Financial education needs an additional push to help more Filipinos be prepared and literate financially.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the results of the World Bank’s 2015 financial literacy survey and the Central Bank’s 2019 financial inclusion survey showed “about half of Filipino adults were unable to correctly answer questions that test their knowledge on the impact of inflation on their purchasing power.”
Both surveys showed “two-thirds of Filipino adults were also unable to answer questions on simple and compound interest rates,” Diokno said. “The concept of compound interest must be fully appreciated in order for consumers to use credit responsibly and pay the loans in full and on time.”
Simple interest is calculated based on the principal amount of a loan while compound interest is calculated using the principal amount of the loan and the interest that has accumulated from the previous period.