HGC sells P6-B of 7-year zero coupon bonds

HOME Guaranty Corp. (HGC), the Philippine state-owned mortgage insurer, sold P6 billion ($121 million) of seven-year zero-coupon bonds at an auction in Manila.                       
           
The bonds, guaranteed by the government and exempt from some taxes, were sold at a yield of 6.375 percent. That compares with 7.1883 percent for seven-year Treasury bonds in trading among banks Wednesday, according to the Money Market Association.                  
           
Zero-coupon bonds are sold at a discount to face value, which is paid on maturity. Buyers will pay 64.999 percent of face value. Home Guaranty will raise a net P3.87 billion,
           
President Gonzalo Bongolan said the company will sell another P6 billion of the bonds by "early next year," he said.
           
Wednesday's sale follows the company's rejection of all bids at an October auction for P12 billion of debt. Investors demanded excessive yields, Bongolan said at the time. That sale was planned in part to pay P7 billion of debt maturing as early as next year.                                            
    
Banks and other investors submitted bids to buy P11.99 billion of the bonds.  (Bloomberg)                                        

 

Business Mirror
November 23, 2006

 

Inflation likely rose 3.9%-4.6% in January--BSP

By Erik de la Cruz
Xinhua Financial News Service
Last updated 08:33pm (Mla time) 01/30/2007

MANILA, Philippines -- The consumer price index likely rose 3.9 to 4.6 percent in January than a year earlier, the Bangko Sentral ng Pilipinas, Manila’s central bank, said.

"Our inflation forecast for January is between 3.9 percent and 4.6 percent. The actual rate may be slightly lower than the December 2006 [rate], considering the strengthening of the peso and the generally lower retail prices of domestic petroleum products," Governor Amando Tetangco of the BSP said in a cellphone text message to reporters.

The CPI data for January will be released next Tuesday.

Tetangco said average inflation this year was projected to be within the government's target range of 4-5 percent "in the absence of further adverse shocks".

He said the latest forecasts also indicated that average inflation next year was likely to be within the targetted range of 3-5 percent.

However, he said that despite recent benign signs for the inflation outlook, the central bank remained watchful for potential risks.

"These include the impact on food prices of the El Nino dry spell, upward adjustments in domestic power costs and wages, and volatility in world oil prices," he said in a letter to President Gloria Arroyo.

He said the central bank would also continue to pay close attention to strong inflows, including remittances from Filipinos working abroad, which could mean additional pressure on prices.

http://business.inquirer.net/money/topstories/view_article.php?article_id=46486

5-5-5 group packs small lenders in advocates' network

By Dennis D. Estopace
Reporter

ACTIVISTS among the upper- and middle-income families of the country launched on Monday an attempt to consolidate the reach and powers of small lenders —called microfinance institutions—in a bid to raise five million Filipinos from poverty via a P5-billion capital in the next five years.              

The 5-5-5 goal of the consortium that calls itself the PinoyME Movement —ME standing for microenterprise—was formulated by the who’s who in the country’s business and business’s foundations, led by former President Corazon Cojuangco Aquino.

These companies included Bank of the Philippine Islands, United Coconut Planters Bank, Negros Navigation Inc., PLDT Co. and Phinma, while major charitable groups included Ayala Foundation Inc., Metrobank Foundation Inc. and the Philippine Business for Social Progress.

The consortium brought into the network of these companies and groups eight MFIs that Ayala Foundation’s Victoria Garchitorena said currently has two million clients.

Garchitorena said in her prepared speech at the consortium’s first anniversary celebration that these MFIs were “personally handpicked” by Aquino and whose clients are expected to be more than three million by 2010.

The move to consolidate the works of these MFIs, according to Aquino, was in recognition of their success “in uplifting lives in depressed communities and in proving that the poor are truly credit-worthy.”

“Hence, the consortium is focusing on ways by which to enhance the MFI’s effectiveness and to achieve the scale necessary to have a palpable impact on reducing poverty,” Aquino said.

According to a brochure, the group would help create a broad middle class as the “key to equitable economy and stable democracy.” Notably, Aquino was swept into power in 1986 by an antidictatorship movement supported by middle-income families.

The brochure added it believes that “as more and more microenterprises grow into SMEs, there emerges a strong base for economic growth.”

Aquino noted that the P5 billion her group would try to raise “is the minimum we would need to augment the current equity and deposit base of the MFIs.”

This year, Garchitorena said, they aim to raise P1 billion, to be led and managed by the PBSP.

Speaking for PBSP, Phinma chief executive Ramon del Rosario said that this money called a social investment fund would be lent wholesale to MFIs.

The eight MFIs include the foundation of Lopez family-owned ABS-CBN Corp., the Luzon-centered Center for Agriculture and Rural Development (CARD) and the Visayas-based Taytay sa Kauswagan Inc. (TSKI).

“Funds will be sourced from social investors either through donations or low-yielding investments,” del Rosario said.

He said “anyone can be a social investor” by contributing to the fund from “P5,000 (for a microfinance loan size availed of by one member of a poor family); P150,000 for a group of 30 borrowers in a community; P2.5 million for a branch in an urban/semi-urban area (managing centers with approximately 1,000 to 1,500 borrowers); and, P5 million for a branch in a hard-to-reach area.”

Del Rosario added that they would ensure the MFIs tapping this lending facility would relend to families in “hard-to-reach areas where there is little or no microcredit facility available, except for loan sharks.”

Likewise, del Rosario said that the MFIs could also borrow from this fund to lend to “higher value adding enterprises and not the traditional and retail enterprises.”

“By applying these two criteria, it is believed that the poverty reduction impact of microfinance can be better realized,” he added.

Borrowers could tap into the fund of up to P150,000, according to del Rosario. On the other hand, enterprises wanting to borrow above that and up to P10 million could access the PBSP’s lending facility, del Rosario said.

http://www.businessmirror.com.ph/01242007/economy04.html

Lending to farmers key to fighting poverty, says expert

By Dennis D. Estopace

Reporter

GIVING farmers and agricultural producers access to microfinance could greatly embolden Philippine society’s battle against poverty, according to Professor Ronald T. Chua of the Asian Institute of Management.  

Speaking at the launch of a group organized by former President Corazon Aquino—PinoyME, a consortium of bankers, business, and microfinance institutions—Chua said 68 percent of families government surveyed in the year 2000 said their main source of income was from nonwage sources.    

“There were only 32 percent of Filipino families earning P60,000 and less a month who said that their main source of income came from wages.” The other 68 percent who are into enterprises will apparently need social support via micro financing, the aim of PinoyME.   

Citing the Family Income and Expenditure Survey by the National Statistics Office seven years ago, Chua said that of the families polled, 54 percent of those earning more than P60,000 a month cited their main source of income as wages. Only 10 percent of this income class said that they earn from agricultural entrepreneurial activities while 36 percent said income comes from activities not related to farms.   

Among those earning less than P60,000, however, 37 percent said they earn from agricultural entrepreneurial activities. “This means that any microfinance initiative couldn’t ignore the agriculture sector.”     

Chua noted that the data also reflects “the failure of society to provide meaningful and gainful employment to its people.” This is what he emphasized at the launching of Aquino’s PinoyME consortium, which is primed to help through microfinance some 5 million poor Filipino families with its P5 billion capital expected to be paid-in in the next 5 years.        

Chua said that while current efforts to bring microfinance services—credit, savings, investments—to the poor are notable, gaps remain. “For one, very few MFIs venture to lend to growing enterprises requiring over P50,000 in capital, as well as in agriculture-related financing.”            

Chua, according to PinoyME executive Victoria Garchitorena, is “the acknowledged guru of microfinance in the country.”         

He estimates that some P2 billion to P5 billion in loans had been made available to some one to 2 million households. “But these are people with formal access to these services, located mostly in urban and peri-urban areas.” And the “loan design suits those with regular cash flow.”           

“We have to change our mindset about the poor,” said Chua, adding “it is not true that they don’t save and, ergo, can’t pay. I can give you tons of evidence to prove that the poor are not helpless and should be avoided by lenders like banks have avoided them.”    

Citing the 2004 poverty threshold of P13,113 monthly household income, Chua said that a household that borrows P5,000 could pay the principal at P200 a week or P40 a day on a 12-percent interest within a 25-weeks payment scheme.      

In addition, he said assuming the household posts a net earnings a week of P100, the family could still posts an 8-percent increase in household income. “The poor are no different from you and me in terms of benefitting from access to financial services.”        

PinoyME said there is “a need to make available P25 billion to provide average microloans of P5,000 to each of the 5 million clients” the group is targeting. The group’s brochure noted that some 300 to 500 MFIs—consisting of nongovernment organizations, rural banks, and cooperatives—remain inadequately capitalized to lend to more clients.    

“The current reach of microfinance is a tiny drop in a big bucket,” said Chua.

http://www.businessmirror.com.ph/01242007/headlines03.html

 

BSP posted P4-billion net income in 2006

 

 

By LC. CHIPONGIAN

The Bangko Sentral ng Pilipinas likely posted a lower net income of P4 billion in 2006 based on a preliminary year-end statement of income and expense report.

BSP Governor Amando M. Tetangco Jr. confirmed initial figures show BSP had a net gain of more than P4 billion last year, half of what was reported in 2005 of P8 billion.

As of October the BSP income and expense report indicated a net income loss of P8.40 billion (unaudited) due to foreign exchange fluctuations. Gains from foreign exchange operations declined from P7 billion in September to P5 billion in October.

BSP revenues for the period were also down 8.55 percent to P43.93 billion from P48.04 billion in 2005, mainly because of a significant drop in the collection of miscellaneous income of only P2.49 billion from P9.93 billion the previous year. Interest income, on the other hand, was higher at P41.44 billion from P38.12 billion last year.

Expenses reported for the period, meantime, was higher by 7.16 percent to P43.22 billion from P40.33 billion because of higher interest payments of P33.79 billion during the January-October period compared to P29.25 billion in 2005. Expenses from "others" amounted to P9.43 billion from P11.08 billion last year.

To boost its dollar hoard, the BSP bought almost billion-worth – in gross total — of foreign exchange in the spot market and transacted almost billion via the foreign exchange swap market last November.

BSP’s total assets as of end-October 2006 stood at P1.50 trillion, higher than October 2005’s P1.31 trillion. The total liabilities, in the meantime amounted to P1.24 trillion, which resulted to a decline in net worth of P256.24 billion with a surplus/reserves of P246.24 billion.

http://www.mb.com.ph/BSNS2007012385277.html

Editorial: People Power through microcredit

Editorial:

 

 

People Power through microcredit

"It's time to take 'People Power' to the next level. We need to fight poverty in a systematic way by mobilizing disadvantaged communities to help themselves with the empowering support of multiple sectors."—Former President Corazon C. Aquino.

MONDAY night, former President Corazon Aquino launched what could probably be the largest single private sector microcredit program in the country's history.

Called PinoyME, or Filipino Micro-Enterprise, the program aims to mobilize P5 billion to assist five million poor entrepreneurs in depressed communities all over the country in five years. The Philippine society should support this program for three major reasons.

First, the program represents a major shift in thinking among the country's economic elite about the potentials of the poor and marginalized sectors of society as agents of development and progress. For so long, managers of banks and financing organizations looked down on the poor as "unbankable." They usually have nothing to offer as collateral. They neither have stable jobs, nor what would be deemed a good résumé.

In developing countries like the Philippines, they often derive irregular incomes from economic activities (e.g. farming, peddling) and are considered high-risk and seasonal. They have no credit history that the banks could verify. And yet, Cory and her group are embarking on a program that is certainly risky and yet has the potential of transforming the country's economy for the better.

Of course, since Mohammed Yunus got a Nobel Prize for the success of the Grameen Bank that he founded in Bangladesh, bankers and financiers have started to realize that there is business in banking with the poor, especially women.

In fact, bankers these days have started to change their phraseology about microfinance: it's not that the poor are "unbankable"; they are simply "prebankable," and microcredit—given factors like adequate social preparation like training in entrepreneurship, value formation and effective community organizing—could be the best way of bringing them into the mainstream of the country's financial system. Once they are able to build a "track record," the poor are likely to be as reliable a partner of the banks as those who do their business from their posh offices along Ayala Avenue in Makati.

Second, microcredit programs, such as PinoyME, are probably the best way to ensure gender equality in the Philippines. Based on the experiences of Yunus's Grameen Bank as well as other schemes worldwide, microcredit programs are often focused on women. Why women? It's because, based on actual experience (believe us, there's empirical data for this), loans extended to women and their projects are likely to benefit the entire family more than when these are extended to men.

According to the Microcredit Summit Campaign launched in 1997: "Experience shows that women are a good credit risk, and that women invest their income toward the well-being of their families.  At the same time, women themselves benefit from the higher social status they achieve within the home when they are able to provide income."

Third, economic and social programs such as this one could help ensure broad-based growth in the Philippines. If it succeeds, it has the potential of uplifting the lives of a least five million poor families all over the country. Some of them may eventually grow into small and medium enterprises, create more jobs in their localities, and transform a lot more lives in the process.

In the last 12 quarters, the Philippine economy has been growing at decent growth rates (5 percent to 6 percent of the gross domestic product), driven mostly by robust performances of electronics, outsourcing and consumption-oriented economic activities buttressed by the dollar remittances of overseas Filipino workers. An initiative such as PinoyME, therefore, is a good way of complementing the growth of these sectors, boosting the economy even more. In fact, if we want to broaden the ranks of the middle class, microcredit is probably one of the best ways to do it.

The expansion of the ranks of the middle class is important because of its role in strengthening the country's democratic institutions. Former Negros Occidental governor Daniel Lacson sums it up well: "By making microfinance more accessible, PinoyME aims to unlock the potential of individual Filipinos, particularly those who have been marginalized and stripped of their dignity by sheer poverty. Over the medium to long term, this will also pave the way for better governance as a critical mass of citizens is empowered to make mature political choices and demands, as well as to aspire to become a new breed of leaders. Our vision is to help create a broad middle class, which is the foundation for an equitable economy and a strong democracy."

Of course, microcredit alone would not solve all the economy's problems. We will need growth-oriented policies, political stability and greater private-sector investments. We will need effective governance, educational reform and better infrastructure. It is within this context where people's entrepreneurial energies would even find fruition. It's not the be-all and end-all , but it is a significant contribution by the private sector that each one has to help nurture.

http://www.businessmirror.com.ph/01232007/opinion01.html

T-bill rates continue slide on lower govt appetite for borrowings

By Jun Vallecera

Reporters

SHORT-TERM Treasury bill rates continued to slide on Monday, falling lower still by 62.4 basis points in the case of the 92-day benchmark to 3.171 percent.           

Lower government appetite for borrowed funds and relatively high levels of liquidity in the system helped push the rates lower.

But National Treasurer Omar Cruz insisted the drop was more than a by-product of liquidity alone, saying this was on account of the upbeat mood of the local markets.

“It’s more than that, the market is still counting on positive news,” he told reporters.

He meant the economic prospects of the country this year when personal consumption is seen trending up, exports performance intensifying, such that services and industry output should also lift the gross domestic product (GDP) to growth ranging from 5.7 percent to 6.5 percent.

Cruz intended to sell no more than P4 billion worth of T-bills but ended up selling P5.6 billion as the auction drew bids nearly eight times more than what was available totaling P30.51 billion.

Cruz actually wanted to sell no more than P500 million in three-month T-bills, but accepted P200 million worth of bids to take advantage of the low rates the banks offered.

He also sold P600 million more in six-month IOUs and P800 million more in one-year papers when he planned to sell only P1.5 billion for the former and just P2 billion for the latter.

The rate for six-month T-bills dropped by 65.2 basis points to 3.665 percent and that of one-year T-bills by another 28.6 basis points to 4.218 percent.

The Bangko Sentral ng Pilipinas said it was closely monitoring the sale of government IOUs and was on a special watch for peso liquidity levels to ensure this did not translate into unwarranted inflationary pressure in the next few months.

The banks apparently turned a corner in November last year when bank lending, in single-digit growth levels most of the time, hit double-digit, with commercial bank lending averaging 11.1 percent for the first time since 1997.

But officials remained cautious and want more evidence of sustained lending growth going forward.

Cruz sold P2.1 billion worth of 182-day T-bills instead of only P1.5 billion as planned, as its bid rate fell 65.2 basis points to P3.665 percent.                

He also sold P2.8 billion rather than only P2 billion in one-year T-bills to take advantage of the rate that fell in this case by 28.6 basis points to 4.218 percent.          

http://www.businessmirror.com.ph/01232007/nation03.html

T-bill rates drop to fresh lows

January 22, 2007
Updated 14:09:02 (Mla time)

Xinhua Financial News Service

TREASURY bill rates dropped to new, all-time lows across the board in Monday’s auction, with the government's offering of P5.6 billion fully awarded as total tenders from banks reached P30.51 billion, the Bureau of Treasury said.

The auction committee's regular offer of P4 billion had already been fully awarded but given the strong demand, it decided to accept additional bids totaling P1.6 billion for a total award of P5.6 billion.

The 91-day T-bill average rate, which banks use in pricing loans, fell to 3.171 percent from the previous rate of 3.795 percent.

The government initially accepted bids of P500 million for this tenor but later added P200 million, for a full award of P700 million.

Total bids for the 91-day rate reached P4.97 billion.

The average rate for the 182-day bill declined 3.665 percent from the previous rate of 4.3171 percent.

A full award of P1.5 billion was accepted for this maturity out of total bids of P13.345 billion, with the auction committee offering an additional P600 million, for a total award of P2.1 billion.

The 364-day rate also fell to 4.218 percent from the previous rate of 4.604 percent, with the government making an initial award of P2 billion. It later increased its offer by P800 million for a full award of P2.8 billion for this tenor.

Total bids for the one-year rate hit P12.195 billion.

http://services.inquirer.net/express/07/01/22/html_output/xmlhtml/20070122-44872-xml.html

Financial planners give advice to INQUIRER.net readers

January 22, 2007
Updated 09:02:02 (Mla time)

INQUIRER.net

REGISTERED financial planners from the RFP Institute have teamed up with INQUIRER.net to provide free financial advice to readers who wish to ensure their financial security.

Starting January 2007, readers who wish to ask a financial planning expert can send their questions to personal_finance [at] inquirer.net. Answers to these questions will be posted in the Advice section of INQUIRER.net’s Money site on its Business channel.

"This tie-up with the RFP Institute is only the latest in our efforts to help readers get answers to their financial questions," said INQUIRER.net editor-in-chief JV Rufino.

INQUIRER.net has long been at the forefront of educating online readers on reaching financial goals and personal money management. It has developed its personal finance section long before other online publications, and for the past years has seen a tremendous increase in traffic as readers reacted with enthusiasm.

Recently, its series of articles called Take Charge of Your Money ) published in collaboration with Citibank has drawn in an amazing number of readers from all over the world, notably overseas Filipino workers who long to gain the financial security they richly deserve.

Because of the huge volume of e-mails INQUIRER.net received, experts from RFP (Phils.) Institute ) will also provide answers to questions that touch on many other areas of financial planning, investing and saving for retirement, among others.

RFP (Phils.) Institute is the local chapter of US-based RFP Institute, an independent, self-regulatory professional organization for financial planners. RFP Institute is the first organization that has established the use of designations "RFP® Registered Financial Planner" and "SRFP® Senior Registered Financial Planner" in the world.

The local chapter, headed by Henry Ong, aims to promote professionalism in financial planning in the Philippines.

(Do you want to ask the experts? Send your questions to personal_finance [at] inquirer.net).

http://services.inquirer.net/express/07/01/22/html_output/xmlhtml/20070122-44805-xml.html

Cory, business to launch P5-B microfinance fund

By Dave Llorito

Research Head

VOWING "to bring people power up to the next level," former president Corazon Aquino will launch a P5-billion microfinance fund on Monday (January 22) to uplift the lives of at least five million poor people as well as address what she calls a "persistent poverty in the country."

Lending their names to the campaign are prominent personalities in the business sector and "civil society" groups who will help mobilize money from various sources including banks, development financing institutions, the business community, and other "social investors." Among them are Washington Sycip, former ambassador Howard Dee, ambassador Jesus Tambunting, Manny Pangilinan, Ramon del Rosario of the Phinma group of companies, Vicky Garchitorena and former Negros Occidental governor Daniel Lacson.

"We need to fight poverty in a systematic way by mobilizing disadvantaged communities to help themselves with the empowering support of multiple sectors," said Aquino in a press statement.

The launching will be held on January 22 at Tiendesitas in the Ortigas Center in Pasig City.          

To be called PinoyME or Pinoy micro enterprise, the fund aims to enable microfinance institutions (MFIs) to mobilize P5 billion in capital in five years and serve at least 5 million clients in depressed communities all over the country, an initiative patterned after the Grameen Bank of Nobel Prize winner Muhammad Yunus.         

Aquino believes that through small loans lent by MFIs, microentrepreneurs can earn a decent livelihood and improve their quality of life. Eventually, some of these microenterprises will grow and create jobs in their communities, and the more successful ones can go on to become small and medium enterprises (SMEs). As more and more microenterprises grow into SMEs, a strong base for economic growth will emerge.           

"Microenterprise (ME) development is emerging as a vital anti-poverty strategy all over the developing world," says PinoyME spokesman and former Negros Occidental governor Daniel Lacson. "The recent conferment of the Nobel Peace Prize on Dr. Muhammad Yunus, founder of Grameen Bank in Bangladesh, attests to the success of MFIs in empowering millions to work their way out of poverty."      

"By making microfinance more accessible, PinoyME aims to unlock the potential of individual Filipinos, particularly those who have been marginalized and stripped of their dignity by sheer poverty," adds Mr. Lacson. "Over the medium to long term, this will also pave the way for better governance as a critical mass of citizens is empowered to make mature political choices and demands, as well as to aspire to become a new breed of leaders. Our vision is to help create a broad middle class, which is the foundation for an equitable economy and a strong democracy."         

In addition to former President Aquino and Lacson, the other members of the steering committee of the PinoyME consortium are: Jaime Aristotle Alip, managing director, Center for Agricultural and Rural Development; Ruth Callanta, president, Center for Community Transformation; Ronald Chua, faculty member, AIM Center for Development Management; Ambassador Dee, as chairman of the Assisi Development Foundation; Ms. Garchitorena, as president of Ayala Foundation; Edward Go, president, ASA Philippines; Rosalinda Hortaleza, president and CEO, HBC Inc.; retired general William Hotchkiss III, president, Rural Bankers Association of the Philippines; Cayetano Paderanga, Jr., president, CIBI Information Inc.; Manuel Pangilinan, chairman, PLDT and Philippine Business for Social Progress; Anton Pascual, executive director, Caritas-Manila; Ramon del Rosario Jr., president and CEO, Phinma; Aniceto Sobrepeña, president, Metrobank Foundation; Mr. Sycip, as AIM chairman; Ambassador Jesus Tambunting, chairman, Planters Bank; and Veronica Villavicencio, executive director, Peace and Equity Foundation.

http://www.businessmirror.com.ph/0119&202007/headlines05.html

 

BSP: Average micro loans doubled in 2006

By Jun Vallecera

Reporter

 

THE banks, notably thrift institutions and microfinance-oriented lenders, have embraced the idea of extending loans to small borrowers in increasing numbers in 2006, more than doubling the average loan extended to P11,600 per borrower, the Bangko Sentral ng Pilipinas said on Wednesday.          

This compares with micro loans the year before averaging only P5,000 per client; and boosting BSP optimism that significantly more people this year will benefit from the program started only six years earlier.        

“Latest data indicate there are more than 200 banks providing microfinance services to 630,000 microborrowers with total loan portfolio of P3.7 billion,” Tetangco told reporters.            

The increase is indicative of the heightening interest in a sector that Nobel Prize winner Mohammad Yunnus proved worth engaging in without losing the money of profit-conscious shareholders.    

Tetangco noted that less than 50 micro lenders were in existence before his immediate predecessor and mentor, Rafael Buenaventura, formally started the program in 2000.            

The general attitude at that time was that the poor, whose sole collateral is the strength of their character, were an unbankable lot that only credit cooperatives and nongovernment organizations touch.         

Attitudes have changed and according to Tetangco, the micro-lenders have become key units in their advocacy for alleviating poverty in the country. 

The microfinance unit of the BSP, headed by Pia Bernadette Roman, said while banks account for some P3.7 billion worth of microloans outstanding at the moment, the aggregate size was around double if the loans granted by credit cooperatives and NGOs were included.               

“More than P7 billion worth of microloans are outstanding at the moment,” Roman said. 

Former BSP governor Buenaventura in 2000 started the microfinance program as an advocacy program, believing in the creditworthiness of the Filipino poor who often fall victim to so-called five-six loan sharks for lack of access to the formal credit channels.        

Tetangco, Buenaventura’s ward, now heaps praise on the banks “for [their] growing support for the microfinance industry, our special advocacy for alleviating poverty in the country.”

http://www.businessmirror.com.ph/0119&202007/headlines04.html

 

Grepalife mutual funds perform beyond expectations

INQ7.net
Last updated 05:32am (Mla time) 12/15/2006

ORIGINALLY launched to better fight inflation, Grepalife-managed mutual funds have performed beyond expectations in 2006, according to Efren Cruz, SVP & General Manager of Grepalife Asset Management Corporation (GAMC).

According to Cruz, the Grepalife Fixed Income Fund (GFIF) and the Grepalife Dollar Bond Fund (GDBF) posted net absolute returns of 9.25 percent and 8.58 percent on a year to date basis up to December 8, 2006. Cruz adds that in terms of ranking among bond mutual funds invested primarily in foreign currency securities, the GFIF and GDBF were ranked number 1 and 3, respectively in terms of investment performance.

Edgardo Franco, treasurer of GAMC says that, “it is important for us to produce positive real returns for our investors; otherwise there would not be any point in investing.” Franco adds that only with such positive real returns can people better afford future obligations like sending children to college or funding one’s retirement.

Cruz says that they are making good progress in getting the public aware that Grepalife mutual funds are logical alternatives to investing for the future, especially in this regime of low interest rates. Cruz says that investing in mutual funds is like investing in a business franchise with time-tested procedures and practices on how to make money. The only difference is that mutual funds come with in-house expert portfolio managers who do nothing but trade and monitor investment funds.

Mutual funds also benefit from liquidity as a mutual fund company stands ready to buy back the investment of a person at any time. Under current regulations, the proceeds from such buying back of investments, called redemptions, must be paid within seven banking days from receipt of the redemption request. As for the Grepalife mutual funds, shareholders don’t have to wait for seven days because redemption proceeds are paid within three banking days after the receipt of the redemption request.

http://business.inquirer.net/money/announcements/view_article.php?article_id=38444

The credit gap revisited

Business Options

 

 

 

By Benel P. Lagua

Consultants for the SME Development Plan are developing indicators to review the situation on access to credit. They basically ask these questions. One, have SMEs been borrowing from formal sources? And, two, have financial institutions been lending to SMEs? They also want to gather indicators that will measure the total number of SMEs applying for a loan, the total funds lent to the SME sector, the ratio of loans to applications, and the ratio of loans to available funds.

At the onset, these numbers appear to be reasonable gauge of whether or not those who applied for loans are able to solicit funding. But probing deeper, are these indicators valid and substantive, even if available?

According to the Bank of England (2001), "Public sector initiatives to support the financing of small firms may be justified if market imperfections mean that the private sector does not provide capital to firms on competitive terms. In the absence of market failure, such initiatives may themselves cause distortions by subsidizing at considerable public costs, non-viable firms which are not attracting enough capital because they do not offer good investment opportunities, the information that is then conveyed to other potential investors may be misleading."

The key issues here revolve around the validation of what constitutes market failure. Some economists and bankers, in reaction to the indicators above, argue that the ratios are too simplistic. This school of thought believes that, in most cases, the inability of firms to acquire capital reflects a reasonable business decision by the potential financier. According to this theory, firms unable to access capital are inherently too risky and do not present proper fit with the supply of capital. These firms are simply unable to meet specific business standards in terms of the usual five C’s of credit — capital, character, condition, capacity to pay, and collateral.

In sum, the argument is that a valid credit gap exists only if it can be well demonstrated that firms unable to obtain financing actually merit financing. It must be shown that there is rationing of some form which has disadvantaged legitimate and well deserving small businesses. Accordingly, a denied SME loan application represents market failure if and only if the SME account represents a potentially viable exposure.

To my mind, this is the challenge in the Philippine business environment. Because it would appear that some, if not many, of those who are so noisy about the credit access problem may not be so "deserving" in the first place. For example, there are suggestions for the build up of a quick disbursing fund to assist distressed firms. Now, how did these firms become distressed in the first place? If the reasons are exogenous, then some support may be well deserved. But if the poor state of affairs is traceable to mis-management, should public funds be invoked?

Addressing the credit gap is indeed a big challenge. The Small Business Corporation (SB Corporation) assumes there is such a gap and aims to plug in the holes given its limited resources. One such area is in the micro finance sector. But since the Small Business Corporation is only a support player, it innovates in order to spread its outreach.

After a successful negotiation for a US $ 15.0 million Official Development Assistance (ODA) fund with the International Fund for Agricultural Development (IFAD), the SB Corporation redesigned its program with features crafted as a result of focus group discussions and consultative meetings with industry players as well as with other micro finance government financial institutions (GFIs) and with the Regional Operations Group of the Department of Trade and Industry.

Based on the said recommendations, the new products under the program shall be differentiated based on the type of conduit as follows: MICRO-LEAD- micro lending through LEAD MFIs or those whose lending portfolio and organizational structure are pre-dominantly micro-finance; MICRO-LOCAL- micro lending through Micro and Small and Medium Enterprise Rural Banks; and MICRO-LEAP- micro lending through small micro finance providers such as community cooperatives and local NGOs.

The redesigned program will allow larger and well-established micro-finance institutions (MFIs) higher loans ceilings than the smaller MFIs, but with stricter eligibility criteria. Moreover, to enable greater access to the program, the eligibility criteria will be relaxed, but the selection of the conduit shall be undertaken through a competitive process.

Loans under the program regardless of the type of conduit shall be for one year payable either monthly or quarterly only. The pass on rates to the conduit will depend on two factors: (1) their credit risk rating using the recently published micro finance standards, and (2) loan size or per Peso transaction cost. This means less risky and more efficient conduits will enjoy a lower pass on rate. Additional incentives such as rebates on the corporation’s fees will be adopted for conduits that are able to offer more competitive pricing to the microentrepreneurs.

* * *

(Mr. Benel P. Lagua is the President / COO of the new Small Business Guarantee and Finance Corporation. He is likewise an active member of FINEX. Feedback and comments are welcome at benellagua@alumni.ksg.harvard.edu).

 

http://www.mb.com.ph/BSNS2007011884966.html

Opiniano: Real-life financial litanies

Tuesday, January 16, 2007
By Jeremaiah M. Opiniano

 

SAN FRANCISCO, USA - Albert's work shift as a nurse, at least twice or thrice a week, is from 3 p.m. to 7 a.m. the next day. A few minutes of watching Filipino television shows plus a few munches of breakfast soon followed, and then he hit the sack.

I was an 80-day boarder at his home when I was in this city for a 100-day media fellowship on overseas Filipinos. So one day that I was about to leave, Albert's voice was heard even as his door was closed. He was on his weekly phone call to family members and relatives in the Philippines.

 

I did not hear much of the discussions. But over a meal, in episodes of talks with him and my fellow border Renato, Albert's explanation of the phone conversations reveals a familiar theme facing Filipinos abroad like him.

It is about money, about working hard abroad and sending some income back home, and about a litany of frustrations of whatever happened to the amount sent back home.

Renato also has his weekly phone conversations, but with his US citizen mother based in Los Angeles. Renato's mother just sent some US$400 to his sibling and in-laws. Just some weeks after, the remittance sent had dried up, and the family back home is asking Renato's mother for additional remittance.

He was cooking then while talking with his mother over the mobile phone. But as the conversation became serious - also about handling money - Renato's faced turned sour: "They thought it is easy to earn money here and all they do is ask and ask for more."

Earning additional income is the root cause of many Filipinos' overseas emigration for either temporary contract work or permanent settlement. As colleague Tony Ranque of the Economic Resource Center for Overseas Filipinos (Ercof) would say, it is "about love" that many of these compatriots of ours left abroad.

"It is love, therefore, that should make you financially literate and make you handle your money properly," Ranque said in one of Ercof's activities in a European country.

I do not claim to be a finance expert, not even in the caliber of businessman Francisco Colayco. I admit only starting to save some money thanks to being involved in advocacy work for overseas Filipinos (of which one of the advocacy themes is financial literacy). I am, in fact, a convert of Tony's financial literacy messages: saving loose coins, and accumulating many of those, is quite easy-and it works.

The rudiments of financial literacy are however something that is not easy to imbibe unto overseas Filipinos. Sure it is easy to teach this tip and give that financial advice to overseas Filipinos. Yet when you are the one who is abroad, managing your own finances and needs as well as those of your family and relatives back home, it is certainly a challenge.

Given an overseas Filipino's freedom by being abroad, and the numerous things in the host country that will really tempt the consumer in him or in her, one will really spend. Noticeably, like every time I join Renato shopping, he always strives to get the cheapest buy but with assured quality and good taste. Since he made good buys, he is able to save.

Both Albert and Renato even have fits of thrift in their daily lives. Since San Francisco is a chilly place and food stored in the refrigerator can still be consumed even days after, the Sunday night dinner that Renato cooks can be consumed the next two days and, if there are still some leftovers, in some breakfast meals. Both of them work hard to earn more, and they still manage to have the energy to work extended hours by just a small lunch box of rice and ulam.

I think a basic financial literacy lesson is to "love yourself and reward yourself" by saving and investing for your own needs, such as insurance. When you try to join Filipinos abroad and find out what do they do to reward themselves, you would notice their pursuit of erasing the deprivation that they had when they were still in the Philippines.

Albert just bought a two-storey home last July, and I was just in time to be his border so that his monthly mortgage of US$5,000 will supplement payments coming from his salary and overtime pay. Weeks before I left for Manila, he just bought a second-hand Mercedes Benz since he had grown tired of always walking to his workplace. He also wanted to enjoy his increasing bounty.

Since moving to the US some three years ago, Renato had been paying monthly mortgage of US$400 for a family house in San Pedro, Laguna. He also bought a condominium unit so that he has a place to stay whenever he goes home to the Philippines during vacation leaves.

Undocumented migrants Rico and Elizabeth (not their real names) have been working "underground" for some three years already. The income is not enough by US standards. But the couple claims that God has really blessed them, and they are still able to send some money to Elizabeth's parents and Rico's nephews.

"Our biggest purchase made was a US$150 microwave," Elizabeth said. "We are happy that we are still able to eat some good food, save money and put it beneath our pillows, and send some money back home."

In countries like the US, you will not survive there if you do not have a credit card. The credit card is not only one's requisite to make purchases, but it is something shopping centers, banks and property firms use to trust the consumer. "In as much as you want to eliminate your credit card dues," Renato explains, "a forthcoming credit card greets you and you have no choice."

Again I am not a finance expert. But given my previous immersion with these overseas Filipinos, financial literacy for Filipinos abroad is no easy cookie. The family and relatives back home are also part of the equation, and in fact play an important role in the financial success or failure of the overseas Filipino. That's where Albert's and Renato's stories come in.

The Bangko Sentral ng Pilipinas, in a January 3 banner story by BusinessMirror, claims the increasing number of financially literate overseas Filipinos has pulled up the country's low savings rate from the dumps. Credit that to BSP's periodic financial literacy seminars last year, BSP deputy governor Diwa Guinigundo said.

Unfortunately, no definite numbers can back up such claim. Meanwhile, a 2002 University of the Philippines thesis in AB Economics by Jose Ramon Idang and Cheddie Yap ("Determinants of the Saving Behavior of Filipino Households") had a major finding: "Filipino households are not significantly sensitive to transitory income (coming from abroad). Thus, as more Filipino families have relatives working abroad, or as relatives receive increasing amounts of remittances, the less then that they see the need to increase their savings."

Given all these anecdotal and empirical observations about the savings behavior of Filipinos abroad and their families back home, it is a challenge then to design a financial literacy design that understands the lives and conditions of overseas Filipinos and the families and relatives left behind. They all have a unique dynamic, and I guess it takes a ton of effort to change mindsets among us Filipinos, including those abroad, in terms of saving and handling money properly.

Designing such kind of a module is Ranque's current endeavor. For the meantime, Albert and Renato continue to deal with their financial situations and those of their families, and they are based overseas. And there are millions more of them in luckier or less-lucky jobs overseas

Just before I came back to Manila, I gave my copy of Colayco's module packaged for the Overseas Workers Welfare Administration to both nurses. I hope reading the book's tips will work for them, and their litanies will be lessened.

Comments are welcome at ofw_philanthropy@yahoo.com (the email address of the Institute for Migration and Development Issues).

 

http://www.sunstar.com.ph/static/man/2007/01/16/oped/jeremaiah.m..opiniano.html

RCBC set to acquire credit-card pioneer Bankard Inc.

By Honey Madrilejos-Reyes
Reporter

AFTER its negotiations with GE Consumer Finance bogged down, the Yuchengco-led Rizal Commercial Banking Corp. (RCBC) said Tuesday it would acquire credit-card service provider Bankard Inc.
           
RCBC had earlier planned to sell Bankard, a member of the Yuchengco Group of Companies (YGC), to GE.
           
In a disclosure to the stock exchange Tuesday, RCBC said its board has authorized to purchase “all or substantially all of the assets and liabilities of Bankard subject to approval by the Bankard board and its stockholders in the special stockholders’ meeting scheduled on December 27, and subject further to approval by the Bangko Sentral ng Pilipinas (BSP).”
           
The disclosure, however, did not, however, indicate the cost of the transaction.
           
RCBC has also proposed to make a P1-billion capital infusion into Bankard, subject to the approval of the BSP.
           
The negotiations between RCBC and GE reportedly failed, not because of pricing issues, but because of a noncompeting clause preventing RCBC from running a credit-card unit and directly competing with Bankard.
           
RCBC had earlier announced plans to set up another credit company, a few years after the proposed sale of Bankard to GE.
           
A pioneer in the Philippine credit card industry, Bankard was established in 1981 as the Philippine Commercial Credit Card Inc. (PCCCI), operating a domestic credit-card operation, which started full commercial operations in June 1982.
           
After 10 years, PCCCI changed its name to Bankard Inc.
           
In May 2000, Bankard became a member of YGC after RCBC acquired 67 percent of the company’s shares through RCBC Capital Corp.
           
As of end-September this year, Bankard’s had posted losses amounting to P571 million, higher by P258 million compared to the amount posted in the same period in 2005. The increase in the losses was primarily due to the booking of higher additional valuation reserves, in the amount of P272 million, as required by the BSP.
           
This was coupled with the nonrecognition of deferred tax assets on credit provisions effective January 2006.
           
Its diversification into so-called card-not-present transactions, or those where neither the card nor the cardholder is present at the point-of-sale (e.g. over the Internet, by mail, telephone or fax), combined with selective card-present transactions, is generating new fee income expected to contribute to Bankard’s returning to profit.
           
Last year, Bankard’s net merchant discounts reached P173.3 million, a growth of 91 percent or P71.2 million from year-ago figures. In the third quarter this year, merchant discounts grew by P50.5 million or 232 percent over the same period last year.
           
Its January-to-September 2006 merchant discounts grew by P122.6 million or 149 percent from the previous year.
           
Year-to-date September 2006 billings ended at P5.5 billion, an 8-percent growth compared to year-to-date September 2005.
           
Bankard also reported a total of 335,529 cards as of end-September this year.
           
Among the three major brands issued by the company, MasterCard contributed more than 49 percent to total cards, followed by JCB with 27 percent of the total pie.
           
RCBC shares on Tuesday shed 2.94 percent to close at P24.75. On the other hand, Bankard shares last traded on November 27, 2006 at 82 centavos.

Business Mirror

November 29, 2006

DBP, Land Bank merger 'just a matter of time'

By Jun Vallecera
Reporter

THE Development Bank of the Philippines said on Tuesday its reported merger with the Land Bank of the Philippines was a question largely of time than anything else.
           
DBP president and chief executive officer Rey G. David said he favors the union on both substantive and relevant grounds.
           
Such a union “bodes well for operational and financial efficiency,” he said.
           
“Mergers and acquisitions leading to the consolidation of the banking system are a positive trend that is quite clear. Another round of capital contributions is always an option that the monetary authorities can also use to enable consolidations and mergers,” David noted.
           
He said such a union was not an impossibility and in fact makes sense from a number of angles.
           
“A merger also bodes well for operational and financial efficiency. As you know, the cost of the banking infrastructure that is needed to meet the imperatives of Basel 2 and other Corporate Governance and Risk Management requirements are quite substantial.”
           
A combined enlarged institution will result in “substantial savings in terms of hardware, software and processes. So why would the national government need to have two independent structures that is practically doing the same business?” he asked.
           
Basel 2 pertains to a global risk management framework allowing banks to handle better the credit, operational and market risks to which they are routinely exposed to.
           
More importantly for them, Basel 2 forces compliance by penalizing noncompliant institutions with burdensome capital charges that sap their ability to lend and therefore limit their capacity to generate profits.
           
David also said the average age of its employees has risen significantly over the years, currently pegged at 46 years versus only 30 years at the private sector.
           
“Hopefully, with a Land Bank-DBP merger, we will have a younger, more streamlined organization that will poised to meet the developmental challenges and needs of the national government in the next decade,” he said.

Business Mirror
November 29, 2006

Inflation seen at 4.5-5.2%

RATE LOWEST IN 29 MONTHS ON LOWER
CRUDE COST, STEADY RICE YIELD

By VG Cabuag
Reporter

CONSUMER prices in November are expected to further go down as a result of lower cost of crude in the domestic market and rice production is seen going steady.
           
Bangko Sentral ng Pilipinas governor Amando M. Tetangco Jr. said inflation rates for this month could hit between 4.5 and 5.2 percent, which could be the country’s lowest in 29 months.
           
The last time inflation went below the 5.4 percent level was in May 2004 when it hit 4.5 percent.
           
“Inflation in November is seen to decelerate further given lower rice and domestic oil prices alongside a strong peso,” Tetangco said in a text message sent to reporters.
           
There is, however, a general downtrend of the country’s inflation rates, computed on the prices of a basket of basic commodities and services, this year from a high of 7.6 percent in February to 5.4 percent in October.
           
For the 10-month period, the consumer prices already averaged at 6.6 percent. This, however, is still higher than the 4 to 5 percent target for the year.
           
According to data from the National Statistics Office, rice prices last month went down by less than .33 percent, while prices of fuel, light and water went down by .35 percent.                    
For this year, the inflation rate forecast of the Development Budget Coordinating Committee (DBCC) was between 6.9 percent and 7 percent.
           
The BSP wants to revise such inflation forecast to 6.5 percent due to the easing up pressure on oil prices and the rising peso against the dollar.
           
Government economic agencies change their forecast from time to time, while target is being fixed for a particular period.
           
The central bank last week upgraded its peso-dollar exchange outlook for 2007 to between P50 and P52 to $1, from the previously adopted P51 to P53 exchange rates. The current peso-dollar exchange rate, however, already hovered at P49. On the other hand, oil companies made a series of reductions on their prices—almost on a weekly basis—since late August.
           
BSP last week also narrowed its forecast on the prices of Dubai crude to $62to $64 per barrel from $61to $67 per barrel.
           
Government economic managers said they are optimistic that the 4- percent to 5-percent inflation rate may be achieved next year if there are no adverse shocks on crude prices during the period. (With Bloomberg)  

Business Mirror

November 29, 2006

P6-B RTBs sold, blitz set

TREASURY CONFIDENT OF GOOD RECEPTION

By VG Cabuag
Reporter

THE Bureau of Treasury will hold a road show in several parts of the country this week to promote and sell its remaining retail treasury bonds, a debt paper meant for both the general public and the institutional buyers.
           
The road show, which starts Tuesday through December 4, will cover Cebu, Davao and the whole of Luzon, National Treasurer Omar Cruz said Monday after the auction of the five-year RTBs.
           
“We want to (hold) the roadshow to build up and size up the interest of the market (on the RTBs),” Cruz said, adding that the measure would also build up the books of the BTr after some of its debt instruments have already matured or will mature by end of the year.
           
In the auction, the BTr raised P6 billion from its five-year debt instruments, which fetched a coupon rate of 5.875 percent. Although it received tenders that reached P9.8 billion, Cruz said yesterday’s rate was lower compared to the 7.5 percent rate that it fetched when the same debt instrument was offered last year.
           
One of the reasons for the decline was the easing up of the country’s inflation rates, Cruz said.
           
It plans to sell P14-billion debt papers during the roadshow.
           
Cruz is optimistic that they would receive good reception among the buyers, especially from the banks which have a lot of money as a result of, among others, the maturing debt papers that they hold.
           
In July, he said, the BTr paid about P38 billion of its maturing debt papers and in December, it will again shell out P32 billion, or a total of P70 billion in fresh funds going into the banking system that would have to be reinvested somewhere.
           
“With that ‘hang-up’ of funds, what will be their (banks’) investment alternative, savings or time deposit?” Cruz said.
           
The P6-billion RTBs are part of the P20 billion that the government plans to sell this year. Half of those funds were supposed to be offered to the institutional buyers and the remaining to the general public.
           
In previous years, however, when the BTr offers the debt instrument, most of the RTBs were just gobbled up by the institutional buyers and only a handful by the general public, as there were not enough information to generate interest.
           
This time, Cruz said they will sell the debt paper, with the rate of 5.875 percent, through its 11 selling agents. 
           
These are Allied Banking Corp., Banco de Oro Universal Bank, BDO Capital, Deutsche Bank, Development Bank of the Philippines, Equitable PCIBank, First Metro Investment, Land Bank of the Philippines, Metropolitan Bank and Trust Corp., Multinational Investment Bank and Rizal Commercial Banking Corp.

Business Mirror
November 28, 2006

Canada extends aid program for SMEs

By Manuel T. Cayon
Reporter

DAVAO CITY—The Canadian government said it would pour in P45 million more to finance the extension of its flagship program for private enterprise in the Philippines that would focus on ensuring the sustainability of the businesses of small and medium enterprises (SMEs).
           
The program, Private Enterprise Accelerated Resource Linkages 2 (Pearl 2), covers the SMEs spread in the entire country, with one university for each island group to provide the “knowledge component” in ensuring sustainability, information and dissemination of the program, said Ed Sutherland, project director.
           
The Ateneo de Davao University was the latest “to enter the Pearl 2 Production Examination Program,” along with La Salle University for Luzon, and the University of San Carlos for the Visayas area.
           
Peter Sutherland, Canadian ambassador to the Philippines, said that the Autonomous Region in Muslim Mindanao (ARMM) would be included in the extended Pearl 2 project owing to its vast improvement in governance and its capability to utilize already its corporate powers.
           
The ambassador said that the improvement of the ARMM local governments was aided by a separate project, the Local Government Support Program of the Canadian International Development Agency.
           
It has been providing “capability-building” assistance to local officials in the ARMM provinces of Maguindanao, Lanao del Sur, Basilan, Sulu and Tawi-Tawi during the last 15 years, he added.
           
Ed Sutherland said that the Pearl 2 project would end in November 2008, instead of the previous timetable of November 2007 prior to the new funding. He said that the extension of the project was prompted by its “very bright return” for very low funding.
           
During the last three years, for instance, the Pearl 2 project has helped generate about one million jobs “due to the improved performance of the SMEs.”

“If we have the exact figures from all the SMEs and business associations that we have helped, this number [one million jobs] may be an underestimation, in fact,” he said.
           
The Pearl project helps business associations and business chambers provide professional and entrepreneurial skills in management and operations.
           
Ed Sutherland said that the Pearl 2 project does not provide funds for any particular livelihood project, but for the capacity improvement of businesses to improve their viability and sustainability.
           
He said that between 50 to 60 business associations have been covered by the project, “with each association having several more small businesses as members.”

Business Mirror

November 17, 2006