negatively affected by the difficulties

encountered in fully implementing Republic Act No. 11055. The logistical constraints,

potential privacy concerns, and technical complications represent substantial challenges

in attaining the NSFI Program's objectives. In particular, KPI 1, which aims to raise the

number of people with transaction accounts, could be slowed down by the delays and

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inefficiencies caused by the problems with putting RA No. 11055 into action.

The potential challenges associated with establishing a comprehensive

nationwide identification system could cause disruptions in integrating individuals into

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the formal financial sector. Restrictions on identity card and registration facilities can

make it more difficult for people to make it into the banking system, which will directly

impact meeting the KPI of the NSFI Program.

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Due to the dynamic nature of the issues and the evolving implementation

process, it is not easy to estimate an exact percentage that the BSP can reach in KPI 1.
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However, the negative impact on financial inclusion programs may mean that the goal

percentage is not reached as quickly as it could be if things went better during

execution. The situation is still complicated and changing, but continuous efforts to deal

with these problems, proactive steps, and strategic adjustments to how things are being

implemented could improve things.

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VII. Conclusion

To summarize, the difficulties in executing Republic Act No. 11055, which seeks

to establish a national identity system in the Philippines, have significant consequences

for the BSP's National Strategy for Financial Inclusion Program and the microfinance

sector. The obstacles, which include challenges related to public acceptance, potential

privacy issues, and technical intricacies, provide a significant barrier to the seamless

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integration of persons into the official financial sector. As a result, this is expected to

hinder the NSFI Program's objectives, including the attainment of KPIs like the

proportion of people with transaction accounts.

The adverse consequences also affect the microfinance sector, which is crucial in
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catering to the financially excluded and marginalized populations. Delays hinder the

operational efficiency of microfinance and could be improved by deploying the national

identification system, which affects their ability to onboard clients and offer crucial

financial services. The populations without access to banking services and those with
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limited access, primarily dependent on efforts such as RA No. 11055 to achieve

financial inclusion, are experiencing protracted exclusion due to potential obstacles in

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implementing the identification system.

Microfinance institutions need help with problems such as lengthy client

onboarding processes and potential misidentification hazards. However, they also have

the potential for innovation, diversification, and collaboration. Taking proactive initiatives,

such as advocating for faster adoption of the identification system, can assist in

reducing difficulties and opening up new opportunities for servicing vulnerable

communities.
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It is crucial to tackle the difficulties in implementing RA No. 11055 to effectively

align the NSFI Program and the microfinance business with their primary objectives of

promoting financial inclusion in the Philippines. To overcome these obstacles, adopting

a cooperative strategy, employing inventive remedies, and demonstrating a dedication

to establishing public confidence in identification systems is necessary. This will

ultimately facilitate the development of a more comprehensive and robust financial

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environment inside the nation.

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VIII. Sources

NATIONAL ID | Inadequate machines delay printing of national ID – PSA. News 5.

(n.d.).

https://news.tv5.com.ph/breaking/read/national-id-inadequate-machines-delay-prin

ting-of-national-id-distribution-psa

Official Gazette of the Republic of the Philippines. (n.d.-a).

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https://www.officialgazette.gov.ph/2018/08/06/republic-act-no-11055/

Philippine Identification System. (n.d.). https://philsys.gov.ph/

BORamos, M. (2023, September 26). 41 million Filipinos may have to wait until 2024

to get national ID cards. INQUIRER.net.

https://newsinfo.inquirer.net/1836567/41-million-filipinos-may-have-to-wait-until-20

24-to-get-national-id-cards
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TED CORDERO, G. N. (2020, October 9). Gov’t sets p27.8b budget for National

ID System. GMA News Online.

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https://www.gmanetwork.com/news/topstories/nation/759183/gov-t-sets-p27-8b-bu

dget-for-national-id-system/story/

Towards financial inclusion through digital s e i ‘N C P M. (n.d.-b).

https://scholarlycommons.law.case.edu/cgi/viewcontent.cgi?article=1122&context=

jolti
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IX. Appendix

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