Running Low: Understanding The Role of Culture in The Dismal Savings Rate of Filipinos
One key measure of a country’s development is savings rate as this is a major source of productive investments in the future. Sadly, the Philippines lags behind in this front, especially if compared to its Southeast Asian peers. In 2005, the Philippines’ gross domestic savings, as a percentage of gross domestic product , was 15.9%, compared to Indonesia’s 27.5%, Thailand’s 29.5%, Malaysia’s 44.3% and Singapore’s 49.4%. The Philippine economy has boomed for the past decade with a thriving business process outsourcing industry and increased dollar remittances of Overseas Filipino Workers. However, the Philippines’ savings rate surprisingly dipped further. Much of the current literature emphasizes on a highly economic approach to boost savings – just increase income levels and roll-out financial literacy campaigns. Conversely, this paper argues that more than the level of income and financial literacy, cultural ideologies such as “Bahala na” (leave it to God) play a primordial role on Filipinos’ dismally low savings rate. This research proposes that economic interventions can only be effective if it makes cultural reorientation an integral component. In conclusion, this paper sheds light on the rarely acknowledged influence of culture on a developing country’s savings behavior.
Index Terms - Culture, Financial Literacy, Public Administration, Savings Rate