Bankers Institue of the Philippines, General Membership Meeting
Good morning.
I would like to thank the Board of Directors of the Bankers Institute of the Philippines for inviting me to be the guest speaker to your general membership meeting. I am honored to be given the opportunity to address the members of this very prestigious organization of professional bankers.
I commend the BAIPhil leadership for adopting the theme “Moving Towards Global Banking Compliance” for the year 20062007. As a Government Financial Institution, the Pag-IBIG Fund contributes to building a foundation for a strong Philippine economy. Economic growth can only be a possible with a stable financial sector, and the adherence to international regulatory standards being advocated by your organization is an important step towards maintaining such a stability.
I cannot claim to be an expert on the more profound, esoteric aspects of banking regulations. On that matter, you are the Yodas, I’m just an apprentice Jedi. So today I would like to talk to you about something in which I have the advantage of familiarity over you—the PagIBIG Fund, and its place in the housing and real estate sector. Given the magnitude and impact of PagIBIG’s accomplishments, I firmly believe that its story deserves the spotlight.
LEADING THE WAY IN HOUSING
Today the housing and real estate industry is said to be booming. This is evident in the growing number of residential projects being developed in various parts of the country. In Metro Manila, where the scarcity of land makes it impossible to put up new subdivision projects, the housing boom is taking the form of vertical developments. There are numerous condominium projects now in various stages of completion, trying to outdo each other in terms of location, amenities and pricing. Some of these projects are funded by Pag-IBIG through our Medium/High Rise Building Program, or MHRB.
On the financing side, and this is something you know firsthand, the banks are trying to outdo each other in offering housing loans to consumers. You open the newspapers and you will see several pages of advertisements where banks vigorously try to sell their housing loan products almost as aggressively as mobile phone companies advertise their latest promo.
The banks have been so aggressive, in fact, that even some of our own private developer partners who have funding commitment lines with Pag-IBIG have turned to the banks for their mortgages.
This was not the case a few years ago.
At that time, banks were staying away from housing. Even the other GFIs were very timid, to say the least, in taking part in housing (they continue to be shy till today by the way). In fact I have been warned by colleagues in the other GFI that the Fund is courting trouble by investing heavily in housing. They instead suggested that we put our money in other investments that are easier to manage. We went ahead anyway.
Our resolve was fuel by the knowledge that the government alone cannot fully address the supposed 3.5 million housing backlog. This is a great task, and one that would require more than a trillion pesos, which government simply cannot provide.
Any meaningful effort to address the housing backlog must therefore include, and even be led by, the private sector. Thus, we took on the task of leading the way for the private banks to come in.
We took some very bold steps that have contributed to the vibrant mortgage market we are seeing today. We adopted the lowest of interest rate in the market. We increased our loanable amounts to a maximum of P2 million. We reduced equity requirements of borrowers, end even eliminated them altogether in the lower housing loan packages. We streamlined the process to make takeouts faster for our developers.
As a result of our efforts, the PagIBIG Fund’s housing loan program took off and managed to reach previously unattained levels of accomplishment.
Our consistently high performance in this area has brought the PagIBIG Fund to the forefront as the single biggest provider of housing loans in the country. Let me repeat that. We are today the biggest provider of housing finance in the entire economy.
By the end of 2005 for instance, Pag-IBIG accounted for 36.68% of mortgage financing in the country, ahead of all the other government financial institutions (GFIs), and all the private banks. Not one single institution came close to even half of what we had financed.
But apart from our dominant position in mortgage financing today, we have also succeeded in accomplishing our goal of paving the way for greater private sector participation in housing.
This is what we set out to do around six years ago. We set out to prove and show that housing was not a charity but a viable program. And if managed well, coupled with the discipline of dealing only with legitimate and responsible developers, it can also be profitable.
Very few people give credit to the Pag-IBIG Fund for its major role in drawing the banks back into housing. But I am convinced that the bold steps we took six years ago have contributed to the vibrant mortgage market we have today.
While we are not exactly elated that our previous 35% annual growth in mortgages may not be repeated again, we are really excited about the substantial increase in participation by the private banks. The banks have substantially increased the housing finance pie. We are witnessing today a rejuvenated role by the banking sector in housing finance.
FUND PERFROMANCE
Our position as the leading source of home financing in the country today is only one of the bright spots in Pag-IBIG’s recent history. The truth is, our performance in housing has gone hand in hand with the remarkable growth of our assets and revenues.
The Pag-IBIG Fund’s asset base has been growing consistently in the last five years. As of December 2006, we have already built up our total assets to P191.55 billion.
I would like to point out that in 2000, the Fund’s total assets reached only P113.77 billion, and that was built up over the Fund’s first 20 years of existence. Today we are already close to doubling that amount, after a span of only six years. In short, what took our predecessors 20 years to do, we are close to duplicating in only 6 years.
I mentioned before that we had set out to prove that housing can be profitable. Our proof of that can be seen in our strong income growth since 2000. In 2005, our net income reached a record high, surpassing the record we have set the previous year. We do not have the final numbers yet for 2006, but we are confident that our income would be even better.
Let me stress that the fund’s success is not the fact that we have been making income in the past five years. Rather, it is the fact that we have had a positive income growth over the past 6 years. From being a virtual cellar dweller among Philippine corporations in its earlier years, Pag-IBIG in fact rose to being sixth and ninth in 2002 and 2003, respectively, in terms of net income.
It has been a consistent six-year growth for Pag-IBIG. This has been given independent confirmation by the Philippine Ratings Services Corporation, or Philratings, when it granted the Fund a “Aaa” credit rating. This is the highest rating that has been given to a government agency today. It recognizes Pag-IBIG’s performance as a consistently profitable company, with a well-managed investment portfolio and with a highly-assured liquidity to meet all of its obligations to members and conditions alike.
The Fund has been going through quarterly rating confirmation proceedings, and I am glad to say that we have maintained our standing.
So we have not only taken the lead in housing and shown the way for the private sector. We have also managed to transform a quiet and unheralded government agency into a consistently strong financial institution.
And we have managed to do all these despite the limitations inherent in the Pag-IBIG Fund.
First is the fact that our employees are earning less than their counterparts in the private sector and other GFIs because of the salary standardization law, which we are subject to.
Secondly, the bulk of our employees are contractual hires.
Thirdly, we are not a tax-exempt corporation.
And lastly, we have been collecting only P100 a month from every member, plus the employer’s share, since 1980.
And yet despite all these, we have managed to do very well for a government agency. I’d like to think that this is also our share in restoring the people’s flagging faith in government.
FOCUS ON LOW INCOME EARNERS
Now, despite the greater participation banks have been showing the past two years, the Fund continues to enhance its shelter financing programs. This time around, we are putting a stronger focus on low income earners.
Upon the direction of our chairman, Vice President Noli De Castro, the Pag-IBIG Fund management studied the feasibility of further lowering the interest rates for our most affordable housing loan packages. Last December our Board of Trustees approved the new housing loan guidelines with the new interest rates.
For loan packages up to P300,000 we have brought down the interest rate from 9% to only 6%. For loans exceeding P300,000 up to P500,000 we have lowered the interest rate from 10% to only 7%.
For loans over P500,000 to P1 million, the old interest rate of 11% has been decreased to 10.5%. Over P1 million up to the maximum of P2 million, the interest rate has been reduced from 12% to 11.5%.
The maximum payment period has also been increased to 30 years. These changes effectively lower the monthly amortizations so that even minimum wage earners and government employees in the lower salary grades can afford our housing loans.
For a housing loan of P300,000, for instance, the monthly amortization is only P1,798. For a P500,000 housing loan, our borrowers would only have to pay P3,326.
This does not mean we are competing more aggressively against the banks for a greater share of the mortgage financing market. Far from it. Like I said earlier, we have a huge housing backlog in the country. There is plenty of room for the banks to participate. What we are doing is focusing more on the P500,000 or lower segment of the market, giving access to affordable housing to people who otherwise might never consider themselves capable of buying a house. We are positioning ourselves more in socialized and lowcost housing, leaving the more lucrative middleclass housing an open field.
Sa amin na yung mga teachers, security guards at government employees na gustong magkabahay. Sa inyo yung mga managers, junior executives at call center agents.
Also, to raise additional Funds for our housing programs, we will be floating P2 billion worth of Housing Bonds this year.
The Housing Bonds shall be issued at par, with a term of up to five years from issue date. For this issue, the coupon rate will be a fixed interest rate based on the prevailing market rate at the time of issuance. This will be tax-exempt. The bonds will be secured by an HGC guaranty up to the amount of Principal and Interest. We are opening the bonds to retail investors, with a minimum participation of P10,000. A unique feature of our Housing Bonds is the raffle promo, where eligible bondholders may win a house and lot worth up to P1 million in our annual raffle draws.
This is part of our continuing efforts to boost the housing sector and provide shelter financing services to even more Filipinos.
Our economy is on an upswing. 2006 proved to be a very good year for the Philippines as far as the economy is concerned, and 2007 is looking good as well. I think you will agree that the housing and real estate sector, which is recognized for its high multiplier effect, has contributed to this positive state of affairs. In fact it is one of the important sectors of the country’s economy and one of the indicators of its economic health. Services generated from the real estate industry form part of the services sector, which is one of the fastest growing industry sectors of the economy.
Housing has played a key role in jumpstarting the economy and realizing the gains that we are seeing now. To sustain this, we need greater participation of the private sector, especially the private banks, without disregarding the need for prudent investment policies, of course.
The Bankers Institute of the Philippines plays an important role as one of the guardians of the banking sector’s stability, soundness and productivity. While your organization’s main focus for this year is on compliance with global standards, I hope that you will also lend support to our call for more investments in housing.
Thank you very much.
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Rotary Club of Marikina
Good afternoon.
Firstly, i would like to thank you for inviting me here. I am honored to be part of this gathering, and it is my pleasure to address this distinguished group.
I am here today to speak about my experience as a public servant. Last December, i was named among the outstanding young men of the Philippines for 2006, in the field of government service. I am elated to receive such a recognition, of course. But the truth is that until about six years ago, i never even thought i would be working for the Philippine government.
I grew up with a high regard for government employees because both my parents were public servants. My father was a member of the judiciary, while my mother was an employee at the SSS.
However, I never really seriously thought of working for the government. In fact I spent most of my college life as an activist, strongly criticizing the government, shouting slogans essentially calling for it to be brought down.
Before I joined the Pag-IBIG Fund I was a practicing lawyer. And like anyone in the private sector, my colleagues and I had our share of criticisms against the government. We complained against the slow service, the ineptitude of many government workers, the red tape, and the rampant corruption that goes on in many levels of the government bureaucracy.
I guess I was like most Filipinos in that respect. We have practically raised complaining against the government to an art form. But for me, it got to the point that i just grew tired of the constant complaining. I felt that we in the private sector have been doing nothing but complain, and that doesn’t really accomplish anything. Wala namang nagbabago.
So when I was presented with the opportunity to join the government through the Pag-IBIG , I saw it as a chance to actually do something about those things that have been the objects of our incessant complaints. I thought, here was a good opportunity to help change things.
The Pag-IBIG Fund certainly was a good starting point. When I joined the fund, it was just another government agency that was not really well known. I doubt that many of its members even knew or cared about the Pag-IBIG Fund then, apart from that fact that it is one of those names listed on their payslip under “deductions.”
My predecessors had a done a good job of protecting the fund, but I guess that did not do much for its growth and activity as an institution, in much the same way that overprotective parents would inhibit a child’s creativity and development.
When I first joined Pag-IBIG , I saw that it did not fit the typical image of a government office. It was not a cesspool of corruption. It was not staffed by lazy and inept employees who punched in at 8am, left the office at precisely 5pm, and did very little in between.
On the contrary, Pag-IBIG had a wealth of good, reliable people in its roster. But it was like a powerful engine that wasn’t firing on all cylinders. It had a lot of potential that was largely untapped. That convinced me all the more that it could do a whole lot better. And i was determined to see that happen on my watch.
It wasn’t easy, of course. Apart from being the young upstart who has been put in charge of many veterans in the fund, I faced various challenges inherent in the fund itself as an institution.
First, unlike other government institutions, like the SSS and GSIS, Pag-IBIG Fund is still subject to the salary standardization law. Not only were the employees being paid less than their private sector counterparts, but we could not raise their salaries even when the fund started earning higher incomes. As a tool for improving personnel efficiency, salary increases were not among our options.
Secondly, more than half of our employees are contractual hires. The lack of tenure of the bulk of Pag-IBIG employees had serious implications on efficiency.
Thirdly, we are working with very limited resources. Today, we are only collecting one hundred pesos per member every month, plus the employer’s equivalent counterpart contribution. This contribution rate for Pag-IBIG members was set more than two decades ago, and has not been changed since then. The value of the peso has depreciated considerably in more than two decades, but we’re still constrained to collect the same amount.
Another factor that limits our resources is the fact that unlike SSS and GSIS, we are not a tax-exempt institution. Instead of devoting all our income to our member’s benefits, we have to turn over some of it to the national government.
Fourth, there are the bureaucratic hurdles that have seriously limited the growth of Pag-IBIG’s centerpiece program, which is the housing loan. Apart from the fact that the interest rates were not very competitive, borrowers had to deal with having to submit as many as 17 required documents, and waiting for up to 40 days for the loan application to be processed. There were high processing fees that had to paid. Not surprisingly, these deterred many low-income workers who would have wanted to avail of housing loans.
Despite these challenges, we succeeded in transforming the fund into a more dynamic institution. By adopting innovative policies and making some very bold changes, we were able to maximize our resources, motivate the employees and raise awareness about the fund itself. Moreover, we were able liberalize the housing loan program to make it more attractive and accessible to low income earners.
Today, Pag-IBIG is one of the biggest income earning corporations in the country, and the leading force in shelter finance.
I think that in accomplishing what we have with the Pag-IBIG Fund, we have proven that government can and does work. We have shown that, in terms of performance, we can be at par or even better than the private sector.
I believe that what we have established is no less than compelling evidence that a government agency can overcome its limitations, that government wages and bureaucracy are not valid excuses for mediocrity.
In physics, efficiency is defined as the relationship between energy input and ouput. Finger pointing takes energy. Complaining takes energy. So does finding someone to blame. And these are all energy wasted because they don’t really produce positive output.
We can get more results if we stopped finger pointing and instead devoted all our energy to solving problems and getting things done.
I think that is what our country needs right now—the resolve among its people to work on finding solutions to our problems. We already have a surplus of critics and nay-sayers.
About two weeks ago, I spoke before a group of young people in a forum organized by youth leaders in san juan. A young man asked me what qualities are needed to accomplish what we have in government service. It’s a very good question, but one that i do not ask myself too often.
I said then that one very important quality is a purity of purpose. I think dalisay na hangarin was how i put it. One does not go into government service for the financial rewards because, frankly, there’s not much of that. You have to really want to serve the public. In that sense, government work is both profession and vocation.
One also needs integrity. It’s such a simple word, but it encompasses many things—honesty, honor, strength of character, uprightness and reliability. It is what one needs to resist being swept by the tides of corruption that have been engulfing the government bureaucracy for a long time.
One needs dedication. In the face of challenges, setbacks, delays, and detours, we have to remain committed to our goal.
And finally, the passion and the drive to see things through.
It was our drive to succeed that allowed us to increase Pag-IBIG ’s net income year after year for the past six years, and transform it from a virtual unknown into one of the top corporations in the country in terms of income.
It was our drive that turned it into a financially stable corporation with a triple “a” credit rating, the highest for any government institution.
It was our drive that enabled the 300% growth in Pag-IBIG ’s housing loan program. It was our drive that put us ahead of any government financial institution and any private bank in terms of mortgage financing. It was our drive that gained for Pag-IBIG international recognition in the form of the UNHabitat Scroll of Honour awards granted to us last year.
Of course, the Rotarians are no strangers to these qualities. What took me some three hundred words to say here, the Rotarians have long ago expressed in a simple formula consisting of four simple questions: is it the truth ? Is it fair to all concerned ? Will it build goodwill and better friendships ? Will it be beneficial to all concerned?
As an organization built around the ideals of community service and high ethical standards, the rotary club is a powerful force in our efforts to build a strong and progressive nation.
As a public servant and a Filipino, I humbly appeal to the Rotarians for greater help in strengthening our countrymen’s faith in government.
When I was a student activist, i was among those who shouted “ibagsak” at every opportunity. Today, I stand with you to say, “itayo natin ang dangal ng serbisyo publiko, itayo natin ang integridad ng gobyerno, at itayo natin ang isang matatag na sambayanang pilipino.”
Maraming salamat po.
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United Architects of the Philippines, 27th Anniversary Celebration
Good Evening.
I would like to congratulate the Diliman Chapter of the United Architects of the Philippines on your 27th anniversary. I am deeply honored to have been invited to join you in celebrating this milestone in the history of your distinguished organization.
Congratulations also to your new set of officers, headed by your incoming president, Architect Malu Marquez-Gutierrez. I am pretty sure this organization is in very good hands.
You know in my position as President and CEO of the Pag-IBIG Fund, I have plenty of opportunities to meet with various people involved in housing, real estate and construction, especially the developers whom we work closely with in our housing program. But I do not often get the chance to speak to the architects people like you who play a very important role as planners and designers. Which is why I am especially thankful to the UAP Diliman Chapter for giving me the opportunity to address this illustrious group.
I have always had a high regard for architects, as your profession demands that you be both artists and scientists. Indeed, when you think of the wonders of the world, we have to remember that these began as ideas in the minds of the planners and designers who were your forerunners.
Of course, UAP Diliman Chapter counts among its members some of the most outstanding and prominent practitioners of your profession in this country. I know of, for instance, Ronnie Manahan, former Dean of the UP College of Architecture and LIKHA Awardee. Another is Froilan Hong, who worked with Pag-IBIG on the joint housing program with the University of the Philippines. You also have Antonio and Cristina Torralba, who are not only architects but developers as well with Active Realty.
Housing is the common ground that the Pag-IBIG Fund shares with your profession. We work on the finance side, providing funding both to housing developers and to homebuyers. You work on the construction side, creating the designs and plans for new homes. But at the fundamental level, our objectives are the same to improve the quality of people’s lives through quality housing.
In the last five years, Pag-IBIG has made great strides in improving its standing as an institution and in fulfilling its mandates, particularly the housing mandate. I’d like to take this opportunity to report briefly on the Pag-IBIG Fund’s accomplishments.
2005 was a very good year for us in terms of Pag-IBIG’s financial performance. We ended the year with a net income of P7.38 billion, which is the highest in Pag-IBIG’s 25year history. In the last five years, we have seen Pag-IBIG grow from an ordinary workers’ fund into one of the country’s financial giants today. In 2000, our net income was only P2.37 billion, which means that we have made a 170% leap in a span of only five years.
Our assets have also been growing steadily in the last five years. We ended 2005 with P178.3 billion in total assets. This is remarkable because in 2001, the Fund’s assets stood at only P113.77 billion, and it took 20 years to build up that amount. We’re closing to doubling that figure in only five years time.
The Fund’s phenomenal growth also translated into greater achievements in out shelter financing program. Our housing loan program for endusers reached an all-time high last year with total disbursements of P15.30 billion. That’s a 3.41% increase over the previous year. And again, this constitutes a remarkable increase of 200.98% compared to our housing loan program five years ago which was able to release P5.08 billion. This improvement can be attributed to the reforms we have introduced to the housing loan program, particularly our interest rates which are among the lowest in the market.
The Pag-IBIG Fund is now the single biggest provider of mortgage financing in the country. In 2004 alone, we accounted for 34.29% of the total mortgage financing in the country, with total housing loans exceeding that of GSIS, SSS, NHA and NHMFC combined. Our performance in this area is only surpassed by the banks, but only if you compute their collective housing loan releases.
We expect to further improve our accomplishments in housing as we have just begun implementing the amended guidelines to our housing loan program. I will not give you the full details here, but suffice to say that we have restructured our housing loan packages to offer lower interest rates and longer payment terms, depending on the loan amount. We have been observing that private banks are getting more and more aggressive with their housing loans, and we saw the need to change our guidelines to be more competitive and to offer a better deal to our members.
I mention these things not so much to trumpet our financial stability and accomplishments, but to give you an idea of the resources that we are making available to the housing industry.
I said earlier that we both share the vision of improving the quality of people’s lives through quality housing. We also share the knowledge that we still have a long way to go to realize this vision.
When we speak of housing in the Philippines, I think we can say about architects something similar to what we usually say about doctors. Just as many Filipinos live and die without ever having seen a single doctor, similarly, a great number of our countrymen who belong to the poorest of the poor build their homes without ever consulting an architect. To the Filipino as do-it-yourself architects, the concept of designing a home is simple: build walls and roofs that are sturdy enough to withstand the typhoons and the summer heat. Scant attention is paid to aesthetics, if at all.
This is especially and painfully evident in the numerous informal settler communities, or what we used to call squatter areas, that we still see today in many parts of Metro Manila and other urban centers. Blighted communities made up of ramshackle shanties hastily put together using all sorts of scrap materials, with no forethought whatsoever as to how the structures are arranged or organized. Theirs is the architecture dictated by need and limited resources.
I long to see the day when Filipinos will no longer have to make do with this kind of architecture. I long to see the day when every Filipino family will be able to leave the job of planning and designing their homes to the professionals like you.
As members of the UAP, and especially of one the best Chapters of your organization, you all play an important role in the housing industry and the provision of decent shelter for Filipino families.
I urge you to support the housing sector. As professionals, it is also to your advantage to see a more active housing market, as it means more business for you. But beyond that, as Filipino citizens, it is also in your interest to have a vibrant housing industry, which translates to more and better homes for our countrymen, and greater economic growth for the Philippines through downstream economic activities generated by this sector.
I know you are all very much aware of your great responsibility, both as individual architects, and as a community of professionals. The fact that you have invited me to this event indicates that you are also keenly aware of your part in the national shelter program.
There is still so much that we need to do, and we can only accomplish our goals if we work together.
Thank you very much, and more power to the UAP Diliman Chapter.
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