I must confess to some doubt as to whether your esteemed organization chose the right person to speak before all of you this morning.
For a politician to talk finance before luminaries in the Philippine financial management community is much like asking a university professor to discuss Shakespeare with the Bard himself. No matter how accomplished he may be, he has understandable cause for nervousness.
Nonetheless I thank Finex for their gracious invitation to speak before their membership this morning.
The Aquino administration’s Public Private Partnership Program is typically associated with infrastructure and the government is currently reviewing the initial assumptions behind the PPP to explore all possible funding prospects, national and regional, in order to meet the President’s Five-R directive of Right Project, Right Cost, Right Quality, Right People, and Right on Time.
We at the Housing and Urban Development Coordinating Council, which brings together the key shelter agencies of the government, are pushing to involve the private sector in the task of closing the housing gap within a ten-year period. Through the past year, we have engaged, encouraged and assisted the Local Government Units in assuming a key role in addressing the housing problem in their areas, with the National Government extending technical or funding support as the situation requires. Controls have also been tightened to ensure that the transactions within the agencies are consistent with transparency, fair play and good governance in general.
One of the foremost objectives of the Council I chair is to make housing affordable to the homeless and to those who may not be able to avail themselves of housing via the formal sector. This task is nothing less than challenging, and the attached agencies are exhibiting the utmost creativity and dynamism in order to try and meet expectations. The Social Housing Finance Corporation (or SHFC), in particular, has a Mortgage Program to aid Community Associations purchase land that the community already occupies but is not owned by the occupants. This has been of help in addressing the housing need of informal settlers but clearly, the road ahead is long and much remains to be done.
We need to ensure that our labors reach the entirety of the sectors needing housing, while remaining sustainable. It is necessary to evaluate our financing strategies and operational policies if the programs we launch are to succeed. Agencies such as the SHFC and the Home Mutual Development Fund (or PAG-IBIG) stand ready to provide to qualified beneficiaries the funding they need. PAG-IBIG itself has allocated 50-billion pesos for loans.
However, members of PAG-IBIG are typically capable of meeting the required monthly payments and no longer need financing assistance. Meanwhile, the poor–who are usually unemployed, have no assets and are in most need of housing–are the ones who are not qualified to apply for loans. Others who are employed may not also be earning enough to pay the loans available.
This is not very different from the relationship between entrepreneurs seeking loans and banks that want to loan money. The ones who need funding to launch enterprises may not make the checklist of criteria for securing a loan, and those who can afford a loan may have more than enough working capital to fund their venture from startup to stabilization, with even initial expansion being funded by a portion of the business’s profits.
Some ideas have been raised for us to untie this Gordian knot. There is the model of providing housing first, with low-cost financing extended by the private sector for this purpose, and the government providing subsidies. The idea has some merit, but warrants thorough examination to determine if it is realistically implementable and more importantly, sustainable.
This objective belies the truth behind low-cost housing, that it is - to borrow an allusion to microfinance - a social business. Yes, the output must hit the desired mark, but it must be profitable if the private sector is to throw its support behind it. Indeed, the parallel between housing and microfinance is too stark to ignore but the distinctions between the two fields are equally clear.
Both carry similar intent, which is to alleviate the plight of the poor and set them on the road to recovery. Each also creates spin-off activities in terms of stimulating local economies and creating additional employment. The difference is that microfinance has established more maturity and profitability whereas the housing sector is in its infant stages, as far as being a social business is concerned. Experts from the academe, the public and private sector have developed an intimate knowledge of what can make microfinance work or fail, and this has led to admirable growth in that industry over the past decade.
The Philippines seems to have created an environment conducive to microfinance. In 2010, we were ranked second in the world based on a study of the Economist Intelligence Unit. The year before, a microfinance institution was able to raise 500-million pesos through a corporate notes issue, with the Grameen Foundation from Washington, DC providing technical advice and Security Bank Corporation’s Trust Division as the facilitating agent. International financial organizations such as the ADB continue to recognize the nation’s sound progress and the repayment rates of MFIs remain high.
We in housing would like to draw extensively from the success of this sector, but we cannot forge ahead alone. Government’s competence lies in the establishment of an environment conducive to business so that the economy can flourish and its citizens can prosper. However, establishing businesses and making them profitable is the expertise of the private sector.
It is in this light that I ask FINEX and its members to work with us in housing, to formulate long-term solutions. Let us work together to examine policies, programs and indeed, even objectives.
In the past, one of the biggest problems faced by the shelter agencies was a misguided sense of entitlement on the part of the beneficiaries. We have worked hard to dispel the notion that government housing is free. In our meetings with communities, the message is clear: the terms of payment are being made as affordable as they can be, but they must be paid if the program is to continue.
I do know that the members of Finex can sit down with us to discuss best practices in screening recipients. We have already undertaken numerous reforms in this area, but I believe the successful record of financial managers shall ensure lasting relevance.
The role of technology is also something that you may be intimately familiar with, as your enterprises survive and thrive on the judicious application of modern advances. Mobile devices and offsite terminals have reduced the cost of business for many financial institutions. Aid us in determining if and where these should be applied, and how these can decrease the cost and increase the convenience of repayments of borrowers.
The law also establishes what we can and cannot do in the pursuit of our housing goals. For instance, PAG-IBIG, while in very good health, must charge rates that are below market. In terms of delinquent borrowers, PAG-IBIG cannot simply eject occupants from the property.
We may seem to sail through brackish waters, but this is precisely where we can all work together to plot the course ahead. When it comes to law, policy and investments, help us examine the legal areas that require upgrades or improvements in order to bridge the goals of social impact and profitability for investors.
The Public Private Partnership model is not just about securing financial investments. It is just as importantly, seeking intellectual and institutional contributions from the biggest stakeholders of the country: its citizens.
This concept is not new to the members of FINEX, as the themes you adopt each year consistently hold a social or developmental objective. This year, you chose to look at how to build momentum in the Philippine Investment Challenge. In my modest opinion, extending your powers and talents to aid the housing challenge will create a huge component of that momentum.
Work with us to build a legacy for our people’s development. I have the most fervent faith that together we can build a model that the rest of the world will seek to emulate. If in our lifetimes, we can see these objectives fulfilled, then our professions would have meant something to our country.
The apex may be hidden by the clouds but we shall never see it if we are afraid of the climb. I look forward to working with you and beginning our country’s ascent to full and equitable development.
In parting I would like to remind you of Winston Churchill's words:
“If we are together nothing is impossible. If we are divided all will fail.”
Thank you and good morning.