CENTRAL BANKING FOR SOCIO-ECONOMIC

DEVELOPMENT
FIN 102 – Monetary Policy and Central Banking
PREPARED BY: Susan T. Casulla, MBA
Learning Objectives:

At the end of the lesson, the learners are expected to:

1. Understand how central banks help in socio-economic
development.
2. Explain the concept of “two different worlds”.
3. Determine what jobs the central bank does.
Activity

It is a premier financial institution that supervises the

banking institutions and regulates the non-bank financial
institutions. It is a central monetary authority.

C N A L

A K
Activity

It is a premier financial institution that supervises the

banking institutions and regulates the non-bank financial
institutions. It is a central monetary authority.

C E N T R A L

B A N K
Analysis

1. In our day to day lives, how has policies helped us?

Central Banking for Socio-Economic Development
• Central Bank
• a premier financial institution.
• As central monetary authority, is supervises banking
institutions and regulates non-banking ones.
• It plays a major role in helping the national economy
move towards higher levels of stability, employment,
and growth.
Central Banking for Socio-Economic Development
• Central Bank
• Due to changing and increasing of needs of the economy, a central bank
should tailor is development approaches. Otherwise, its existence has no
relevance.
• A more deep rooted problem is the widespread of social injustice.
• The main thrusts of the new government are rural development and
agricultural development.
• Our own Bangko Sentral should discharge its social responsibility because it is
the right thing to do.
The Right to Development
• Development
• Is a dynamic process which involves the
interaction among various economic, social,
cultural, political, and religious factors.
• Results are factories, houses, cars, crops, schools,
and hospitals.
• Development in poor countries however means a
sustained effort at the elimination of hunger,
disease, ignorance, injustice and inequity.
The Right to Development
• Central purpose of all economic and social development programs is to meet
basic human needs.
• Participants of the 1997 International Conference on Human Needs declared:

"The satisfaction of human needs is indeed the whole purpose of growth, trade and
investments, development assistance, the world food system, population policy,
energy planning, commodity stabilization, ocean management, environment
protection, monetary reform, and arms control."
The Right to Development
• Poor countries cannot even satisfy the most basic needs like
food, clean water, decent shelter, and access to health
services and educational opportunities.
• Every man must have the freedom and opportunity to satisfy
their needs while the society helps him help himself.
• President of Senegral Supreme Court, Keba Mbaye, said:

“The right to development is a human right because man cannot

exist without development.”
Two Different Worlds
• We live in two different worlds.
One for the rich, the other for the
poor. And poverty separates the
2 worlds.
• The concern of the rich is the
betterment of their quality of life.
While the poor are striving for
sheer physical survival.
Two Different Worlds • The Poor
• Two-thirds of mankind exists on
less than 30 cents a day.
• There are about one billion
illiterate people all over the
world.
• 70% of children in the Third World
are suffering from malnutrition.
• 40,000 children die every day
due to malnutrition. Yet the world
has resources to feed them.
Two Different Worlds

• The Rich
• Spend several billions of dollars every year for food supply for their dogs.
• In the arms race, superpowers spend more than $900 billion a year. More
than enough to erase global property.
Two Different Worlds
• Unjust distribution of worlds resources causes these problems.
• Rich countries consume 20 times more of their resources per capita than poor
countries.
• the Third World, millions of people work under the heat 4 of the sun from
morning to dusk in exchange for miserable wages.
• Such condition is unfit for the dignified existence of man. He has become a
beast of burden.
The Promotion of Human Dignity

• Development includes justice and equity.

Development is primarily concerned with
human dignity.
• Without human dignity, man is just like an
animal. Insulted, exploited, maltreated, or
even killed.
• Slaves have no human dignity.
The Promotion of Human Dignity
• The United Nations fully supports the social Philosophy that development
process must promote human dignity. They declare:
1. The aim of development should be the constant improvement of the well-being
of the peoples on the basis of their full participation in the process of
development and a fair distribution of its benefits;
2. Each country has the right and responsibility to choose its means and goals of
development, such as the implementation of progressive economic and social
reforms; and
3. All countries have the duty, individually and collectively, to cooperate in
removing the obstacles that the hinder mobilization and utilization of
resources.
 The Promotion of Human Dignity
• The UNESCO Director-General stated:

“The social reality of development is something much more than material

wellbeing. Human dignity is at least as important a part of it as happiness, and that
dignity is meaningless except in relation to those values which make life worth
living and of which culture is both the custodian and the critic, the repository and
the originator.”
Deprivations of the Rural Poor
• In less developed countries, like the Philippines, majority live and work in rural
areas.
• Agriculture has been the principal source of income.
• Since the resources are unjustly distributed and not productive, rural folks tend
to be poor.
• Aside those, rural people have not experienced adequate health care. Only
quack doctors and faith healers. Even school facilities are limited.
Rural Areas – Roots of Poverty
• Employment opportunities are few and far in rural areas.
• Most are tenants, laborers, or sharecroppers.
• Rural poverty has been deep-rooted in unjust social, economic, and political
structure.
• Such large-scale escape from rural poverty has caused very rapid urbanization.
To have a better life.
• Big cities have been experiencing economic and social problems which are
beyond their control to resolve.
Small farmers – “Boat People” of Agriculture

• In urban societies, the poorest of poor are

called “boat people”
• No land of their own. They live in small boats
and they also use it for their source of
income.
• By any social standard, this situation is devoid
social justice.
Small farmers – “Boat People” of Agriculture
• Thomas Jefferson says that, “real democracy does not exist if there are slaves of
Agriculture.”
• The land reform program under Marcos rule for example has been a failure. It only
benefited the suppliers of agricultural inputs like pesticides, fertilizers, etc.
• Dr. Ernest Feder, agricultural consultant of UN claimed that the program has only
promoted substantial profits of multinational corporations who are supplying
inputs of agriculture.
Small farmers – “Boat People” of Agriculture
• The small farmers who are landless are the poorest of the poor.
• Farm workers weren’t allowed to leave their villages.
• If the daughter of a peasant decided to be the wife of a man outside the land of
his lord, the latter would give his consent only if he received payment.
• In Austria, at the height of feudalism, every bride was required to sleep - as a
matter of cultural tradition with the landlord during the first night of her wedding.
The Miseries of the Urban Poor
• Urbanization is a symbol of economic growth. However, this is only true in
developed economies
• Urbanization in less developed countries is never a sign of economic prosperity.
• Here are some situations of the miserable plight of the urban poor.
• In Cairo, squatters have set up their houses in rich men's tombs.
• The bottom quarter of the urban population in most African and Asian cities cannot
afford even minimal housing.
• People put up their shanties in steep hillsides, river banks or in swamps despite
the threat of landslides and floods.
The Miseries of the Urban Poor
• In Mexico City, 1.5 million people live on the drained bed of a salt lake bedevilled by
dust storms during the dry season and floods during the rainy season.
• In some of the favelas (slums) of Sao Paulo, Brazil- the largest industrial society in
Latin America- infant mortality is over 100 per thousand live births.
• Urban dwellers are rapidly becoming a majority of the population. Most of them
live in the developing countries. Most of the most populated cities in the world are
now in the developing countries.
• Makeshift settlements can be found on the outskirts of almost every city in the
less developed countries. They live in abject conditions: lacking water, sewerage,
and solid waste disposal facilities, electricity, and paved streets.
The Jobs of Central Banking
• As the Central Monetary Authority, the BSP does not only control the volume of
money supply but also the allocation of available credit facilities.
• Through the banking system, BSP channels its loans to various sectors of the
economy. Allocation is based on the priorities set by the government.
• The main focus of economic recovery strategy in on the development agriculture
and the countryside.
The Jobs of Central Banking
• The BSP, through its monetary tools, can mobilize savings. Such information
provides funds for production for goods and services.
• The principal target of the BSP is domestic financial mobilization.
• The BSP extends loans, either from domestic or foreign sources, to the
government for its various socio-economic programs and projects.
Rural Development Programs and Projects
• Rural development is primarily concerned
with optimum utilization of resources
human, economic, social, and physical
based on self-reliance. It is planning from
the bottom.
• It involves the active participation of the
people not only in planning but also in
decision-making and implementation of
their own programs or projects.
Rural Development Programs and Projects
• In the Philippines, many of our major rural development projects have been
funded by rich countries. Examples are roads, bridges, irrigation, etc.
• Our rural development program, aside from those, is basically in a given area
through a systematic manner agricultural development program.
Rural Development Programs and Projects
• Through rural banks, PNB, LBP, and DBP, a large amount of Bangko Sentral funds
has been flowed into rural areas.
• Here are a few agricultural credit facilities of the BSP:
• Masaganang maisan
• Gulayan sa Kalusugan
• Ipil-ipil
• Duck
• Goat
• Biyayang Dagat, etc.
Housing the Urban Poor
• Before, during the Spanish Era, Manila had only
about 2,000 people. With 40 Chinese. Due to
the encouragement of the colonial
administrators, by 1903, Manila had 220,000
residents. Now, about 7 million.
• Such massive influx has been brought by rural
people to change their lives.
• By 2020, it will be about 15 million.
Housing Program of the Government
• Our urban development program, is largely funded by the World Bunk.
• This program under the present government has envisioned a housing program
which is affordable even for the poorest of the poor.
• Here are the concepts and approaches in sheltering the urban poor:
• Housing is seen as a whole process of development, embracing all the needs
important to man, his community and the place he lives in;
• Majority of the housing programs must be for the poor since they have the
largest need for decent shelter and deserve government assistance;
• The residents must actively participate in improvement of their communities;
Housing Program of the Government
• Housing benefits, designs, and costs are planned according to the ability to pay of
residents;
• Investments must be recovered either directly from beneficiaries or indirectly from
other sources to sustain the efforts of the government to provide shelter to the
urban poor;
• Housing is the concern of everybody, thus every sector of society must contribute
to the solution of the housing problem;
• All agencies of the government, both local and national, must participate in the
total housing program; and
• Private resources must be mobilized to satisfy the housing need.
The Social Responsibility of Central Banking
• Main function of Central Banking is the management of money.
• Proper management of it can lead to price stability, more jobs, and better
economic growth.
• In a society where hunger, ignorance, injustice , and etc. are rampant, a central
bank has a greater responsibility.
• A central bank, therefore, must not only pursue price stability and economic
growth if these do not touch the lives of the poor masses.
The Social Responsibility of Central Banking
• Credit is the key factor in accelerating rural development. It provides funds for
projects that creates jobs for the rural poor.
• However, financial institutions extend their facilities more to the reach borrowers
and urban developments.
• It is the responsibility of financial institutions to engage in social credit. They must
directly participate in the urban and rural development programs of the
government by extending soft loans for the poor
The Social Responsibility of Central Banking
• Society must not only have economic abundance and modern technology, but
more important, it must have a heart for the less fortunate members. Central
banking must help blaze the path towards the attainment of social justice. This is
the only way for man to live with human dignity.
Summary
• Development is a sustained effort to eliminate hunger, disease, ignorance, and injustice.
It is not only concerned with economic betterment but also the promotion of human
dignity. The right to development is a human right.
• We live in two different worlds. One for the rich and another for the poor. In the world of
the poor, there is widespread hunger, disease, and ignorance. In fact, 40,000 children die
every day due to malnutrition. The gap between the two worlds is very wide.
• Development is primarily concerned with the promotion of human dignity. This is the
priceless gift of God to man. Without human dignity, man is no better than an animal.
Summary
• The roots of poverty are the rural areas. The poorest of the poor are found in such
places. Hoping against hope, they go to the cities for a possible better life. This influx of
rural poor to the urban centers has created slums and squalor. Not a few of them live
under the bridges and along river banks.
• The central bank of any country has the social responsibility to help the poor help
themselves. It should actively participate in eliminating or reducing poverty, ignorance,
disease and injustice.
• Economic abundance and modern technology become only meaningful if these touch the
lives of the poorest of the poor. So, it can be said that there is social justice. This is the
only way for man to live with human dignity
Abstraction/Generalization
1. How do central banks help in socio-economic development?
2. What are the jobs that the central bank does?
Application

ORAL RECITATION
Application

1. Explain the concept of “two different

worlds”.