Technical Assistance Consultant’s Report

Project Number: 51325-001

January 2022

Regional: Advancing Inclusive and Resilient Urban

Development Targeted at the Urban Poor
Philippines: Scaling Up Green and Inclusive Housing
Microfinance

Prepared by Joji Reyes

GlobalWorks International Consulting, Incorporated

For Asian Development Bank (ADB)

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and
ADB and the Government cannot be held liable for its contents.
 ABBREVIATIONS

AKP – Alalay sa Kabuhayan Program

AMP – Alalay sa Magsasaka Program
ADA – Appui au Développement Autonome
ADB – Asian Development Bank
AGFP – Agricultural Guarantee Fund Pool
ALD – amount of loan disbursed
AHP – Affordable Housing Program
APP – Alalay sa Pabahay Program
ASA – ASA Philippines Foundation, Inc.
ASHI – Ahon Sa Hirap, Inc.
ASKI – Alalay sa Kaunlaran sa Gitnang Luzon, Inc.
AUB – Asia United Bank
BAP – Bankers Association of the Philippines
BCRUPD – Building Climate Resiliency Through Urban Plans and
Designs
BKI – Bangko Kabayan, Inc.
BOI – Board of Investments
BOP – base of the pyramid
BSP – Bangko Sentral ng Pilipinas
BSP – Bangko Sentral ng Pilipinas Center for Learning and
CLIA Inclusion Advocacy
CARD – Center for Agriculture and Rural Development
CBB – Country Builders Bank
CBU – capital build up
CDA – Cooperative Development Authority
CLPs – comprehensive land use plans
CMP – Community Mortgage Program
COVID- – Coronavirus disease 2019
19
CSO – civil society organizations
CSR – corporate social responsibility
DBP – Development Bank of the Philippines
DevSEA – Developing Sustainable Energy Access
DMC – developing member country
DOF – Department of Finance
DPRM – Disaster Preparedness & Response Management
DPUCSP – Development of Poor Urban Communities Sector Project
DRRM – disaster risk reduction and management
DSHUD – Department of Human Settlements and Urban
Development
DTI – Department of Trade Industry
EDS – Enterprise Development Services
EIB – European Investment Bank
ELUPDP – Environmental and Land Use Planning and Development
Bureau
ENA – Energy Needs Assessment
EO – Executive Order
ESG – environmental, social and governance
ESMF – environmental and social management framework
FDA – Foundation for Development Alternatives
FIDA – Farmers integrated development assistance
FIL – Financial intermediation loan
GAA – General Appropriations Act
GBCI – Green Business Certification Inc.
GCF – Green Climate Fund
GDP – Gross Domestic Product
GEF – Global Environmental Facility
GEL – Green Energy Loan Program
GIF – Green Inclusive Finance
HDMF – Home Development Mutual Fund
HFC – Home Financing Corporation
HFH – Habitat for Humanity
HGC – Home Guaranty Corporation
HMF – Housing microfinance
HOACDB – Homeowners Association and Community Development
Bureau
HREDRB – Housing and Real Estate Development Regulation Bureau
HUDCC – Housing and Urban Development Coordinating Council
IFRIC – International Financial Reporting Interpretation Committee
IPP – Investment Priorities Plans
IRR – Implementing Rules and Regulations
ISFs – informal settler families
JFJCM – Japan Fund for the Joint Crediting Mechanism
JMH – JMH Microfinance, Inc.
K Coop – Kasagana Ka Coop
KCCDFI – KFI Center for Community Development Foundation, Inc.
KDCI – Ka Development Center Inc
KEFI – Kauswagan Educational Foundation, Inc.
KKP – Kaagapay sa Kabuhayan Program
KMBI – Kabalikat Para sa Maunlad na Buhay, Inc.
KRCI – Katuwang Resource Center, Inc.
KSAs – Key Shelter Agencies
LCBU – Locked in Capital Build Up
LEAP – Loan for Educational Advancement Program
LDs – Loan disbursed
LRA – Land Registration Authority
LSPs – local shelter plans
M&E – monitoring and evaluation
MBAI – Mutual Benefits Association Inc.
MC – Memorandum Circular
MCPI – Microfinance Council of the Philippines, Inc.
MDDI – Ministère du Développement durable et des Infrastructures
MF – Microfinance
MFIs – microfinance institutions
MIS – management information system
MNRC – Microfinance NGO Regulatory Council
MOU – Memorandum of Understanding
n.a. – no available data
NATCCO – National Confederation of Credit Cooperatives
NCC – National Credit Council
NCR – National Capital Region
NEDA – National Economic and Development Authority
NHMFC – National Home Mortgage Finance Corporation
NHA – National Housing Authority
NISUS – National Informal Settlements Upgrading Strategy
NWTFI – Negros Women for Tomorrow Foundation, Inc.
NGO – nongovernmental organization
OGCC – Office of the Government Corporate Counsel
OSHDP – Organization of Socialized and Economic Housing
Developers, Inc.
P2P – peer to peer lending
PALMSFI – People’s Alternative Livelihood Microfinance Foundation of
Sorsogon, Inc.
PAR – Portfolio at risk
PBC – Partnership Biodiversity Conservation
PCFC – People’s Credited Finance Corporation
PDP – Philippine Development Plan
PEF – Peace and Equity Foundation
PGC – Philippine Guarantee Corporation
PHILNET – Philippine Network for Helping the Hardcore Poor
PICPA – Philippine Institute of Certified Public Accountant
PMPFI – Pag asa ng Masang Pinoy Foundation, Inc.
PPFPs – provincial physical framework plans
PSF – Private Sector Facility
RAFI – Ramon Aboitiz Foundation, Inc.
RBIs – rights based instruments
REM – real estate mortgage
RESA – Real Estate Service Act
RETA – Regional Technical Assistance
SCCF – Special Climate Change Fund
SEC – Securities and Exchange Commission
SEDP – Simba sa Pag Asenso, Inc.
SHDA – Subdivision and Housing Developers Association, Inc.
SHFC – Social Housing Finance Corp.
SOAP – Subdivision Owners Association of the Philippines, Inc.
SSR – sama samang responsibilidad
SSS – Social Security System
TCT – Transfer certificate of title
TOPS – The Organization of Property Stakeholders
TSKI – Taytay Sa Kauswagan, Inc.
TSPI – Tulay sa Pag unlad, Inc.
TURMM – Transformative Urban Resettlement in Metro Manila
Project
TWG – Technical Working Group
UAAP – United Architects Association of the Philippines
UHLP – Unified Housing Lending Program
USAID – United States Agency for International Development
WASH – Water, Sanitation & Hygiene Program
WB – World Bank
 CONTENTS

Page
I. EXECUTIVE SUMMARY 1
II. INTRODUCTION 4
A. A Highly Urbanized Philippines 4
B. The Urban Governance Conundrum 4
C. Worsening Urban Poverty and its Multifaceted 5
Dimensions
D. Addressing Climate Change and Disaster Risks in 5
Housing
E. Purpose and Structure of the Report 6
III. HOUSING MICROFINANCE: SECTOR TRENDS, 8
CONSTRAINTS, AND CHALLENGES
A. Evolution of Housing Microfinance 8
1. The Global Emergence of Housing Microfinance 8
2. The Advent and Evolution of Housing Microfinance in 9
the Philippines
3. Strengthening and Regulating Housing Microfinance 16
NGOs
4. Strengthening and Regulating Cooperatives as 18
Nonbanking Microfinance Institutions
B. Progress Stocktaking: Evidence and Findings 18
C. Demand Analysis: Prospects for Housing Microfinance 21
in the Philippines
D. Greening Housing Microfinance for Climate Change 22
E. Prospects and Barriers to Scaling Up: Lessons Learned 23
1. Insufficient Knowledge and Institutional Capacity to 23
Launch or Expand
2. Lack of Adequate Capital 23
3. Increased Transaction Costs from Shifting to an 23
Individual Lending Methodology
4. The Need for Accompanying Nonfinancial Housing 24
Support Services to Clients
5. Market Demand and Supply side Constraints and 25
Concerns
F. Housing Microfinance Survey 25
1. Program Origin 26
2. Program Purpose 26
3. Lending Terms 26
4. Collateral Requirements 27
5. Perceived Success Factors 27
6. Interest in Green and Inclusive Housing Microfinance 27
7. Perceived Deterrents to Pursuing Green and Inclusive 27
Housing Microfinance
8. Financing Assistance Required 27
9. Important Areas of Capacity Development 27
G. Problem Analysis: The Challenge of Scaling Up Housing 28
 Microfinance for ISFs
IV. PATHWAYS TO SCALING UP GREEN AND INCLUSIVE 28
hOUSING MICROFINANCE
A. Expanding Green and Inclusive Housing 29
MicrofinanceProducts and Services
B. Developing and Implementing Sustainable PPP 32
Arrangements for Green and Inclusive Housing
Microfinance
C. Strengthening Sector Capactiy for Green and Inclusive 33
Housing Microfinance

APPENDIXES

1. Review of International Experience in Housing Microfinance 37

2. BSP Approval of Housing Microfinance 66
3. Regulation and Supervision of Microfinance Banks 69
4. The Microfinance Council of the Philippines 77
5. Regulation and Supervision of Nonbanking Microfinance Institutions 79
6. Regulation and Supervision of Philippine Microfinance Cooperatives 88
7. Profiles of Selected Philippine Microfinancing Institutions 98
8. Climate Change Adaptation for Urban Poor Housing 111
9. Microfinance and Disaster Risk Reduction and Management 124
10. Profile: Organization of Socialized and Economic Housing Developers of the 125
Philippines
11. Profile: The Subdivision and Housing Developers’ Association 129
12. Summary of Housing Microfinance Rapid Assessment: Microfinance 133
Institutions
13. Summary of Housing Microfinance Rapid Assessment: DHSUD Regional 143
Offices
14. Presentation on Microfinance and DHSUD Survey Results 148
15. Minutes of Virtual Consultation with Sector Stakeholders 153
16. Draft Final Report Presentation to DHSUD Secretary 195
17. Microfinance and Financial Technology 203
 I. EXECUTIVE SUMMARY

1. This final report constitutes the findings and recommendations of a study on housing
microfinance conducted at the request of the Philippine Department of Human Settlements and
Urban Development (DHSUD) under the Asian Development Bank (ADB) Regional Technical
Assistance (RETA) 9513: Advancing Inclusive and Resilient Urban Development Targeted at the
Urban Poor. With funding support from the Urban Climate Change Resilience Trust Fund
(UCCRTF), ADB is implementing the RETA in Bangladesh, Indonesia, and the Philippines, to
improve the capacity of governments to design and implement investment projects that strengthen
the resilience of the urban poor. The country study for the Philippines under the RETA highlighted
housing as one of the program areas for building the resilience of the urban poor against climate
and disaster risk, including the effects of the COVID-19 pandemic. It recommended, among
others, the exploration of alternative and innovative housing finance modalities such as
microfinance for building resilience.

2. The study examined the opportunities, constraints, and challenges encountered, lessons
learned, and institutional and policy reforms needed to accelerate housing microfinance as a
primary pro-poor housing finance strategy in the country. It also looked into how housing
microfinance can help build the urban poor's resilience by identifying potential products that
provide (i) credit that encourages disaster-resilient housing and (ii) support in a post-disaster
context to reconstruct damaged housing. Section 1 of the report provides the background and
context for the study. Section 2 presents the sector assessment and provides an overview of
housing microfinance in the Philippines, its evolution, findings on progress achieved so far, and
lessons on barriers to scaling up. Section 3 discusses the emergence of green, inclusive housing
microfinance as a financial product that responds to the urgent need for pro-poor and resilient
housing and infrastructure for the country's ISF population. It concludes with a 10-year road map
for how to scale-up green and inclusive microfinance in safe and resilient urban communities for
the Philippines’ underserved ISFs.

3. Banking data from the Bangko Sentral ng Pilipinas show that show that the banking
sector's disbursements for housing microfinance have reached a total of P1.535 billion as of the
end of 2019, indicating a stellar aggregate growth of almost 20 times in 10 years. However,
compared to the banking MFIs, of which there were 13 actively operating in 2019, microfinance
NGOs and cooperatives have disbursed significantly more housing microfinance loans since
2010. The biggest of these microfinance NGOs, the ASA Philippines Foundation, reported that its
home financing portfolio had jumped from Php200 million in 2015 to over P12.6 billion in 2020
when they disbursed about one million loans to over 200,000 clients. This indicates an average
loan size of some Php12,600, with each client borrowing about four times during the year. The
Alay Sa Kaunlaran, Inc. (ASKI) issued a total of P111 million housing microfinance loans last year
for use in house construction, lot acquisition, house and lot purchase, house repairs, and
maintenance. They also offered loans for water, sanitation, and hygiene (WASH) as well as green
energy. The Tulay sa Pag-unlad, Inc. (TSPI), under its micro-housing program for the
construction, acquisition, renovation, or improvements of houses and WASH purposes, disbursed
a total of P82 million in 2020, reaching a cumulative total of P459 million for the 3-year period of
2018–2020.

4. The Philippines’ rapid pace of urbanization has caused the proliferation of ISF in the cities
of Metro Manila and the regions. Based on the housing needs assessment of the local shelter
plans prepared by the local government units (LGUs) with the support of DHSUD, the total number
of informal settler families (ISFs) in the country has reached 3.6 million. These ISFs live in
communities along river lines or major highways, coastal or seashores, dumpsites, and
2

government and privately-owned lands. Furthermore, they have limited or no access to security
of tenure, adequate and affordable housing, capital, environmental and health safety, and other
social safety nets. A vast majority of them cannot avail of government housing financing programs
that have mostly catered so far to members of the formal sector.

5. A recent study (Build Change, 2019) concluded that the ISFs are mainly the potential
clients of housing microfinance institutions (MFIs). The ultra-poor, or the so-called bottom-of-the-
pyramid households, can also access MFI products but will require subsidies or some form of
viability gap funding through partnership agreements with the government or international donors
providing concessional financing. There is certainly a growing interest and momentum toward
blending traditional microfinance practices with housing microfinance innovations in the area of
green and inclusive finance. Green and inclusive finance is an emerging approach that attempts
to address the three pillars of sustainability fully. It is evolving as comprising financial services
that support economic growth in a clean, resilient, and sustainable manner and focus on the base
of the pyramid (BOP), including micro, small, and medium-sized enterprises in low-income
countries or such subsets of the population within other developing countries. It has a
multidimensional purpose: economic development, social inclusion, and environmental
sustainability.

6. While remarkable progress has been achieved to grow housing microfinance in the
Philippines and demonstrate the viability of housing microfinance products, policy and market
barriers to further scaling-up exist. These include (i) insufficient knowledge and institutional
capacity to launch or expand; (ii) lack of adequate capital; (iii) increased transaction costs from
shifting to an individual lending methodology; and (iv) the need for accompanying nonfinancial
housing support services to clients. Market demand-side constraints include the limited paying
capacity of the target clients, limited available residential land in urban areas, and more
importantly, in the Philippines, the protracted and costly process for ISFs to obtain certificates of
land ownership. On the supply side, the lack of housing products that match the lower affordable
limits of the poor and low-income households is a serious factor that hinders the growth of housing
microfinance.

7. To augment the initial findings of the study, a survey of MFIs engaged or potentially
interested in housing microfinance was conducted from mid-December 2020 to early March 2021.
Furthermore, to ascertain the capacity-building requirements of DHSUD, the survey for the MFIs
was adapted and tailored for use in its regional offices. A total of 30 questionnaires were sent out
to microfinance NGOs, cooperatives and rural banks based on an initial scoping of the sector in
consultation with the DHSUD, MCPI and BSP. About 57% or 17 MFIs responded to the
questionnaire (amid the ongoing COVID-19 pandemic). For the DHSUD, a 50% response rate
among its 16 regional offices was achieved. Almost 50% of the respondents’ ongoing HMF
programs were started because their members used microenterprise loans for housing
improvements and other housing-related concerns. About 15% developed their programs in
response to their member’s need for electricity and water supply, and sanitation. More recently,
HMF has been introduced or used to respond to the need for sturdier and disaster-resilient
housing structures. The estimated mean average loan size is about Php50,000, payable in 6
months with an interest rate of 3% per month. The loan sizes offered vary from Php15,000 to
Php150,000, depending on the loan purpose. Loan terms ranged from 6 months to a year.
insufficient knowledge and institutional capacity to launch or expand; (ii) lack of adequate capital;
(iii) increased transaction costs from shifting to an individual lending methodology; and (iv) the
need for accompanying nonfinancial housing support services to clients. About 60% of the
respondents use an individual or group guarantor as collateral. Other forms of collaterals
accepted include accumulated capital build-up of the member or transfer certificate of title (TCT).
 3

Almost 42% regard their form of financing as unsecured lending. The banking MFIs expressed
the need to develop rights-based secure tenure instruments further for them to be able to use
them as more valid, acceptable, and negotiable collateral substitutes.

8. The interest rates and loan values or sizes are seen by about 60% as the top reasons
their programs have become successful. The average rate of 3% per month is believed to be
substantially lower than those offered by the 5-6 informal money lenders. Other factors cited are
the MFIs' collection mechanisms and the less stringent income requirements. The mismatch
between the MFI’s shorter-term sources of loanable funds against the need for a longer
repayment period of clients for housing-related loans and perceived risks of lending for housing
were seen as the key constraints to the expansion into green and inclusive housing microfinance.
Insufficient knowledge of the housing sector and the inadequate supply of climate-resilient
housing units or materials also deter the expansion. Almost 85% of the respondents confirmed
the need for affordable financing (grants and concessional loans, if possible) to allow them to
initiate or expand green and inclusive HMF. More than 50% also cited the need for a financially
viable housing rediscounting or liquidity facility.

9. The important areas for capacity development most cited by the survey respondents are
as follows: (i) housing design and construction of climate-resilient products and services; (ii)
further development of negotiable collateral substitutes; (iii) grants for the design of affordable,
climate-resilient products and subsequent pilot testing; (iv) development of affordable and
inclusive microfinance instruments for green (low carbon and climate-resilient) housing; and (v)
improved knowledge of the housing market, particularly the effective demand and supply for green
and affordable housing through microfinance. Building on the problem analysis undertaken as
part of the sector diagnostics, a series of consultative meetings with stakeholders was held from
07 May – 11 June to formulate a 10-year road map for scaling up green and inclusive housing
microfinance.

10. The vision is green and inclusive microfinance in safe and resilient urban communities for
the Philippines’ ISFs. Strategic objective 1 will expand access by ISFs to affordable, green, and
inclusive housing microfinance products and services. Key activities to achieve this objective
include: (i) establish a wholesale financing facility for MFIs (with longer term, lower interest rates,
liberalized collaterals, and climate finance) to encourage affordable, inclusive, and resilient
housing microfinance; (ii) develop and implement a post-COVID 19 strategic recovery program
for MFIs engaged in housing microfinance; (iii) pool funds for post-disaster housing reconstruction
emergencies to supplement the government’s program unable to reach MFI clients in a timely
manner; (iv) provide guaranty and risk mitigation products and services for affordable and resilient
housing microfinance; (v) Make rights-based instruments more marketable, negotiable, and
acceptable for addressing collateral risks in housing microfinance; (vi) update the housing
microfinance product manual; (vi) provide performance-based grants and incentive mechanisms
to MFIs and private developers for investing in affordable, inclusive, and resilient products suitable
for housing microfinance; and (viii) Seek concessional finance from international donor agencies,
specifically from those offering climate finance, through coordinated activities with DOF, NEDA,
and the Climate Change Commission.

11. Strategic objective 2 will develop sustainable PPP arrangements to accelerate the delivery
of housing microfinance products and services to the ISFs. Activities include: (i) develop and
implement a PPP program for green and inclusive housing microfinance properly targeted to the
ISFs ; (ii) incorporate green and inclusive housing microfinance in local shelter plans; (iii) support
the development of community-based shelter resiliency plans ; (iv) incorporate gender
dimensions in green and inclusive housing microfinance; (v) support pilot testing of PPPs (LGU-
4

Private Developer-MFIs partnerships); and (vi) forge partnership agreements with international
NGOs specialized in green and inclusive housing microfinance .

12. Strategic objective 3 will strengthen sector capacity for green and inclusive housing
microfinance policy reforms and program planning and implementation. Activities include (i)
review and develop building standards and regulations for green inclusive housing microfinance
(minimum standards, program approach rather than project specific approach); (ii) as part of the
environmental, social, and governance (ESG) framework of banks/MFIs, incorporate DHSUD
resettlement guidelines and policies and climate-risk based environmental and urban policies and
guidelines; (iii) develop and/or disseminate green inclusive housing microfinance knowledge
programs and tools for MFIs and clients, DHSUD, and other stakeholders; (iv) formulate
partnership arrangements with universities/academe/other CSOs for technical assistance in
affordable, resilient, and low-carbon housing design and construction; and (v) develop a
knowledge management system for DHSUD, including a web-based electronic performance and
monitoring system for green and inclusive housing microfinance.

II. INTRODUCTION

A. A Highly-Urbanized Philippines

13. The Philippines is one of the most populous countries globally, with an estimated
population of 109 million.1 About 48% or some 52 million of the population live in cities and towns
across the country, with varying levels of urbanization.2 Among the administrative regions, the
National Capital Region (NCR), popularly known as Metro Manila with its 13.5 million residents,
ranks among the world's top 20 megacities. Going further to the north and the south, the extended
urban region of Metro Manila, which encompasses the southern and central regions of the island
group of Luzon,3 is home to about 42 million people counting it among the top five largest urban
agglomerations in the world. Metro Manila, together with the key cities in the two other island
groups, the Visayas and Mindanao, account for nearly 80% of the Philippines' total gross domestic
product (GDP).4
B. The Urban Governance Conundrum

14. Philippine cities, particularly Metro Manila and other highly urbanized cities, are the main
drivers of the overall urban economy, which in turn has spurred the country's sustained economic
expansion. In the past five years, from 2015 to 2019, economic activities in the urban sector has
grown by an average of 7%, accounting for 90% of total economic output (footnote 1). However,
natural population growth, which continues to average at least 1.5% annually and rural-urban
migration flows of about 35% have exacerbated the wide gap between the demand for and supply

1 ADB. 2021. Key Economic Indicators for Asia and the Pacific. Manila.
2 As of September 2020, there were 81 provinces; 146 cities; 1,488 municipalities; and 42, 046 barangays (villages or
communities) in the Philippines (see https://www.dilg.gov.ph/facts-and-figure).
3 The country's islands are geographically organized into three major groups—Luzon, the Visayas and Mindanao.
Luzon, the largest island group in the Philippines, is located in the northernmost region of the archipelago. Proximate
to Metro Manila, the rapidly urbanizing and industrializing regions of CALABARZON and Central Luzon continue to
make the southern part of Luzon the dominant part of the country. These two regions maintain a close linkage with
Metro Manila, transforming themselves into major sources of attractions for jobs, small enterprise development, and
other livelihood potential for urban migrants from other regions nationwide.
4 Philippine Statistics Authority. http://www.psa.gov.ph
 5

of basic urban infrastructure and services.5 Consequently, many urban residents are suffering
from a multitude of urban problems such as congestion, overcrowding, poor quality of life, and
rapidly growing poor urban communities. There is deficient investment in urban infrastructure—
mostly for inclusive housing, water supply, sanitation, solid waste management, and low-carbon
yielding urban transport. All these reflect the enormity of the country's urban governance
challenge despite the relative success of its decentralization process.
C. Worsening Urban Poverty and its Multifaceted Dimensions

15. Poverty reduction in the Philippines was on track in 2019, when it was projected that the
country would achieve its goal of reducing poverty incidence to 14% in 2022, from 16.7% in 2018.
The National Economic and Development Authority (NEDA), however, forewarned that poverty
will remain elevated until 2022, averaging between 15.5% and 17.5% in 2021, as a result of the
continuing adverse effects of the coronavirus disease (COVID-19) pandemic and that the urban,
rather than the rural, areas might bear the brunt of the consequences. Poverty is expected to
worsen in the urban areas due to the economic recession posed by COVID-19, which has caused
both significant income and livelihood losses.6

16. Furthermore, urban poverty in the Philippines, particularly in the highly urbanized areas of
Metro Manila, Metro Cebu, and Metro Davao, is multifaceted and goes beyond the income and
livelihood dimensions. Beyond income poverty, the urban poor in the Philippines often lives in
slums, which are physically and socially deteriorated, making a decent quality of life impossible.
Informal settlements or slums have become vivid manifestations of the deepening and widening
urban poverty in the Philippines. It has been estimated that at least 15% of the Philippines' total
urban population live in informal settlements. They live in sprawling slums that do not meet the
most basic needs, or worse, used as dumping grounds for hazardous wastes, and where they are
often exposed to serious health risks. Thus, they have health problems and have limited access
to capital, education, and social services, in addition to the lack of livelihood and employment.7
Most of the urban poor are unable to access the traditional forms of housing finance offered by
the financial system due to the lack of assets to secure loans and the largely unaffordable housing
supply offered by the private sector. The COVID-19 pandemic has made matters worse,
necessitating more innovative approaches to address their need for affordable housing and
climate-resilient urban infrastructure to live a decent quality of life.
D. Addressing Climate Change and Disaster Risks in Housing

17. The Philippines is one of the most disaster-prone in the world, ranking among the top 10
countries most likely to be affected by climate change due to its geographic location and
archipelagic nature. Its metropolitan centers, including the extended urban region of Metro

5 The 2018 National Migration Survey (NMS 2018), the first nationwide survey on migration in the Philippines jointly
conducted by the Philippine Statistics Authority and the University of the Philippines Population Institute, reported
that migration flows in 2018 were dominated by rural-rural movements involving 46.4% of lifetime migrants followed
by rural-urban migration with 35.3%, urban-urban migration with 13.4%, and lastly urban-rural migration with 5.0%
of migrants.
6 The country's poverty rate is projected to average between 15.5% and 17.5% in 2021, likely near the 16.6% posted
in 2018, officials of the National Economic and Development Authority (NEDA) said during the launch of the updated
Philippine Development Plan (PDP) in February 2021.
7 HUDCC. 2014. Developing a National Informal Settlements Upgrading Strategy of the Philippines.
6

Manila, with their dense and growing population,8 are increasingly vulnerable to threats caused
by natural hazards. It is a country ranked third in the world in terms of vulnerability to tropical
cyclone occurrence. An average of 20 typhoons traverses the Philippines yearly, causing physical
and economic devastation. Climate change has induced more severe droughts during El Niño
episodes while triggering more damaging flooding during La Niña. Many cities in the country are
exposed to more than one natural hazard. Metro Manila is among the world's largest urban
agglomerations at high risk of cyclones, floods, and earthquakes. Millions of ISFs are highly
vulnerable to disasters triggered by natural hazards, and economic devastation since many of
them live in flood-prone and dangerous areas.

18. The housing sector has proven to be particularly vulnerable to climate change. Two of the
most devastating typhoons that hit the country in recent history, Ondoy (internationally known as
tropical storm Ketsana) and Yolanda (internationally known as typhoon Haiyan), inflicted
staggering damages and losses. Ondoy’s damage to physical assets came close to P70 billion.
The associated losses from production and other flows of the economy were even higher; almost
double the damage to physical assets. The typhoons left about 220,000 homes completely
destroyed or partially damaged by the floodwaters in Metro Manila and across Luzon. Hundreds
of thousands of people lost their homes and their sources of livelihood. Informal settlers, with their
makeshift dwellings in flood-prone and unsafe areas, sustained the worst damage.9 Meanwhile,
Typhoon Yolanda, described as one of the one of the most powerful typhoons of all time damaged
1.14 million houses, 50% of which were completely destroyed while the rest suffered partial
destruction. With the increasing frequency and intensity of extreme weather events forecast for
the Philippines as a result of climate change and their consequent tremendous negative impacts,
climate-resilient housing and infrastructure, particularly for the urban poor, has become even
more vital in the coming years.
E. Purpose and Structure of the Report

19. This Final Report constitutes the findings and recommendations of a study on housing
microfinance conducted at the request of the Philippine Department of Human Settlements and
Urban Development (DHSUD) under the Asian Development Bank (ADB) Regional Technical
Assistance (RETA) 9513: Advancing Inclusive and Resilient Urban Development Targeted at the
Urban Poor. With funding support from the Urban Climate Change Resilience Trust Fund
(UCCRTF), ADB is implementing the RETA in Bangladesh, Indonesia, and the Philippines, to
improve the capacity of governments to design and implement investment projects that strengthen
the resilience of the urban poor.10 The country study for the Philippines under the RETA

8 Based on the 2020 census of population and housing (CPH), Metro Manila’s population continued to grow albeit at
the slower rate of 0.97% from 2015-2020 compared to the growth rate of 1.58% from 2010-2015. However, three
cities experienced rapid population growth: Valenzuela (3.03%); Mandaluyong (2.07%), and Taguig (2.06%). The
extended urban region of Metro Manila which includes Region III in the north and Region IV-A in the south continues
to have the highest share of the Philippine population at 38.6%. The total population of the extended urban region
according to the 2020 CPH is 42.1 million. Highly urbanized cities outside Metro Manila reported to be growing rapidly
include Angeles (2.5%), Olongapo (2.36%), Lapu-Lapu (4.26%); Cebu (2.63%); and Davao (1.79%).
9 The post disaster needs assessment conducted jointly by the Philippine Government and the World Bank concluded

that massive financing would be needed—for technical assistance, capacity development, housing repairs and risk
reduction, transitional housing, housing reconstruction, and housing for informal settlers living in water hazard areas
always at risk for flooding.
10 The TA has three (3) outputs: (i) country studies to identify opportunities for strengthening the resilience of the urban

poor completed (Output 1); (ii) skills for using climate change and disaster risk information for designing pro-poor
 7

highlighted housing as one of the program areas for building the resilience of the urban poor
against climate and disaster risk, including the effects of the COVID-19 pandemic. It
recommended, among others, the exploration of alternative and innovative housing finance
modalities such as microfinance for building resilience.11

20. While housing programs for the urban poor abound in the Philippines, a huge demand-
supply gap estimated at 3.6 million informal settler families (ISFs) remains.12 The urban poor,
mostly ISFs, are constrained from accessing most of the formal, traditional forms of housing
finance due to their prohibitive and costly transactions that rely on assets they do not possess.
To better respond to the needs of the ISFs, the Philippine Development Plan (PDP) 2017-2022
earlier identified the intensification of alternatives and innovative solutions, including housing
microfinance, as a key strategy in addressing the housing needs of the lower-income classes and
vulnerable sector. The National Informal Settlements Upgrading Strategy (NISUS), which was
formulated with the funding support of the World Bank and approved in 2015, served as the
DHSUD’s entry point for integrating the various solutions and approaches discussed in PDP 2017-
2022. Consistent with the recommendation of the Philippine country study, the NISUS also
identified housing microfinance as a reliable alternative in delivering adequate, affordable, and
climate-resilient housing and infrastructure for the country's urban slum dwellers.

21. The housing microfinance study examined the opportunities, constraints, and challenges
encountered, lessons learned, and institutional and policy reforms needed to accelerate housing
microfinance as a primary pro-poor housing finance strategy in the country. It also looked into
how housing microfinance can help build the urban poor's resilience by identifying potential
products that provide (i) credit that encourages disaster-resilient housing and (ii) support in a post-
disaster context to reconstruct damaged housing. Section 1 of this Final Report provides the
background and context for the study. Section 2 presents the sector assessment and provides
an overview of housing microfinance in the Philippines, its evolution, findings on progress
achieved so far, and lessons on barriers to scaling up. Section 3 discusses the emergence of
green, inclusive housing microfinance as a financial product that responds to the urgent need for
pro-poor and resilient housing and infrastructure for the country's ISF population. It concludes

resilience-building investments improved (Output 2); and (iii) preparatory work for investment projects with an explicit
focus on strengthening the resilience of urban poor supported (Output 3). Under Output 1, the TA supported the
preparation of three (3) country studies undertaken in consultation with governments and other stakeholders. The
country studies will provide recommendations for developing the required capacity building interventions under
Output 2 and potential investment projects under Output 3.
11 The country study urged the Department of Human Settlements and Urban Development (DHSUD) to look more

closely into housing microfinance as a promising alternative and innovative housing finance modality. In the
Philippines, NGOs are serving as the leading microfinance institutions and have also been instrumental in resilience
building by way of building capacity and hand-holding for many communities. Access to these types of financing can
better help the poor in strengthening their housing and can also help the government prevent the seemingly vicious
cycle of relief assistance for damaged houses after every disaster. See ADB. 2021. Building Resilience of the Urban
Poor: Philippines (unpublished).
12 Informal settler families (ISFs) are defined by the Philippine Government are those residing in areas that cannot

provide any of the following basic living characteristics: (i) durable housing of a permanent nature that protects
against extreme climate conditions; (ii) sufficient living space; (iii) easy access to safe water in sufficient amounts at
an affordable price; (iv) access to adequate sanitation in the form of a private or public toilet shared by a reasonable
number of people; and (v) security of tenure that prevents forced evictions. This is consistent with the principles
embodied by the United Nations Human Settlement Programme (UN-Habitat) which defines informal settlements as
areas where groups of housing units have been constructed on land that the occupants have no legal claim to, and
where housing is not in compliance with current planning and building regulations. An often used name for informal
settlements is slum settlements, making ISFs synonymous with slum dwellers.
8

with a 10-year road map for how to scale-up green and inclusive microfinance in safe and resilient
urban communities for the Philippines’ underserved ISFs.

22. The study was initiated in September 2020. To augment the initial findings of the study, a
survey of MFIs engaged or potentially interested in housing microfinance was conducted from
mid-December 2020 to early March 2021, amid the ongoing COVID-19 pandemic. To ascertain
the capacity-building requirements of DHSUD, the survey for the MFIs was adapted and tailored
to its regional offices. Furthermore, building on the problem analysis undertaken as part of the
sector diagnostics, a series of consultative meetings with stakeholders was held from 07 May –
11 June 2021 to present the study’s sector diagnostics and surveys and based on these, to
formulate the 10-year road map for scaling up green and inclusive housing microfinance. A
participatory, consensus building approach was used to arrive at the road map, led by DHSUD,
to facilitate informed discussions among the various stakeholder groups comprising microfinance
NGOs, banks and cooperatives, the Bangko Sentral ng Pilipinas (BSP), NEDA, and key shelter
government agencies and bureaus, and private developer groups.

III. HOUSING MICROFINANCE: SECTOR TRENDS, CONSTRAINTS, AND

CHALLENGES

A. Evolution of Housing Microfinance

1. The Global Emergence of Housing Microfinance

23. Housing microfinance has transformed in the past twenty years into an increasingly
attractive and innovative source of finance for the urban poor and low-income households in
developing countries to meet their housing needs. All over the developing world, several financial
institutions have blended good microfinance practices with housing finance as a creative
approach to address the failure of traditional housing finance in offering products adapted to the
needs of the urban poor and the near-poor. Demand for housing microfinance is soaring for a
variety of reasons. First, housing is a basic human need that helps ensure personal safety and
health. Through housing microfinance, the urban poor are able to access small, incremental loans
that fit with the way they can afford to build—progressively and over time. Second, the home is a
personal asset that typically appreciates over time. Through housing microfinance, the urban
poor are not just able to live a better quality of life; they are also able to create an asset that can
be considered an investment. Third, the home can be considered a productive asset that can
generate income. Through housing microfinance, the urban poor acquires the ability to create
wealth through a place they can own to produce goods, store inventory, and conduct business.13

24. A 2017 survey by Habitat for Humanity14 of housing microfinance practitioners worldwide
revealed that housing microfinance continues to emerge as a differentiated product that can
contribute to the profitability of financial institutions and become a relevant subsector within the
microfinance industry (Box 1).15 Globally, about 64% of housing microfinance providers report

13 CGAP. 2004. Helping to Improve Donor Effectiveness in Microfinance: Housing Microfinance. Donor Brief No. 20.
14 Habitat for Humanity is a global nonprofit housing organization working in local communities across all 50 states in
the United States and in approximately 70 countries. Habitat’s vision is of a world where everyone has a decent place
to live.
15 S. Prieto and E. Simmons. 2017. The 2016-17 State of Housing Microfinance: Understanding the Business Case for

Housing Microfinance. Habitat for Humanity.

 9

growth in housing microfinance as part of their overall portfolio. Latin America and the Caribbean
were early adopters of housing microfinance products in the 1990s, with growth peaking in 2012.
MiBanco, the largest microfinance institution in Peru and Latin America, became the fastest-
growing housing microfinance provider among emerging countries with a widely renowned
program called MiCasa. Eastern Europe and Central Asia showed rapid growth from 2001 but
notably tapered off after 2011. Though growth was slow in the earlier periods, both the Asia/Pacific
region and Africa and the Middle East region have experienced steady growth since 2002.
Growth, however, appeared to be strongest in the Asia-Pacific region these days, with the
Philippines, Cambodia, and India driving the uptake. Appendix 1 provides a comprehensive
review of the international experience of the developing world in housing microfinance.

Box 1. The Global State of Housing Microfinance: Growth and Demand Prospects
Habitat for Humanity’s 2017 global survey of 101 housing microfinance practitioners indicated that 35%
of housing microfinance offerings began within the past five years, 68% within the past decade, and 85%
within the past 15 years. Microfinance borrowers are estimated to have reached 130 million by 2015, yet
this constituted only about 20% of the population that could benefit from a microfinance product,
indicating continued demand and potential for strong growth. The survey revealed that the housing-
related portfolios of banks and NGOs engaged in microfinance in Asia and the Pacific are growing fastest
at an annual average of 20% to 30%.

2. The Advent and Evolution of Housing Microfinance in the Philippines

25. The Housing and Urban Development Coordinating Council (HUDCC), the predecessor
to the newly created DHSUD,16 officially launched housing microfinance in the Philippines through
the ADB-funded Development of Poor Urban Communities Sector Project (DPUCSP). DPUCSP
was designed to make a direct and
significant contribution to reducing
income- and asset-based poverty in the
Philippines. Implemented over a 6-year Box 2. The DPUCSP Shelter Finance Component
period from 2004-2020 with an ADB loan The DPUCSP had two lending components, one of
of $30.5 million, DPUCSP had three which catered directly to housing finance for low-
income communities. In part B, Shelter Finance for Low
components. In part A, Site Development Income Communities, DBP relent to locally identified
and Distribution of Secure Tenure, the intermediaries for onlending to poor and low-income
Development Bank of the Philippines households. Eligible intermediaries under Part B were
(DBP) relent to qualified local government mostly microfinance institutions (MFIs) but other
units (LGUs) or other project proponents qualified financial institutions with an established track
record in mortgage and/or microfinance lending were
with the support of LGUs, to enable the also eligible for participation as appropriate.
detailed design and provision of secure,
serviced plots in existing low-income
neighborhoods and at identified new sites. In part B, Shelter Finance for Low-Income

16 The law creating the Department of Human Settlements and Urban Development (DHSUD), Republic Act No. 11201,
was signed into law by President Rodrigo Duterte on February 14, 2019, with the signing announced to the public by
the government on February 19, 2019. Prior to the establishment of DHSUD, the Housing and Urban Development
Coordinating Council (HUDCC) was the umbrella agency of various housing and development offices in the
Philippines.
10

Communities, DBP relent to locally identified intermediaries, which onlent to poor and low-income
households. Part C provided capacity development and project implementation support (Box 2).

26. The DPUCSP also had a policy action plan to support effective project implementation
and sector strengthening. The housing finance-related policy actions pursued under DPUCSP
included the following:

 Establishing a clear policy for market-based interest rate financing and appropriate lending
modalities to provide affordable finance on a sustainable basis in place of administered or
subsidized interest rates;17
 Engaging local government units (LGUs) to promote, in partnership with MFIs, a
sustainable shelter finance system based on private savings mobilization and targeted
capital subsidies instead of interest subsidies;
 Developing mechanisms to enable the use of interim titles, such as lease with option to
purchase and other lease variants, as collaterals (Box 3);18
 Preparing an executive order to liberalize collateral requirements, allowing banks to lend
against long-term leases and other variants;
 Assessing the role of guarantee agencies in shelter provision for the poor and
recommending financially sustainable changes to current practices; and
 Developing and implementing support and monitoring mechanisms for housing MFIs.

17 A study conducted by Llanto et.al. (2001) estimated the Philippine Government’s housing fiscal subsidies mainly
through concessional or below-market, subsidized interest rates loans at 2.7% of gross domestic product in 1995.
The fiscal costs of the housing subsidies were large but they were transparent neither to the public nor to policy
makers because they were largely indirect in nature as they were implemented through the financial system. The
study also found evidence that the housing subsidies have benefited mostly the high-income group and not the
intended beneficiariesꟷthe low income group which could not access the formal housing finance system. See G.
Llanto, et.al. 2001. The state of Philippine housing programs: A critical look at how Philippine housing subsidies work.
Makati City, Philippines: Philippine Institute for Development Studies. The DPUCSP was designed to correct the
distortions and inefficiencies caused by indirect interest rate housing subsidies through a pilot approach under its
part B component which was to be implemented with the appropriate housing finance policy reforms.
18 A primary constraint to the delivery of housing and basic urban services for the poor in the Philippines was the lengthy

and complex processes of land titling and distribution in the Philippines. This stems from findings that land regulation
in the Philippines is heavily fragmented and clearly outdated compared to other land administration systems of other
countries within the region, a consequence of having at least 70 different laws that govern public and private
transactions on land and where formal judicial proceedings are required to effect simple property transactions. As a
result, the settlement of land matters turns into a lengthy, complex, and costly process adversely impacting the plight
of the urban poor. A seminal study, De Soto (2000) showed that the procedure to legalize informal urban property in
the Philippines can take anywhere from 13 to 25 years and require 168 steps to complete. Even preparatory activities
to proclaim public land as alienable and disposable to beneficiaries of socialized housing programs can take as much
as two years. Thus, in the case of housing for the urban poor, their access secure tenure and housing finance are
seriously constrained by the protracted and costly process of obtaining freehold titles prompting HUDCC to advocate
through DPUCSP that an incremental approach to secure tenure be adopted. This entailed the use of interim titles
or rights-based instruments which DPUCSP defined as tenure instruments that confer varying degrees of property
rights. See Hernando de Soto. 2000. The Mystery of Capital: Why Capitalism Triumphs in the West and Fails
Everywhere Else. New York: Basic Books.
 11

Box 3. DPUCSP’s Incremental Approach to Secure Tenure Distribution Through Interim Titles
In the Philippines, a study by De Soto (2000) showed that the procedure to legalize and title informal
urban property can take from 13 to 25 years and require 168 steps to complete. This is a lengthy and
costly process that millions of ISFs cannot afford, making it difficult, if not impossible, for them to invest
in their homes and communities, knowing that they have no “full rights” to the land they occupy. Their
lack of legal status also severely limits their access to credit and financial services including traditional
mortgage finance and other forms of financing to support their entrepreneurial activities and aspirations.
Under DPUCSP, an incremental approach to secure tenure was adopted and advocated. This entailed
the use of interim titles or rights-based instruments which the project defined as tenure instruments that
conferred varying degrees of property rights. Freehold continues to be the most conventional and
recognized form of tenure instrument in the Philippines and involves the full conveyance of permanent
and absolute property rights to the owner through a Torrens title. Leasehold, on the other hand, confers
almost equivalent property rights except that the rights to possess and use are limited by the period and
other conditions specified in the lease. Compared to freehold, leases are believed to be much cheaper
and faster to deliver. They are also more flexible and can be upgraded incrementally as and when
required. Usufruct is a peculiar property right under the Civil Code of the Philippines that allows the
usufructuary to enjoy nearly all rights of ownership except the right to have legal title and to alienate or
dispose. DPUCSP defined interim titles or rights-based instruments to include usufruct and leasehold
variants such as lease with option to purchase. Within proclaimed sites for socialized housing, the
Department of Environment and Natural Resources (DENR) and HUDCC, the Certificate of Entitlement
to Lot Allocation (CELA) which served as evidence of the intended beneficiaries’ right to acquire portions
of the proclaimed area they are occupying were considered the most basic form of an interim title.
Source: HUDCC. 2006. Reducing Urban Poverty and Accelerating Pro-Poor Housing Through Rights-Based Secure
Tenure Arrangements.

27. Working jointly with the DBP and ADB and consistent with the DPUCSP policy action plan,
HUDCC formally launched housing microfinance in the Philippines in March 2005 through a
national forum that provided the venue for exchanging ideas on emerging global trends and best
practices. The forum discussions were led by internationally renowned housing microfinance
expert Franck Daphnis (Box 4).19

Box 4. Philippine National Forum on Housing Microfinance

The Philippine National Forum on Housing Microfinance, held on 18 March 2005, was envisioned to
provide the venue for exchanging international and national best practices on housing microfinance. It
also aimed to highlight the infrastructure and policy reforms urgently needed to support the development,
promotion, and practice of sustainable and replicable Philippine housing microfinance programs
characterized as basically private-led, with the government providing a conducive and appropriate
regulatory framework for their growth and development. The forum was a collaborative undertaking of
HUDCC, DBP, the Microfinance Council of the Philippines, Inc. (MCPI), and ADB as part of a series of
activities under the ongoing Development of Poor Urban Communities Sector Project to build the
capacity of public and private sector groups for developing and implementing sustainable pro-poor
housing.

19 A leading expert in the emerging field of housing microfinance, Mr. Daphnis co-edited and co-authored the book
Housing Microfinance: A Guide to Practice, published and released in 2004 by Rienner Publishers in Lynne, France.
12

28. Table 1 below presents the general characteristics of housing microfinance that differentiate
it from traditional housing finance.

Table 1: Key Features of Housing Microfinance Loans

Item Description
Size Varies, but generally 2–4 times larger than average working
capital loans and smaller than traditional mortgage loans for low-
income housing
Term Usually 2–24 months for home improvements, and 2–5 years for
land purchase or construction
Interest Lower than microenterprise loans but higher than traditional
mortgage loans
Delivery Methods Almost always provided to individuals, rather than to groups
Collateral Mostly unsecured; co-signers often used; real guarantees may
be used; formal ownership of dwelling or land may be required;
savings sometimes used as a guarantee (may be compulsory)
Target Clientele Low-income salaried workers; microentrepreneurs primarily in
urban areas; poor people; ISFs
Other Services Sometimes accompanied by land acquisition, land registration,
and construction (including self-help
building techniques)

29. In addition, given the importance of security of tenure in housing and as part of the
DPUCSP policy action plan to enable the use of interim titles for collateral and allow banking MFIs
to lend against rights-based instruments, primarily lease variants, HUDCC embarked on a series
of policy dialogues and inter-agency consultations with DBP and the Bangko Sentral ng Pilipinas
(BSP) which culminated in the formulation of a housing microfinance product manual. The manual
was formulated based on a policy paper prepared by HUDCC, which proposed bank regulatory
reforms to enable the adoption of housing microfinance best practices to deliver more pro-poor
and socialized housing under DPUCSP. It also recommended using interim titles and other rights-
based secure tenure mechanisms as collateral substitutes within acceptable bank prudential
standards instead of focusing solely on using titled real properties to secure housing loans.
Subsequently, in March 2008, BSP issued Memorandum No. M-2008-015 to all banks in the
Philippines approving the housing microfinance product designed to address the economically
active poor's housing needs using best practices developed over the years for microenterprise
and housing finance.

30. The salient features of the housing microfinance product manual for DPUCSP as
articulated in the BSP memorandum were as follows:

 Definition of pro-poor housing microfinance product in terms of purpose, eligibility, loan

amount, loan value, payment, and terms;
 Use of rights-based secure tenure instruments as collateral substitutes for house
construction and house and serviced plot acquisition loans;
 An appraisal and loan valuation framework for rights-based instruments such as freehold,
usufruct, leasehold, and right to occupy or build;
 Assessment of the clients' ability to repay based on cash flow analysis and affordability
 13

additional risk cover from the Home Guarantee Corporation cash flow guarantee program;
and
 Accreditation of banks by HUDCC for DPUCSP participation with standards approved by
the BSP and formalized through a Memorandum of Agreement.

31. The manual defined housing microfinance as “the application of microfinance principles
and methodologies to the provision of housing finance.” The housing microfinance products
approved consisted mainly of loans to the poor and low-income households for (i) renovation or
expansion of an existing home, (ii) construction of a new home, and (iii) land acquisition and
access to basic infrastructure or municipal services. The type of tenure security or legal right
enjoyed by the client over the house and lot can be used as an added tool to determine the value
of the loan. The following loan terms and ceilings were specified in the manual:

• home improvement loans, up to P150,000 payable in 5 years;

• house construction, up to P300,000 or as may be determined by HUDCC periodically for
the maximum socialized housing ceiling; payable in 10 years; and
• house and lot purchase, up to P300,000 or as may be determined by HUDCC periodically
for the maximum socialized housing ceiling; payable in 10 years.

32. In 2010, as part of the government’s efforts to strengthen the expansion of housing
microfinance among banks, BSP decided to further issue Circular 678. The circular, which was
based on the previously approved housing microfinance product manual for DPUCSP, expanded
the definition of microfinance by allowing qualified housing microfinance loans up to P150,000 for
home improvement and up to P300,000 for lot acquisition and house construction. The circular
included the following: (i) the minimum criteria to ensure that banks have the capability and
technical capacity to offer housing microfinance, (ii) the basic housing microfinance
characteristics; (iii) appropriate risk management, (iv) the application procedure for BSP approval,
and (v) the regulatory treatment of housing microfinance loans.

33. Table 2 below lists the various rights-based instruments which BSP approved for use by
banks as housing microfinance collateral instruments and their corresponding loan valuation and
appraisal methodologies. Appendix 2 provides a comprehensive summary of the BSP’s approval
process and requirements for banks interested in offering housing microfinance products and
services based on Circular 678.

Table 2: Secure Tenure Instruments Acceptable as Collateral in Housing Microfinance

Form of
Secure Tenure Nature and Description of Terms and Appraisal Loan
or Property Acceptable Instrument Conditions Methodology Valuation
Right
Usufruct o Usufruct agreement or The Term of the Valuation of 70% of the
contract Lease must not Leasehold appraised
(Duly executed contract be less than the Interest value of the
executed by the owner of the term of the loan collateral
property granting the
usufructuary/
beneficiary/client the right to
use, possess and enjoy the
real property, including its
14

Form of
Secure Tenure Nature and Description of Terms and Appraisal Loan
or Property Acceptable Instrument Conditions Methodology Valuation
Right
fruits and other rights or
benefits)
Lease o Lease agreement or contract The Term of the Valuation 70% of the
(Duly executed contract Lease must not of appraised value of
granting the lessee the right be less than the Leasehold the collateral
to use and possess the real term of the loan Interest
property for a fixed long–term
period in consideration of
rental payments)
Freehold o OCT/TCT – Torrens title Market 90% of the
Variants issued by the Register of Data appraised value of
Deeds evidencing absolute Approach the collateral
ownership of real property
o Interim Title, Contract to Sell,
or Conditional Sale- Duly Adjustment of
executed contract or other appraisal value Market 90% of the
legal instrument issued by due to Data appraised value of
the appropriate government documentary Approach the collateral
agency indicating full nature or status
payment for the purchase of of the
the property or its conditional instrument must
sale or conveyance to be be taken into
perfected upon full payment account
of the purchase price and the
fulfillment of other conditions
Right to occupy o Certification validity issued by Adjustment of Market 70% of the
and build the appropriate government appraised value Data appraised value of
agency stating that the due to Approach the collateral
borrower/client has the right documentary (as to the
to occupy, build and acquire nature or status improveme
the property they are of the nt or
possessing being an eligible instrument must housing
beneficiary of a public or be taken into unit)
private social housing account
program or a Presidential
proclamation, or 70% of the
Adjustment of
o Certification or written appraised value of
appraised value
acknowledgment from the the collateral
due to
owner of the property that the Market
documentary
borrower/client has the
nature or status Data
owner’s consent and
of the Approach
permission to occupy and
instrument must (as to the
build on such property
be taken into improveme
(includes CELA or Certificate nt or
account
of Lot Assignment, which is housing
issued by NHA, SHFC, and unit)
 15

Form of
Secure Tenure Nature and Description of Terms and Appraisal Loan
or Property Acceptable Instrument Conditions Methodology Valuation
Right
other relevant government
agencies)

34. With its banking policy reforms on housing microfinance, the BSP as regulator and
supervisor of banks has proven to be not only a keen advocate of microfinance products and
services but also of financial inclusion, which it defines as “ not only meaning that there are
financial products and services that are available. The products and services must also be
appropriately designed, of good quality, and responsive to the varied needs of individuals and
businesses—whether for saving, payments, financing, investing, or getting insured.”

35. Appendix 3 outlines the supervisory functions of BSP over banks engaged in
microfinance and how it discharges these functions. In assessing the performance of banking
MFIsꟷboth thrift banks and rural banks, the BSP uses the Supervisory Assessment Framework
(SAFr), which effectively replaced in July 2020 the various rating systems including the CAMELS
rating system it employed. The SAFr explicitly links the systemic importance and risk profile of a
BSP-supervised financial institution (BSFI) to formulating supervisory plans for each supervised
institution (Box 5).

Box 5. The BSP’s Supervisory Assessment Framework

The Supervisory Assessment Framework (SAFr) is a risk-based supervisory framework aimed to
facilitate assessments of BSP-supervised financial institutions (BSFIs). It explicitly links the systemic
importance and risk profile of a BSFI to the crafting of supervisory plans for each supervised institution
such that: (i) supervisory attention continues to be proportionately focused on financial institutions that
are of greater impact and higher risk; and (ii) prompt and calibrated enforcement actions are deployed
to reinforce prudent risk-taking behavior. The principles, concepts and processes of the SAFr apply to
all BSFIs, regardless of size and risk profile. It also facilitates the conduct of consolidated supervision,
where impact and risks are viewed on a group-wide basis. The primary elements of the SAFr include:
(a) the BSFI’s impact on the financial system, (b) the BSFI’s risk profile, and (c) required supervisory
intensity. The assessment of impact reflects the importance of a BSFI and how it will affect the financial
system in the event of distress and apparent problems in solvency, prolonged business disruption, or
major conduct of business. BSP’s examination of a BSFI’s risk profile focuses on its major business
activities which influence its key risk drivers. It considers the safety and soundness of BSFI in terms of
the following: (a) how effectively critical risks stemming from significant activities are managed and
controlled; and (b) how strongly capital adequacy, earnings, liquidity, and governance support the
institution’s overall net risk. Supervisory intensity, the third primary component of the SAFr framework
refers to the depth of BSP supervision required for and applied to the BSFI as the integral result of the
BSP audit on the BSFI. The required supervision is anchored on the BSFI’s rating on its impact on the
financial system and risk profile as signified by the resultant BSFI’s composite rating.
 16

3. Strengthening and Regulating Housing Microfinance NGOs

36. In part B of DPUCSP, an apex financial institution, DBP, relent to eligible MFIs and other
qualified financial institutions with an established track record in mortgage or microfinance lending
for onlending to poor and low-income households. By the end of 2010, six MFIs NGOs had availed
of DPUCSP financing and initiated their housing microfinance programs, disbursing a combined
total of P85 million. These MFIs represented the best in the industry given their performance,
based on the Microfinance Council of the Philippines, Incorporated (MCPI) standards.

37. The MCPI evolved out of the USAID-funded project Developing Standards for
Microfinance Project (DSMP), which started in mid-1996 and ended in 1999. The MFIs
participating in the DSMP decided to form an association or network. The resulting organization,
MCPI, was registered with the Securities and Exchange Commission (SEC) as a non-stock
corporation in June 1999.20 In 2004, MCPI merged with the Philippine Network for Helping the
Hardcore Poor (PHILNET), a microfinance association focused on the Grameen replicators in the
Philippines. Since then, MCPI has evolved into an umbrella organization comprising 59 MFIs,
including 46 practitioners, two regional councils, and 11 support institutions. It is estimated that
MCPI members account for at least 75 percent of the microfinance sector's total active outreach
in the Philippines. MCPI's vision is to become a world-class national network of microfinance
institutions and support organizations advocating sustainable, innovative, and client-responsive
solutions to poverty in the Philippines. It has a three-pronged mission which it aims to accomplish
through its member MFIs (Box 6). MCPI, with its capacity development support for MFIs in the
country, has been instrumental in fostering the adoption and growth of housing microfinance in
the Philippines. The organization profile of MCPI is discussed in Appendix 4.

Box 6. The Microfinance Council of the Philippines, Incorporated

The Microfinance Council of the Philippines, Incorporated (MCPI) is the national network of microfinance
institutions working towards sustainable, innovative, and client-responsive solutions to poverty in the
country. Its mission consists of the following: (i) advocate poverty reduction and social protection in the
Philippines by promoting ethical and inclusive financial and non-financial services, (ii) advance their
capacity to serve poor households in a sustainable, innovative, and client-responsive manner, and (iii)
achieve the highest global standards of excellence in governance, stewardship, and service towards staff,
clients, and communities they serve.

38. In 2015, Republic Act (RA) 10693 otherwise known as the Microfinance NGO Act was
enacted.21 To comply with this law, microfinance NGOs must be registered with the Securities

20 Microfinance Council of the Philippines, Incorporated. https://microfinancecouncil.org/history/

21 The Microfinance NGOs act was enacted to support and work in partnership with qualified NGOs in promoting
financially inclusive and pro-poor financial and credit policies and mechanisms, such as microfinance and its allied
services. In legislating this Act, the Philippine Government recognized microfinance NGOs as effective partners in
promoting social welfare and development and pursuing poverty alleviation and holistic transformation.
Fundamentally, it acknowledged microfinance as a viable solution to empowering the poor. To enable the sustainable
operations of microfinance NGOs, the Act mandated microfinance NGOs to develop financial, social, and
governance performance standards to help define and govern the industry toward greater outreach and sustainability.
It also prescribed that they abide by the Client Protection Principles, such as, but not limited to, appropriate product
design and delivery, prevention of over-indebtedness, promotion of transparency, practice of responsible pricing, fair
and respectful treatment of clients, privacy of client data and mechanisms for complaint resolution.
 17

and Exchange Commission (SEC) of the Philippines, which has been required to establish an
accreditation body called the Microfinance NGO Regulatory Council (MNRC). Under RA 10683,
the MNRC was tasked with assessing the social performance of microfinance NGOs through
parameters that included, but were not limited to their objectives, governance and accountability
mechanisms, transparency, product design, services, delivery channels, and ethical treatment of
clients. Toward this end, in evaluating the financial performance and sustainability of microfinance
NGOs, the MNRC adopted minimum regulatory standards covering (i) portfolio quality, (ii)
efficiency, (iii) sustainability, and (iv) outreach. The performance evaluation rating system used
by the MNRC for microfinance NGOs is summarized in Table 3. A comprehensive discussion of
the regulation and supervision of microfinance NGOs is in Appendix 5.

Table 3: Performance Evaluation Rating System for Microfinance NGOs

Indicator Description Standard Weight
A. Portfolio Quality
Ratio of the microfinance loan portfolio
1. Portfolio at risk ratio with one day missed payment to the total 5%
loans outstanding
40%
Degree of protection of the institution 100% of
2. Loan loss reserve
against expected losses due to reserve
ratio
delinquency requirement
B. Efficiency
3. Administrative Measures the cost of managing the 10% and
efficiency organization's assets. below
Indicates whether enough revenues are
4. Operational self- Greater than
earned to fully cover the costs of the 30%
sufficiency 120%
microfinance operations
5. Loan officer Measures the ability of a loan officer to
At least 150
productivity service microfinance borrowers
C. Sustainability
Indicates whether revenues are sufficient
6. Financial self-
for operating costs and to maintain the 100%
sufficiency
value of its capital and assets
Indicates whether earnings can sufficiently Greater than 15%
7. Loan portfolio cover the annual depreciation of the peso. the inflation
profitability rate

D. Outreach
Measures the ability of the MFI to expand
8. Growth in number of
its operations through increases in its At least 5%
active clients
active clients
9. Growth in Measures the rate of expansion of the
15%
microfinance loan portfolio based on loan amounts and At least 5%
portfolio number of clients
10. Depth of Indicates whether services are reaching
At most 20%
outreach the lower-income segment of the economy
18

4. Strengthening and Regulating Cooperatives as Nonbanking Microfinance

Institutions

39. Cooperatives may also operate as microfinance institutions. MFI NGOs, as they evolve,
may choose to transform into a cooperative or as an MFI bank. Cooperatives are regulated and
supervised primarily by the Cooperative Development Authority (CDA) and other government
institutions such as the BSP, depending on the type and purpose of the cooperative. A financial
service cooperative (FSC) refers to a cooperative organized for the primary purpose of engaging
in savings and credit services and enhanced financial services. They are subject to the regulations
of the Bangko Sentral ng Pilipinas (BSP). A housing cooperative refers to a cooperative organized
to assist or provide access to housing for the benefit of its regular members. They actively
participate in the savings program for housing. It is co-owned and controlled by its members.

40. On February 25, 2013, the CDA issued Memorandum Circular 2013-15, otherwise known
as the Performance Report Standards for Cooperatives. The performance assessment covered
the financial and social aspects of cooperatives’ operations. Under the financial performance
evaluation, a PISO report was required of every registered cooperative, and this referred to the
(i) profitability, (ii) institutional strength, (iii) structure of assets, (iv) operational strength or staying
power capacity of the cooperative. The PISO was further enhanced to PESOS as financial
performance indicators in May 2014. The PESOS reflect the cooperatives’ financial position
based on the following indicators with the indicative maximum ceiling: (i) P for portfolio quality
representing portfolio at risk and probable losses; 25% (ii) E for efficiency covering asset/portfolio
yield, operational self-sufficiency, rate of return on members’ share, administrative efficiency;
20%; (iii) S for stability reflecting liquidity, solvency, and net returns to capital; 30%; (iv) O for
operations showing the performance in membership growth and the trend in external borrowings;
10%; and (v) S for the structure of assets indicating asset structure and quality; 15%. Appendix
6 describes how the CDA regulates and supervises cooperatives. It also details how the PESOS
performance standards are applied to cooperatives engaged in housing microfinance.
B. Progress Stocktaking: Evidence and Findings

41. Banking data from BSP confirms that significant growth has occurred in the housing
microfinance subsector from 2010 to 2019. The ADB-funded DPUCSP reported that
disbursements in housing microfinance were P80 million by the end of the project in 2010. Table
4 below from the BSP shows that the banking sector's disbursements for housing microfinance
have reached a total of P1.535 billion as of the end of 2019, indicating a stellar aggregate growth
of almost 20 times in 10 years.

Table 4: Microfinance in the Philippine Banking System

Item Category 2018 2019 Growth
Banks 159 154 -3.1%
Borrowers 1,986,683 2,410,677 21.3%
Microfinance
Amount (in million 22,615 27,294 20.7%
pesos)
Banks 145 142 -2.1%
Microenterprise Borrowers 1,652,044 2,088,352 26.4%
Loans Amount (in million 18,640 22,880 22.7%
pesos)
 19

Item Category 2018 2019 Growth

Banks 39 37 -5.1%
Borrowers 8,900 10,465 17.6%
Microfinance Plus
Amount (in million 968 1,162 20.0%
pesos)
Banks 24 23 -4.2%
Borrowers 98,761 94,381 -4.4%
Micro-Agri Loans
Amount (in million 1,092 1,327 21.5%
pesos)
Banks 15 13 -13.3%
Housing Borrowers 127,418 143,291 12.5%
Microfinance Loans Amount (in million 1,396 1,535 10.0%
pesos)
Source: Bangko Sentral ng Pilipinas

42. Compared to the banking MFIs, of which there were 13 actively operating in 2019 (Table
4), microfinance NGOs and cooperatives have disbursed significantly more housing microfinance
loans since 2010. The biggest of these microfinance NGOs, the ASA Philippines Foundation,
reported that its home financing portfolio had jumped from P200 million in 2015 to over P12.6
billion in 2020 when they disbursed about one million loans to over 200,000 clients. This indicates
an average loan size of some P12,600, with each client borrowing about four times during the
year. The Kasagana Ka Cooperative (K-COOP) has several lending windows that offer loans for
incremental house construction, repair, and improvement to more durable and natural disaster-
resilient structures or additional floors or rooms that can be rented out extra income. In 2020, they
disbursed a total of P12 million to more than 8,000 housing microfinance clients. They also
provided loans to cover land tenure security and connection or reconnection of utility fees,
purchase of home appliances, and furnishings). The Alay Sa Kaunlaran, Inc. (ASKI) issued a total
of P111 million housing microfinance loans last year for use in house construction, lot acquisition,
house and lot purchase, house repairs, and maintenance. They also offered loans for water,
sanitation, and hygiene (WASH) as well as green energy. The Tulay sa Pag-unlad, Inc. (TSPI),
under its micro-housing program for the construction, acquisition, renovation, or improvements of
houses and WASH purposes, disbursed a total of P82 million in 2020, reaching a cumulative total
of P459 million for the 3-year period of 2018–2020. Complete profiles of selected MFIs are in
Appendix 7.

43. Table 5 below provides an overview of the housing microfinance portfolios of selected
MFIs in the Philippines and shows that in 2020, their total disbursements reached P13.2 billion
(approximately $275 million). However, there are strong indications that the COVID-19 pandemic
has negatively affected these portfolios. The COVID-19 pandemic also made it difficult to access
data from the MFIs, in part due to the constraints posed by the pandemic and the decline in the
performance of their portfolios but also intrinsically due to the lack of a monitoring system that
tracks the status and growth of the housing microfinance sector in the Philippines, for both bank
and nonbanks. The BSP’s Financial Inclusion Office (formerly the Center for Learning and
Inclusion Advocacy) monitors and focuses on the performance of banking MFIs as in Table 2.
Table 6 presents a condensed version of the profiles of selected MFIs.
20

Table 5: Housing Microfinance Portfolios and Disbursements of MFIs

2018 2019 2020
Name of No. of No. of No. of
No. of ALD No. of ALD No. of ALD
MFI HM HM HM
LDs (P mil) LDs (P mil) LDs (P mil)
Clients Clients Clients
1. ASKI 8,530 266.540 9,494 9,189 322.36 10,349 3,398 111.13 3,550
2. ASA n.a. n.a. n.a. n.a. n.a. n.a. 1,008,103 12,614.28 223,306
3. BKI n.a. 14.60 464 n.a. 14.50 426 n.a. 6.10 187
4. KMBI* n.a. n.a. n.a. 98 1.45 98 64 1.04 64
5. K-Coop 1,259 16.00 n.a. 1,210 15.00 12,413 1,870 12.00 8,190
6. KCCDFI n.a. n.a. n.a. n.a. 6.00 n.a. n.a. 2.00 n.a.
7. RAFI 12,032 179.61 8,082 15,487 225.65 12,457 26,616 415.40 31,574
8. SEDP n.a. n.a. n.a. n.a. 4.56 n.a. n.a. 3.72 n.a.
9. TSKI n.a. n.a. n.a. n.a. 7.89 n.a. n.a. 5.46 n.a.
10. TSPI 214.64 7,716 157.34 5,082 82.83 2,788
Total 691.25 754.75 13,253.96
ALD = amount of loan disbursed; ASA = ASA Philippines Foundation, Inc.; ASKI = Alalay sa Kaunlaran, Inc.; BKI =
Bangko Kabayan, Inc.; HM = housing microfinance; K-Coop = Kasagana Ka Cooperative; KCCDFI = Kasanyangan
Center for Community Development and Microfinance Foundation, Inc.; KMBI = Kabalikat para sa Maunlad - Buhay,
Inc.; LDs = loans disbursed; n.a. = no available data; RAFI = Ramon Aboitiz Foundation Inc; SECP = Simbag sa Pag-
asenso; TSKI = Taytay sa Kauswagan, Inc.; and TSPI = Tulay sa Pag-unlad, Inc.
* Started operations in housing microfinance in 2019.

Table 6: Housing Microfinance Providers in the Philippines

Name of Type of
Description Products Offered
MFI MFI
ASA NGO With a network of 1,150 ASA has a large housing loan
Philippines branches as of 2018, the NGO portfolio as part of its regular
Foundation covers about 82 provinces lending windows and under its
serving over a million disaster assistance program.
borrowers in 25,239
barangays.
Center for Bank A micro-finance-oriented rural Housing microfinance loans are
Agriculture bank with 750 service offices designed to fit clients' needs at a
and Rural nationwide. low-interest rate and flexible
Development payment terms.
(CARD), Inc.
Alay Sa NGO Committed to the promotion Housing microfinance loans can
Kaunlaran, and development of micro and be used for house construction,
Inc. (ASKI) small-to-medium enterprises lot acquisition, house and lot
and the delivery of social purchase, house repairs, and
services. maintenance. It also offers water,
sanitation, and hygiene (WASH)
and green energy loans.
Kabalikat NGO KMBI has 61 branches across Housing microfinance is offered
Para Sa the country, offering demand- but not as a distinct program.
Maunlad Na responsive, sustainable
Buhay, Inc. microfinance and nonfinancial
(KMBI) services.
Kasagana Coop With its initial membership of Offer loans for incremental house
Ka only 200 in the municipality of construction, repair, and
 21

Name of Type of
Description Products Offered
MFI MFI
Cooperative Sapang Palay, Bulacan grew improvement to more durable
(K-COOP) into a microfinance NGO and and natural disaster-resilient
evolved into a cooperative, structures, or of additional floors
with a savings scheme for or rooms that can be rented out
poor women inspired by the for extra income. Also provides
Grameen Bank of loans to cover security of land
Bangladesh. tenure and connection or
reconnection of utility fees,
purchase of home appliances
and furnishings.
Negros NGO Aims to help women achieve Offers individual micro-business
Women for self-sufficiency and self- loans designed for micro-
Tomorrow reliance, particularly in the entrepreneurs needing additional
Foundation, Western Visayas low-income capital for their growing business.
Inc. (NWTFI) and depressed urban and rural Housing microfinance is offered
communities. It has been but not as a distinct program.
operating for 30 years as a
microfinance institution using
the Grameen method of
microcredit.
Taytay Sa NGO Helps microentrepreneurial Offers a micro-housing program
Kauswagan poor through loans and other for the construction, acquisition,
Inc. (TSKI) services. The objectives of renovation, or improvements of
TSKI are to develop micro and houses and WASH purposes.
small enterprises, create
employment opportunities,
and strengthen local
communities.
Tulay Sa NGO TSPI provides microfinance TSPI has a home improvement
Pag-Unlad and micro-agri loans to and sanitation loan program. It is
Inc. (TSPI) microentrepreneurs and a loan facility for housing, toilet,
farmers; training related to water source
financial literacy and setting up construction/renovation, and
livelihood enterprises; electrical connection fees.
and activities that link their
members to better market
opportunities.

C. Demand Analysis: Prospects for Housing Microfinance in the Philippines

44. The Philippines’ rapid pace of urbanization has caused the proliferation of ISF in the cities
of Metro Manila and the regions. Based on the housing needs assessment of the local shelter
plans prepared by the local government units (LGUs) with the support of DHSUD, the total number
of ISFs in the country has reached 3.6 million. These ISFs live in communities along river lines or
major highways, coastal or seashores, dumpsites, and government and privately-owned lands.
Furthermore, they have limited or no access to security of tenure, adequate and affordable
22

housing, capital, environmental and health safety, and other social safety nets.22 A vast majority
of them cannot avail of government housing financing programs that have mostly catered so far
to members of the formal sector.

45. Using available data from the housing market, a study has recently calculated the market
share of each type of financial institution across income segments.23 The study concludes that
90% of middle-income households are potential clients of banks and other types of financial
institutions. On the other hand, the low-income (but not the ultra-poor) households are mainly the
potential clients of MFIs (85%). The ultra-poor, or the so-called bottom-of-the-pyramid
households, can also access MFI products but will require subsidies or some form of viability gap
funding through partnership agreements with the government or international donors providing
concessional financing. ISFs are typically in the bottom three deciles of the income distribution,
which constitute the low-income and ultra-poor households. Given these, there is undoubtedly a
lot of scope for scaling up housing microfinance in the Philippines to address the plight of the
ISFs.
D. Greening Housing Microfinance for Climate Change

46. The Philippines has long been vulnerable to extreme weather events, having an average
of 20 to 21 typhoons each year, with 8 to 9 making landfalls. However, over the past few years,
these typhoons (i.e., Super Typhoon Haiyan) have struck the country more often with severe
damages to lives and properties, and such events are claimed to be caused by climate change.
While this phenomenon is seen as a threat to the country, it may also be an opportunity for each
stakeholder to initiate programs to minimize climate change impacts and contribute to the 2-
degree Celsius target. This opportunity is also relevant to MFIs as they embark on programs to
achieve environmental sustainability.

47. Green and inclusive finance is one of the emerging approaches in finance that attempts
to address the three pillars of sustainability fully. It is evolving as comprising financial services
that support economic growth in a clean, resilient, and sustainable manner and focus on the base
of the pyramid (BOP), including micro, small, and medium-sized enterprises in low-income
countries or such subsets of the population within other developing countries. It has a
multidimensional purpose: economic development, social inclusion, and environmental
sustainability. It encompasses all traditional microfinance forms by specialized institutions,
including banks and non-bank financial institutions. It focuses on all instruments, products, and
services that address climate change: mitigation and adaptation, solutions for waste, water and
sanitation management, land management and ecosystem conservation, organic farming, access
to clean and reliable energy, and energy efficiency. It also applies to housing microfinance, and
there is certainly a growing interest and momentum toward blending traditional microfinance
practices with housing microfinance innovations. Appendix 8 provides a more in-depth analysis
of the climate change risks in the Philippines and how it has influenced climate adaptation and
climate mitigation efforts through more appropriate housing design and technology. Appendix 9
discusses MCPI’s pilot program on green and inclusive finance.

22 Department of Human Settlements and Urban Development, 2021.

23 Build Change. 2019. Disaster Resiliency in Housing in the Philippines: A Market Study of Residential Retrofit
Financing. Consultant’s Report. https://buildchange.org
 23

E. Prospects and Barriers to Scaling-Up: Lessons Learned

48. While remarkable progress has been achieved to grow housing microfinance in the
Philippines and demonstrate the viability of housing microfinance products, policy, and market
barriers to further scaling-up exist. This section of the report discusses these barriers based on
an analysis of data collected, meetings with housing microfinance practitioners, and a review of
the relevant literature on the global experience to date.
1. Insufficient Knowledge and Institutional Capacity to Launch or Expand

49. A financial institution must have a minimum level of resources available, along with some
knowledge and aptitude for housing, to successfully market, implement, and monitor a housing
microfinance product. This appears to be true in the Philippines based on the DPUCSP
experience where the MFIs which adopted housing microfinance first were those knowledgeable
and had some understanding of the housing production, marketing, or financing processes. In
the 2017 survey of Habitat for Humanity, lack of institutional capacity was cited as the most
frequent reason by those in the Asia Pacific region for launching their product. For many banks in
the Philippines, as discussed during DPUCSP implementation and the stakeholders'
consultations undertaken as part of this study, lack of knowledge in housing microfinance or
staffing constraints adversely affected their decision to launch or expand housing microfinance
products.
2. Lack of Adequate Capital

50. There is a fundamental mismatch between the term of the equity capital of most MFIs and
the financing term required by housing microfinance clients to keep within their affordable limits.
The former is usually short term while the latter tends to be medium-term to long-term. This affects
the size and composition of the housing microfinance portfolio. Analysis of the BSP data on
banking MFIs (Table 4) suggested that the average housing microfinance loan size was P10,175
in 2019. Subsequent analysis of data from the housing microfinance survey conducted as part of
the study revealed an estimated mean average loan size of about P50,000, payable in 6 months
with an interest rate of 3% per month. The loan sizes offered vary from P15,000 to P150,000,
depending on the loan purpose. While this signifies an increase in the average loan size when
the portfolios of both banking and nonbanking MFIs are considered,24 the average lending per
household is still relatively small compared to the lowest house and lot price within the Philippines'
socialized housing ceiling (i.e., P480,000). However, it is also apparent from the data that housing
microfinance lending to individual households, while smaller, tended to be short-term and more
frequent, which is more consistent with the incremental approach deemed more suitable to the
affordability constraints of the targeted housing microfinance clients, i.e., the urban poor
households or ISFs in this case (see Table 1 for key features of housing microfinance loans).
3. Increased Transaction Costs from Shifting to Individual Lending
Methodology

51. There is evidence to suggest way back in the early 2000s that housing microfinance is
more compatible with individual lending than group lending, which is traditionally used by
Grameen bank replicators. However, there are transaction costs associated with shifting to the

24 Housing microfinance NGOs, cooperatives and banks participated in the survey which is discussed in more detail in
Section 2.6.
24

individual lending methodology, which poses difficulties for some MFIs. Table 7 presents a
comparative summary of the transaction costs involved in the housing microfinance lending
process between the individual and group methodologies.

Table 7: Comparative Transaction Costs Between Individual and Group Lending

Loan Processing/
Individual Lending Group Lending
Transaction Stage
• Reputation, character • Self-selection of group
reference, credit members
Character Reference
• History (inside information)
• Group formation process
• Evaluation of assets • Emphasis on human capital
• History of business • Examination of experience
Capital Assessment
• Financial statements and
• Business planning skills
• Rigorous financial analysis • Joint analysis
• Cash flow of business (+ • A rough estimate of cash
household) Repayment Capacity flow
• Loan amount determined • Standardized loan amounts
individually set per cycle
• Loan officer responsible • Group members have the
• Close daily tracking of Loan Follow-up/ first responsibility
portfolio basis Arrears Monitoring • The loan officer oversees
the portfolio
• Pledge of assets/collateral
Collaterals and Incentives • Group guarantee
• Guarantor/co-signers • Compulsory savings
Source: H. Dellien et al. 2005. Product Diversification in Microfinance: Introducing Individual Lending. New York:
Women’s World Banking.

4. The Need for Accompanying Nonfinancial Housing Support Services to

Clients

52. Technical assistance for housing microfinance products is more likely to be mandatory
than optional, particularly among financial service providers that offer technical assistance
exclusively to housing microfinance clients. Construction advice, budgeting for home
improvement, and general financial education (whether personal financial education based on
repaying the loan or budgeting for specific home improvements) are the most commonly observed
forms of technical assistance overall.25 Some MFIs do not have access to or the knowledge to
access this form of technical assistance, thereby causing them to stop or limit their exposure to
housing microfinance.

25 F. Daphnis and B. Ferguson. 2014. Housing Microfinance: A Guide to Practice. Kumarian Press, Incorporated.
 25

5. Market Demand and Supply-side Constraints and Concerns

53. Market demand-side constraints include the limited paying capacity of the target clients,
limited available residential land in urban areas, and more importantly, in the Philippines, the
protracted and costly process for ISFs to obtain certificates of land ownership. On the supply side,
the lack of housing products that match the lower affordable limits of the poor and low-income
households is a serious factor that hinders the growth of housing microfinance. The Organization
of Socialized and Economic Housing Developers of the Philippines, Inc. (OSHDP) is working with
DHSUD to address these concerns (Box 7). OSHDP's organization profile and policy agenda are
in Appendix 10. The Subdivision and Housing Developers Association, Inc. (SHDA), the country's
leading organization of housing and real estate developers for socialized to high-end shelter
development in the Philippines, also collaborate closely with the government to address the
housing problems (Appendix 11).

Box 7. Private Sector Participation in Pro-Poor and Low-Income Housing

The Organization of Socialized and Economic Housing Developers of the Philippines, Inc. (OSHDP) is
the leading organization of socialized and economic housing developers in the country with a commitment
to delivering decent and affordable housing to effectively address the country's housing needs. OSHDP’s
policy agenda include the following: (i) expanding housing finance through viable demand-side and
supply-side incentives program; (ii) strengthening access to land; (iii) uniform and efficient regulations,
standards, and permitting processes (for the Fire Code, Building Code, and the Green Building Code);
and (iv) green building and resilient settlements.

F. Housing Microfinance Survey

54. To augment the initial findings of the study, a survey of MFIs engaged or potentially
interested in housing microfinance was conducted from mid-December 2020 to early March 2021.
Furthermore, to ascertain the capacity-building requirements of DHSUD, the survey for the MFIs
was adapted and tailored for use in its regional offices. A total of 30 questionnaires were sent out
to microfinance NGOs, cooperatives and rural banks based on an initial scoping of the sector in
consultation with the DHSUD, MCPI and BSP. About 57% or 17 MFIs responded to the
questionnaire (amid the ongoing COVID-19 pandemic). For the DHSUD, a 50% response rate
among its 16 regional offices was achieved.

55. The results of the survey of MFIs are detailed in Appendix 12. The results of the DHSUD
survey are in Appendix 13. The presentation to discuss the results of the survey with the MFIs
and DHSUD is in Appendix 14. The highlights of the virtual consultative meetings to discuss the
survey results and request inputs from the stakeholders for the road map are in Appendix 15.

56. The ensuing paragraphs briefly discuss the consolidated results of the two surveys.
26

1. Program Origin

57. Housing microfinance NGOs constituted 75% of the survey respondents. Three of the
respondents initiated their housing microfinance (HMF) program in 2007 with the support of the
ADB-funded DPUCSP, which was implemented from 2004 to 2010 by DHSUD (which took over
the functions of the now-defunct Housing and Urban Development Coordinating Council) and the
DBP. Of the three MFIs which initiated their housing microfinance programs under DPUCSP,
ASKI proved to be the most successful, disbursing a total of P43.9 million in housing improvement
loans and housing loans by the time the project ended in 2010. ADB’s review of DPUCSP’s
implementation made several findings that continue to be relevant to scaling up housing
microfinance in the Philippines (Box 8).26

Box 8. Lessons Learned on Housing Microfinance from DPUCSP

▪ Local government unit (LGU)-driven projects are important and strategic for targeting the urban poor.
LGUs could have played a crucial role in the provision of land, particularly land that the President of the
Philippines proclaimed for social housing purposes. Government socialized housing finance through the
PAG-IBIG fund (HDMF) needed to open up to LGU-initiated socialized housing projects, even if they
were for non-HDMF members. To serve the urban poor, LGUs needed to innovate and provide
guarantee funds (guaranteed by the IRA] or other forms of collateral) for HDMF lending operations. In
addition, implementation of socialized housing projects needed to make use of MFI collection practices.
▪ The crucial role of the LGUs in housing for the urban poor should be recognized particularly in the
provision of land, and in forging cooperation with private developers.
▪ The capacity of the private sector to deliver socialized housing should be harnessed by forging
cooperation and partnerships between private sector builders or landowners, LGUs, and NGOs
[including MFIs] in preparation of public–private partnership housing projects.
▪ A more significant MFI engagement in housing should be fostered by broadening the MFI customer
base, and enrolling clients beyond their traditional client base.

2. Program Purpose

58. Almost 50% of the respondents’ ongoing HMF programs were started because their
members used microenterprise loans for housing improvements and other housing-related
concerns. About 15% developed their programs in response to their member’s need for electricity
and water supply, and sanitation. More recently, HMF has been introduced or used to respond to
the need for sturdier and disaster-resilient housing structures.
3. Lending Terms

59. The estimated mean average loan size is about P50,000, payable in 6 months with an
interest rate of 3% per month. The loan sizes offered vary from P15,000 to P150,000, depending
on the loan purpose. Loan terms ranged from 6 months to a year.

26 Independent Evaluation Department. 2012. Philippines: Development of Poor Urban Communities Sector Project.
Manila: ADB.
 27

4. Collateral Requirements

60. About 60% of the respondents use an individual or group guarantor as collateral. Other
forms of collaterals accepted include accumulated capital build-up of the member or transfer
certificate of title (TCT). Almost 42% regard their form of financing as unsecured lending. The
banking MFIs expressed the need to develop rights-based secure tenure instruments further for
them to be able to use them as more valid, acceptable, and negotiable collateral substitutes.
5. Perceived Success Factors

61. The interest rates and loan values or sizes are seen by about 60% as the top reasons
their programs have become successful. The average rate of 3% per month is believed to be
substantially lower than those offered by the 5-6 informal money lenders.27 Other factors cited are
the MFIs' collection mechanisms and the less stringent income requirements.
6. Interest in Green and Inclusive Housing Microfinance

62. Most of the respondents, about 75%, are interested in expanding their HMF program to
finance climate-resilient and energy-efficient housing. This is followed by an estimated 40%
interested in financing water supply and sanitation-related housing improvements or other forms
of housing improvements.
7. Perceived Deterrents to Pursuing Green and Inclusive Housing Microfinance

63. The mismatch between the MFI’s shorter-term sources of loanable funds against the need
for a longer repayment period of clients for housing-related loans and perceived risks of lending
for housing were seen as the key constraints to the expansion into green and inclusive HMF.
Insufficient knowledge of the housing sector and the inadequate supply of climate-resilient
housing units or materials also deter the expansion.
8. Financing Assistance Required

64. Almost 85% of the respondents confirmed the need for affordable financing (grants and
concessional loans, if possible) to allow them to initiate or expand green and inclusive HMF. More
than 50% also cited the need for a financially viable housing rediscounting or liquidity facility.28
9. Important Areas of Capacity Development

65. The important areas for capacity development most cited by the survey respondents are
as follows: (i) housing design and construction of climate-resilient products and services; (ii)
further development of negotiable collateral substitutes; (iii) grants for the design of affordable,
climate-resilient products and subsequent pilot testing; (iv) development of affordable and
inclusive microfinance instruments for green (low carbon and climate-resilient) housing; and (v)

27 A “5-6“lending scheme is a practice mostly associated with informal lenders who charge an interest of 20% per
month.
28 A rediscounting facility is a credit facility to supplement or augment funds needed by wholesale borrowers. Availments

on the rediscounting line are made against promissory notes of sub-borrowers. A liquidity facility is defined as any
committed, undrawn back-up facility that would be utilized to refinance the debt obligations of a customer in situations
where such a customer is unable to rollover that debt in financial markets.
28

improved knowledge of the housing market, particularly the effective demand and supply for green
and affordable housing through microfinance.
G. Problem Analysis

66. Building on the international and Philippine experience review, including DPUCSP and the
survey results, which were validated with the MFIs and DHSUD over a series of virtual
consultative meetings, Figure 1 presents a schematic diagram of the challenge of scaling up
housing microfinance for ISFs in the Philippines.

Figure 1: Problem AnalysisꟷThe Green and Inclusive Housing Microfinance Challenge

Pervasive constraint to Increasing vulnerability of the Increasing urban poverty

Effects economic urban population to the adverse posing social and
competitiveness impacts of climate change environmental threats

Core A large, still growing, financially underserved market in affordable, climate-

Problem resilient, and low-carbon housing for the Philippines’ urban poor

Limited access to Fragmented approach to the Policy constraints and weak

Causes affordable, longer-term, delivery of targeted, affordable, sector capacity and inadequate
and sustainable safe, and climate-smart housing knowledge development and
financing solutions dissemination

IV. PATHWAYS TO SCALING UP GREEN AND INCLUSIVE HOUSING MIRCOFINANCE

67. Building on the problem analysis undertaken as part of the sector diagnostics, a series of
consultative meetings with stakeholders was held from 07 May – 11 June to formulate the road
map for scaling up green and inclusive housing microfinance. A participatory, consensus building
approach was used, facilitating informed discussions among the various stakeholder groups to
arrive at a jointly formulated road map. The series of meetings and their highlights are in
Appendix 15. The presentation to DHSUD Secretary Del Rosario of the draft road map is in
Appendix 16. In the ensuing paragraphs, each strategic objective of the draft road map is
discussed. Figure 2 provides an overview of the road map.
 29

Figure 2: Road Map to Scaling Up Green and Inclusive Housing Microfinance

Safe and resilient urban Socially inclusive urban

More economically
communities adapting growth with lower
Impacts vibrant urban
and mitigating climate poverty incidence and
communities and cities
change reduced vulnerabilities

Green and inclusive microfinance in safe and resilient urban

Vision
communities for the Philippines’ ISFs

Strategic Objective 2: Strategic Objective 3:

Strategic Objective 1: Develop sustainable Strengthen sector
Strategic Expand access by ISFs PPP arrangements to capacity for green and
Objectives to affordable, green, accelerate the delivery inclusive housing
and inclusive housing of green and inclusive microfinance policy
microfinance products housing microfinance reforms and program
and services products and services planning and
to the ISFs implementation

A. Expanding Green and Inclusive Housing Microfinance Products and Services

68. The strategic objective 1 of the road map is summarized in the box below followed by a
brief explanation.

Strategic Objective 1: Expand access by ISFs to affordable, green, and inclusive

housing microfinance products and services
▪ Activity 1: Establish a wholesale financing facility for MFIs (with longer term, lower
interest rates, liberalized collaterals, and climate finance) to encourage affordable,
inclusive, and resilient housing microfinance
▪ Activity 2: Develop and implement a post-COVID 19 strategic recovery program for
MFIs engaged in housing microfinance
▪ Activity 3: Pool funds for post-disaster housing reconstruction emergencies to
supplement the government’s program unable to reach MFI clients in a timely manner
▪ Activity 4: Provide guaranty and risk mitigation products and services for affordable and
resilient housing microfinance
▪ Activity 5: Make rights-based instruments more marketable, negotiable, and acceptable
for addressing collateral risks in housing microfinance
▪ Activity 6: Update the housing microfinance product manual
▪ Activity 7: Provide performance-based grants and incentive mechanisms to MFIs and
private developers for investing in affordable, inclusive, and resilient products suitable for
housing microfinance
▪ Activity 8: Seek concessional finance from international donor agencies, specifically
from those offering climate finance, through coordinated activities with DOF, NEDA, and
the Climate Change Commission
30

69. The basic lending facility operated by MFIs offers microenterprise loans characterized by
an initial small loan amount of short-term repayment period. As clients' credit discipline and
business management are strengthened, members qualify for the 2nd, 3rd, and next cycle of
borrowing on a progressive scale and higher loan amounts. However, the loan terms remain
restricted as the principal fund source of MFIs is the microsavings or capital build-up of the
members, which should be readily available for withdrawal after a minimum holding period. The
lending rates for various types of loans are relatively high as the social intermediation, loan
underwriting, and collection services are included in the cost of funds.

70. For the housing microfinance product, the general purpose of borrowing is for home
improvement. Due to constraints in available funds and members’ repayment capacity, housing-
related loans are short-term and relatively small loan value features. Housing microfinance loans
are deemed to bear higher credit and collateral risks. Thus, the overall planned improvements
would take higher costs and a much longer period to complete, based on the cycles of availment
the member must go through rather than the actual completion time if funds of low-interest rate
and longer repayment term than the current 3-6 months repayment schedule. In general, MFIs’
collateral holdings are the promissory notes of members' loans and lack hard assets acceptable
to the banking sector to secure medium and/or long-term loans. The overall scenario depicts the
need for a wholesale financing facility responsive to the MFIs’ financing requirements and
enabling wider access to inclusive, resilient, and affordable homes to their members.

71. Consultative meetings and a review of financial reports shared by the MFIs with a large
number of memberships pointed to common experiences resulting from the COVID 19 pandemic:
(i) high level of withdrawal from capital build-up, (ii) relatively low level of collection efficiency
evident of a dip to an average level of 77% from 98% for various types of loans, and (iii) an
increase in demand for microenterprise loans. These may be attributed to loss of employment
due to company shutdown, decreased working hours in factories, much decreased trips for
pedicabs, and food sales due to community quarantine rules and guidelines. With these
constraints, MFIs need liquidity to counter withdrawals and still serve the financial requirements
of members to support their difficult income generation and requirements for the students’ online
education. Restructuring of defaulted loans is being undertaken considering the reduced payment
capacity of the borrowers during the COVID 19 pandemic. Again, the necessity of being able to
tap wholesale financing facility with longer-term, lower interest rates is evident to aid the MFIs in
responding to the needs of their members.

72. Due to climate change, the Philippines will continually suffer from severe natural disasters
such as typhoons, earthquakes, and other calamities nationwide. Even monsoon rains cause so
much flooding in Metro Manila resulting in economic, financial, physical losses and severe
damage to the shelter and basic commodities, mainly for the urban poor. National and local
governments have established disaster and risk reduction management units as the frontline
handlers of evacuation to mitigate risk to life and provide temporary shelter, food, clothing, and
health needs. However, funds for emergency housing reconstruction do not reach many MFI
clients on time because they have to go through a lengthy process given the government’s
restrictive and stringent regulations for procurements and releases. The MFIs expressed
willingness to serve the post-disaster emergency housing needs of their members subject to the
availability of low-cost and long-term pooled funds devoted solely for this purpose and available
to MFIs that are SEC-registered and meet satisfactory assessment indicators as provided under
the NGO MFI regulatory framework. This post-disaster fund will be designed to supplement the
 31

Emergency Shelter Assistance provided by DWSD only when necessary. It will be limited so as
not to lose focus on housing microfinance that supports more proactive mechanisms for designing
and funding climate-resilient and low-carbon housing for the ISFs.29

73. The DSHUD, building on the lessons learned of the ADB-funded DPUCSP and the World
Bank-funded NISUS, is determined to tap local and international donor agencies to finance the
road map implementation. The concessional funds will be used to finance (i) various continuing
studies related to the implementation of an expanded housing microfinance program, (ii) housing
microfinance program of MFIs catering to housing needs of their members who are largely urban
poor households, (iii) building climate-resilient housing projects for the informal settler families
under partnership arrangements among the DHSUD, MFIs, and private sector developers, and
(iv) establishment of a performance-based grant and incentive mechanisms to MFIs and private
developers to encourage stronger partnership and participation in housing microfinance.

74. In 2008, as previously discussed, the Housing Microfinance Product Manual was initially
drafted. The BSP issued Memo Circular 015 in 2008 approving the adoption of the manual for
financial institutions operating HMF lending windows. The manual provided major policies and
guidelines, which included maximum loan value pegged at the socialized housing ceiling set by
HUDCC, the definition of acceptable collateral substitutes with appraisal guidelines, loan to
collateral value, the terms and conditions of HGC credit guaranty. In 2010, the BSP amended
the circular to expand the coverage of the program beyond DPUCSP with the coverage of all
banking institutions. The BSP monitoring reports show the participation largely by banks and
reflected lending P1.435 billion to approximately 134,257 borrowers. The relatively average loan
size of P10,700 of banking MFIs for housing microfinance may be attributed to the high cost of
funds available for housing loans. Lending rates and loan terms have always been a challenge in
serving low-income borrowers' housing needs. However, the availability of targeted funds with
highly concessional rates and long term must require a matching increase in the number of
housing microfinance operators to enable efficient fund utilization and ensure the urban poor ISFs’
access to more windows for their safe and affordable housing needs to entice greater commitment
and participation of the banking sector, updating the manual should include the mitigation of credit
risk which was initially covered by credit guaranty coverage of Home Guaranty Corporation (HGC)
on loans extended by financial institutions. However, availment has been very limited as HGC
adopted the policy that only HMF loans collateralized by a real estate mortgage (REM) will be
accepted for guaranty cover. HGC has deemed collateral substitutes as a hindrance to recovery
in the event of a call on the guaranty. It is evident that risk mitigation measures are contingent on
transforming rights-based instruments into readily marketable, negotiable, and acceptable
instruments for addressing collateral risk and enhancing recovery prospects from defaulting
accounts. To hasten the implementation of a strong green and inclusive housing microfinance
program, the product manual will therefore have to be updated.

29 In order to expedite the recovery and rehabilitation for the affected families of typhoons and calamities, the DSWD
released guidelines for the implementation of the Emergency Shelter Assistance (ESA) program to assist in the
shelter reconstruction of the survivors. The ESA is a program created by DSWD to provide assistance to disaster
victims whose houses were totally or partially damaged, as assessed by DSWD. Parallel to the ESA is the Cash for
Work Program (CFW) which provides the disaster victims temporary employment and source of income while
engaged in the repair works of their damaged housing units. It may be released in cash or in the form of construction
materials, depending on the situation favorable to the beneficiaries. The cash aid aims to help the beneficiaries buy
construction materials to rebuild their damaged houses. A receipt should be provided by the beneficiaries to the
DSWD to ensure that it is duly spent for the purchase of the materials.
32

B. Developing and Implementing Sustainable PPP Arrangements for Green and

Inclusive Housing Microfinance

75. The strategic objective 2 of the road map is summarized in the box below followed by a
brief explanation.

Strategic Objective 2: Develop sustainable PPP arrangements to accelerate the delivery

of housing microfinance products and services to the ISFs
▪ Activity 1: Develop and implement a PPP program for green and inclusive housing
microfinance properly targeted to the ISFs
▪ Activity 2: Incorporate green and inclusive housing microfinance in local shelter plans
▪ Activity 3: Support the development of community-based shelter resiliency plans
▪ Activity 4: Incorporate gender dimensions in green and inclusive housing microfinance
▪ Activity 5: Support pilot testing of PPPs (LGU-Private Developer-MFIs partnerships)
▪ Activity 6: Forge partnership agreements with international NGOs specialized in green
and inclusive housing microfinance (e.g., Habitat for Humanity, Build Change)

76. The housing microfinance sector comprises various stakeholders such as MFIs, their
members, housing developers from the private sector, utility companies (water, sewerage, and
electricity), community-based organizations (CBOs), local government (for incremental and
complete housing construction.

77. During the consultative meetings, the private sector developers stated their readiness to
assist in technical planning, design, estimation of materials, and overall costs as optional
compliance to the government’s balanced housing requirements. Some developers prefer to
engage with LGUs and community associations to provide the necessary technical specifications
and services for new site development and housing development to targeted poor households.
MFIs may be tapped for their role in extending microenterprise loans to improve community
members' livelihood and income generation. Then housing microfinance may be provided to
qualified members. There will be recovery measures for the landowner and developer/builder,
allowing revolving funds for the next project.

78. Encouraging PPP arrangements among LGU-Private developers and MFIs, one of the key
lessons learned of DPUCSP will facilitate the integration of green and inclusive housing
microfinance in local shelter plans. At the pilot testing stage, the LGU may support the project
with the issuance of building and development permits considering the climate-resilient features
of the housing units and land development. The private developers will ensure appropriate and
affordable costs of adopting such features while the MFIs support the microenterprise and
housing-related loans of the community members. Partnership arrangements may also be
established with universities/academe/other civil society organizations (CSOs) for technical
assistance in the design and construction of green housing.

79. PPPs should also incentivize the participation of international NGOs specialized in green
and inclusive housing microfinance such as Habitat for Humanity, Build Change, and Water.Org.
With its global experience in housing microfinance for the targeted poor households, Habitat for
Humanity has spearheaded partnerships with government entities worldwide and is engaged with
DHSUD and its current undertaking with the Negros Oriental province. Build Change has
expertise in resilient housing and post-disaster reconstruction through retrofitting home buildings
 33

to enhance disaster resilient housing projects. In the Philippines, Build Change is engaged in
partnerships with such entities as the Kasagana Ka Cooperative and National Home Mortgage
Finance Corporation (NHMFC) for its Balai Berde housing program. Water.Org caters to
partnerships with CBOs and water utility providers in planning and design of access to the network
and financing of connection pipes and meter installation by the MFIs for its members.

80. The Homeowners Associations and Community Development Bureau (HOACDB-MED),

which oversees registration and regulation of homeowners’ associations (HOAs), should likewise
establish an arm to assist registered HOAs to draft their community-based shelter resilient action
plan and provide training on estate management.

81. The majority of MFI members are women engaged in microenterprise activities and avail
of microenterprise, educational, and home improvement loans. The gender lens should be
recognized and directed toward partnership in establishing green and inclusive housing
microfinance programs by the MFIs.
C. Strengthening Sector Capacity for Green and Inclusive Housing Microfinance

82. The strategic objective 3 of the road map is summarized in the box below followed by a
brief explanation.

Strategic Objective 3: Strengthen sector capacity for green and inclusive housing
microfinance policy reforms and program planning and implementation
▪ Activity 1: Review and develop building standards and regulations for green inclusive
housing microfinance (minimum standards, program approach rather than project specific
approach)
▪ Activity 2: As part of the environmental, social, and governance (ESG) framework of
banks/MFIs, incorporate DHSUD resettlement guidelines and policies and climate-risk based
environmental and urban policies and guidelines
▪ Activity 3: Develop and/or disseminate green inclusive housing microfinance
knowledge programs and tools for MFIs and clients, DHSUD, and other stakeholders
▪ Activity 4: Formulate partnership arrangements with universities/academe/other
CSOs for technical assistance in affordable, resilient, and low-carbon housing design and
construction
▪ Activity 5: Develop a knowledge management system for DHSUD, including a web-
based electronic performance and monitoring system for green and inclusive housing
microfinance

83. Private developers expressed their concern on applicable standards for incremental land
development and housing construction or improvement. Current standards under B.P. 220 for
socialized housing do not include incremental home improvement or construction, making it
difficult for developers to partner with MFIs, LGUs, and HOAs in providing their services. This
concern was raised with the Housing and Real Estate Development Regulation Bureau
(HREDRB), and the agreement reached was to establish standards based on a program
approach and not on a project-specific approach where the standards for B.P. 220 are applicable.
As part of the environmental, social, and governance (ESG) framework of banks/MFIs, and
DHSUD should incorporate climate-risk based environmental, social, and governance policies
and guidelines in urban planning and development aspects, and this concern was taken up with
34

the HR Environmental, Land Use, and Urban Planning and Development Bureau (ELUPDB).
Institutional strengthening and capacity development programs must be established to respond
to the evident need for a knowledge-sharing program to ensure lessons learned and best
practices on green, inclusive housing microfinance and tools for MFIs and clients, DHSUD
regional offices, and private sector developers, and other stakeholders are provided.

84. As DHSUD takes on the HMF program expansion in the country, it is essential to develop
a knowledge management system for DHSUD, including a web-based electronic performance
and monitoring system for green and inclusive housing microfinance. Table 8 summarizes the
strategic action plan for the road map.

Table 8: The Green and Inclusive Housing Microfinance Strategic Action Plan, 2021-2030
Agencies/Organizations
Strategic Objectives/Activities Timeframe
Responsible
Strategic Objective 1: Expand access by ISFs to affordable, green, and inclusive housing
microfinance products and services
Activity 1: Establish a wholesale financing
facility for MFIs (with longer term, lower DHSUD/CCC/International
2022 – 2023
interest rates, liberalized collaterals, and Donors
climate finance)
Activity 2: Develop and implement a post-
COVID 19 strategic recovery program for BSP/MFIs 2022 – 2023
MFIs engaged in housing microfinance
Activity 3: Pool funds for post-disaster
DHSUD/MCPI/FIs 2022
housing reconstruction emergencies
Activity 4: Provide guaranty/risk mitigation
DHSUD/KSAs/LGUs 2022
products and services
Activity 5: Make rights-based instruments
more marketable, negotiable, and DHSUD/HGC/BSP/MNRC 2022 – 2023
acceptable for addressing collateral risk
Activity 6: Update the housing DHSUD/DENR-
2022 – 2023
microfinance product manual LMB/KSAs/RBAP
Activity 7: Provide performance-based
grants and incentive mechanisms to MFIs DHSUD/BSP/RBAP 2024 – 2030
and private developers
Activity 8: Seek concessional finance from
international donor agencies, including DHSUD/MCPI/APPEND/MNRC 2022 – 2023
those offering climate finance
Strategic Objective 2: Develop sustainable PPP arrangements to accelerate the delivery
of green and inclusive housing microfinance products and services to the ISFs
Activity 1: Develop and implement a PPP
DHSUD/MFIs/OSHDP/SHDA/
program for green and inclusive housing 2022 – 2030
CREBA/HOAs
microfinance properly targeted to the ISFs
Activity 2: Incorporate green and inclusive
DHSUD/LGUs/MFIs 2022 – 2023
housing microfinance in local shelter plans
Activity 3: Support the development of
DHSUD/NHA/SHFC 2022 – 2024
community-based shelter resiliency plans
Activity 4: Incorporate gender dimensions
DHSUD/MFIs/LGUs 2022 – 2024
in green and inclusive housing microfinance
 35

Agencies/Organizations
Strategic Objectives/Activities Timeframe
Responsible
Activity 5: Support pilot testing of PPPs
DHSUD/OSHDP/SHDA/
(LGU-Private Developer-MFIs 2024
CREBA/MFIs
partnerships)
Activity 6: Forge partnership agreements
with international NGOs specialized in DHSUD/OSHDP/SHDA/
2022
green and inclusive housing microfinance CREBA/MFIs
(e.g., Habitat for Humanity, Build Change)
Strategic Objective 3: Strengthen sector capacity for green and inclusive housing
microfinance policy reforms and program planning and implementation
Activity 1: Review and develop building
standards and regulations for green
DSHUD/HREDB/ELUPDB/
inclusive housing microfinance (minimum 2022
Private Developers
standards, program approach rather than
project specific approach)
Activity 2: As part of the environmental,
social and governance (ESG) framework of
banks/MFIs, incorporate DHSUD
DSHUD/HREDB/ELUPDB/MFIs 2022
resettlement guidelines and policies and
climate-risk based environmental and
urban policies and guidelines
Activity 3: Develop and/or disseminate
green inclusive housing microfinance DHSUD/MFIs/LGUs/SHDA/
2023
knowledge programs and tools for MFIs and CREBA/Habitat for Humanity
clients, DHSUD and other stakeholders
Activity 4: Formulate partnership
arrangements with
universities/academe/other CSOs for DHSUD/MFIs 2022
technical assistance in affordable, resilient
housing design and construction
Activity 5: Develop a knowledge
management system for DHSUD, including
DHSUD/HREDB/ELUPDB/
a web-based electronic performance and 2023 – 2030
HOACDB
monitoring system for green and inclusive
housing microfinance
BSP = Bangko Sentral ng Pilipinas; CCC = Climate Change Commission; CREBA = Chamber of Real Estate &
Builder's Associations; DENR-LMB = Department of Environment and Natural Resources-Land Management Bureau;
DHSUD = Department of Human Settlements and Urban Development; ELUPDB = Environmental Land Use and
Urban Planning and Development Bureau; HOACDB = Homeowners Association and Community Development
Bureau; HOAs = homeowners association; HGC = Home Guaranty Corporation; KSAs = key shelter agencies; LGUs
= local government units; MCPI = Microfinance Council of the Philippines; MFIs = Microfinance Institutions; MNRC =
Microfinance NGO Regulatory Council; NHA = National Housing Authority; RBAP = Rural Bankers Association of the
Philippines; SHDA = Subdivision and Housing Developers Association; SHFC = Social Housing Finance Corporation
36
 Appendix 1 37

REVIEW OF INTERNATIONAL EXPERIENCE IN HOUSING MICROFINANCE

A. Housing Microfinance in Southeast Asia

Housing plays a key socio-economic role and represents the main wealth of the poor in most
developing countries. The UN estimates that the global population will reach 8.5 billion by 2030,
with almost 60% of the population living in urban centers. An estimated 3 billion people will need
new housing and basic urban infrastructure by 2030.1 With rapid urbanization causing the hiked
pressure on housing delivery systems, many urban poor will not be able to afford formal housing
without proper housing finance solutions. This puts the issue of housing finance at the forefront
of the global development agenda.

Habitat for Humanity International’s (HBH) vision is a world where everyone has a decent place
to live. Since its establishment in 1976, Habitat for Humanity International has continually served
over millions of people worldwide through the provision of better housing solutions. In 2009, its
Center for Innovation in Shelter and
Finance (CISF) was established to
support diverse market development
interventions to increase access to Box 1. Housing Microfinance Principles
adequate housing. The center’s vision is Housing microfinance takes the same principles
“To serve as a place of knowledge, applied to other microfinance products and combines
expertise, advice, and innovation, them with a ‘building in stages’ housing method that
enabling low- and very-low-income the majority of the developing world uses to build,
households to acquire adequate housing.” expand and repair their houses.
The center focuses on facilitating
collaboration among public, private, and
non-profit stakeholders and provides consulting services to develop sustainable housing-related
products and services for the millions of families without adequate housing. The center also
assists the private sector in the development of housing products and services that are both
profitable and accessible to the poor. The center offers advisory services, engages in research
and knowledge development, and promotes peer learning opportunities.2 Habitat for Humanity
formally launched the Terwilliger Center for Innovation in Shelter at the historic Habitat III
conference, which took place in Quito, Ecuador, in October 2016. The Terwilliger Center is one
of Habitat’s key commitments toward the implementation of the United Nations member states’
New Urban Agenda.

Box 2. Perceived Benefits of Microfinance

The respondents were asked to rate the following benefits of housing microfinance: “improved economic
opportunities,” “improved health/sanitation,” “improved opportunities for education,” “improved security
of tenure,” “improved social standing,” “improved quality of life/happiness,” “safety from hazards,” and
“other”. The perceived impact of housing microfinance by the respondents was overwhelmingly
“improved quality of life/happiness.” “Improved health/sanitation” was the second-rated impact. Another
benefit provided by comment was “financial inclusion.”

1 Housing For All by 2030, worldbank.org.

2 Habitat for Asia, habitat.org/cisf
38 Appendix 1

Year by year survey from 2014–2017 conducted by the CISF over various regions3 indicated that
Housing microfinance is offered under various product lines, including home improvement, small
construction, full house construction and the purchase of land, and uses of the product range
beyond those categories to renovating and upgrading utilities, providing water and sanitation
solutions, or making a home more energy-efficient or disaster-resilient. Positive feedback
received on housing microfinance includes:

 Housing microfinance products are seen by respondents as equally or more profitable

than other loan products offered by the institutions and have been expanding and
performing as well in the overall portfolios;
 Technical assistance programs are seen to add value in educating their borrowers on
better building practices, budgeting, and repayment; and
 Home improvement (basic repairs, including plastering, roofing, ceiling, finishing floors,
etc.) was the majority purpose of borrowings, compared to small construction loans
(incremental construction to include expansion of a home or addition of a latrine), full
house purchase, or construction, and land purchase or use in acquiring increased tenure
security.

However, respondent institutions identified challenges on the horizon for the future of housing
microfinance such as:

 Finding capital to support the housing microfinance product;

 Difficulties in executing the delivery of technical assistance to ensure clients’ social
benefits; and
 Land tenure and property rights as collateral to housing microfinance loans in many
countries. From 1992 up to 2011, Latin America (LAC region) continued to be the region
with the highest housing microfinance products, but from 2012 onwards, housing
microfinance continues to grow strongest in Asia and the Pacific, mostly in Cambodia,
Philippines, and India.

A.1 State of Microfinance in Various Countries in Southeast Asia

A.1.1 Vietnam

The existing housing solutions for the poor in Vietnam lack sustainability and promote
dependency rather than development. The poor are not given opportunities to participate in the
design of their financial plan or housing intervention and in the case where houses are built for
them, they are of low quality and durability. Habitat for Humanity (HFH) Viet Nam (VN) attempts
to address these weaknesses, beginning with a client-focused approach in designing both the
financial and technical solutions to inadequate housing for the poor.4

USAID-sponsored review of HFH partnership with MFIs in Vietnam identified a major problem
encountered by clients who did not access HFH TA5 as the miscalculation of costs and amounts
of materials needed to complete housing improvements. This results to further difficulties such
as:

3 Habitat for Humanity. (2017, November). The 2016–17 State of Housing Microfinance: Understanding the Business
Case for Housing Microfinance. Terwilliger Center for Innovation in Shelter.
https://www.habitat.org/sites/default/files/documents/The-2016-17-State-of-Housing-Microfinance-Understanding-
the-Business-Case-for-Housing-Microfinance.pdf
4 Mark Estes, Country Director/HFH/VN.
5 MicroNOTE 35 Habitat for Humanity Vietnam Partnering with MFIs to Improve Housing for the Poor, U.S. Agency for
International Development, www.usaid.gov.
 Appendix 1 39

 Under-borrowing and needing to borrow elsewhere at a higher rate of interest

 Under-borrowing and not completing construction
 Under-borrowing and compromising quality of construction
 Over-borrowing and paying interest on funds that were not needed
 Over-borrowing and using those funds for other purposes
 Borrowing and never beginning construction
 Inexperience in managing construction activities and assessing the quality of work and
materials resulting in:
 Being overcharged for materials and labor
 Long, drawn-out construction period due to unreliable workers
 Damage to (or theft) to materials (i.e., cement left in the rain or damaged by flooding)
 Cracks in foundations or tile work due to poor quality materials/labor
 Ignorance of cash management issues resulting in delinquency

Developments in technology have boosted the access to microfinance services for those in rural
areas. However, housing microfinance requires technical assistance on design, cost, and
structure resiliency since Vietnam is also a typhoon-prone country.

A valuable lesson learned from the Vietnam experience is the growth and diversification of needs
for savings beyond lending for microfinance members. The savings mechanism must be client-
friendly in terms of being in safe custody. Even small amounts will be acceptable, remittance
centers will be easily accessible, minimal paper works and interest earnings are at par with market
rates.

Two leading MFIs pushed this challenge into reality: the Capital Aid Fund for Employment of the
Poor (CEP) and the Tinh Thuong Microfinance Institution (TYM).

The CEP was founded in Vietnam way back in 1991 as an unregulated non-profit organization to
offer credit to people with low income in the Mekong region of Vietnam. Over 27 years of
operations, CEP established a strong, credit-focused identity, which produced admirable results
for its clients and the institution.

CEP also recognized that its clients had financial goals beyond credit. It undertook a decade-long
transformation to become a regulated MFI, expecting that term deposits would be a good and
stable funding source while meeting client needs. In October 2016, CEP launched a term deposit
product but quickly learned that its solid foundation as a lender was a big challenge in convincing
clients that term deposits should be an important product in their portfolios.

In rolling out the term deposit, CEP discovered that its strong MFI identity and culture meant that
many loan officers found it difficult to convince clients of the merits of the new savings option.
From the client’s perspective, CEP had always been a lender; they had never asked whether CEP
was a safe institution to store members’ money. The key to overcoming this problem of perception
was the capability of CEP’s loan officers, who needed to become true financial product marketing
agents. CEP realized the problem and today had made real strides in building a savings base.6

CEP regards the savings capacity of its member-clients as a major factor in evaluating housing-
related loans as to total loan size, incremental loan availments and repayment schedule.

With 28 years of experience, TYM knows better than anyone that financial inclusion is intrinsically
linked to breaking the poverty cycle. Our current portfolio is made up of 171,000 poor, near poor
6 Changing Internal Culture to Smooth the Transition from Pure Lending to Savings
BFA (http://bfaglobal.com). Twitter: @kellynhien
40 Appendix 1

and low-income women. While credit is our main service, TYM also offers various savings
schemes to help women accumulate wealth, better manage their finances, and develop their
businesses.

Loans for women were originally patterned after lending schemes of Grameen Bank and have
been adapted to meet Vietnamese women’s needs. The loan features match the needs of (i) poor
and low-income families, (ii) collateral-free, (iii)repayment in small weekly or monthly installments,
(iv) simple to access and based on strict credit discipline.

Majority of TYM clients and members avail of loans for economic development purposes to run
small farming, livestock, fishery, forestry & trading businesses. A smaller part of their portfolio
borrows to meet consumption and housing needs or invest in small and medium-sized enterprises
(SMEs). To meet all households’ different needs for micro, small and medium enterprises, lending
is short-term and medium-term. Loans range in size according to capital requirements, project
price, economic capacity, and the repayment capability of the members, as strongly indicated by
savings capability. Microloans cover housing-related loans and disaster risk needs.

TYM “DOs” in its savings program includes the following marketing and savings features:

1. Secure: Client’s money is safe with TYM

2. Adapted: They don’t require large deposits, as little as 20 cents a week (5000 VND)
3. Convenient: Collection takes place close to clients’ homes
4. Simple: Transactions are fast and require minimal paperwork
5. Competitive: We use market-based interest rates

Types of savings accounts for individual members include:

 Compulsory savings
 Voluntary savings
 Monthly savings
 Term deposits

A.1.1.2 Habitat Brief on Vietnam as of 2019

The housing need in Vietnam has lifted more than 45 million people out of poverty since the early
1990s, thanks to rapid economic growth and political reforms. The poverty rate fell sharply to
below 6%, with most of the poor being ethnic minorities. Almost three in four ethnic minority
households lack access to safe sanitation, while a quarter of them do not have adequate housing
and clean water. The pressing need for resilient housing is widely recognized as Vietnam
becomes a climate change hotspot given various environmental challenges. Low-income families
who cannot afford permanent, high-quality houses are facing serious risks. In 2018, disasters
caused structural damage to almost 115,000 homes, out of which nearly 2,000 homes were
destroyed.

Country facts:

 Capital city – Hanoi Population – Over 98.7 million; Life expectancy – 74.4 years;
Unemployment rate – 2.2% Below poverty line – 8%

Habitat facts:

 Habitat started in Vietnam in 2001.

 Appendix 1 41

 Individuals served in FY2019 – 12,705

 Through new construction – 695
 Through incremental building – 6,035
 Through professional services – 5,070
 Through market development – 905
 Volunteers hosted in FY2019 – 1,223
(Source: World Factbook, World Bank)

How Habitat addresses the need for inclusive housing and human settlements. Habitat
Vietnam focuses on providing housing solutions, water and sanitation access, and waste
management for marginalized people and ethnic minorities, persons with disabilities, and
vulnerable people living in disaster-prone areas such as those affected by Agent Orange.

Housing affordability. While its microfinance institutional partners provide housing microfinance
loans, Habitat Vietnam supports families through construction technical expertise. Habitat also
builds the capacity of smaller local actors such as community housing funds and social funds by
leveraging the revolving fund.

Safe and resilient communities. Through training in the Participatory Approach for Safe Shelter
Awareness, Habitat Vietnam engages local authorities, disaster risk management boards, and
communities to protect lives and assets. Customized housing solutions to build back safer are
also shared among local masons and communities.

Advocacy in public and people sectors. Habitat supports the Government of Vietnam’s
program in eliminating asbestos through its advocacy efforts. It calls on the government to
contribute to housing interventions and water, sanitation and hygiene programs. Habitat also
advocates for standardization of technical guidance by national policymakers in government
housing support programs.

A.1.2 Indonesia

As one of the fastest-growing economies in Southeast Asia, Indonesia is forecasted to become

the 4th largest economy in the world by 2050. It also has one of the fastest-growing microfinance
industries globally, a development perhaps correlated to the growing number of businesses in the
country, the majority of which are SMEs.

Many of these SMEs are based in rural areas that lack enough access to banks for the funding
they need to grow their businesses.

Owing to this, Bank Indonesia, the country’s central bank, issued a rule. Where banks require to
have at least 20% of their loan portfolio dedicated to microcredit, this will open new opportunities
to grow the microfinance sector in Indonesia further.

Other than a booming economy, Indonesia is winning in other domains as well. It is the fastest-
growing internet economy in the world with a high number of mobile phone users. However,
despite all the progress the country has been making, 81.5% of the citizens are at the bottom of
the economic pyramid.

As an archipelagic country, inhabitants in its 13,000 islands remain devoid of any financial
services. In particular, SMEs in these very areas need and would benefit significantly through
microfinancing to grow their business. This means that there is an immense opportunity for
42 Appendix 1

branchless banking. Bringing financial services to their doors would help propel the GDP of
Indonesia to greater heights.

Habitat brief in Indonesia as of 2019. Despite its impressive economic growth, one fifth of
Indonesia’s population is vulnerable to falling into poverty. More than half of the country is
urbanized, with one in five urban residents living in slums. For over 20 years, Habitat for Humanity
Indonesia has partnered with families to improve their homes and lives through branches in
Jakarta, Surabaya, Yogyakarta, and Batam. Habitat Indonesia aims to reach a total of 100,000
families through housing, market development, water and sanitation, and open defecation-free
programs by 2020.

Country facts:

 Capital city – Jakarta Population – Over 267 million; Life expectancy – 71.5 years;
Unemployment rate – 4.4%; Below poverty line – 9.8%

Habitat facts:

 Habitat started in Indonesia in 1997, individuals served in FY2019 – 77,035

o Through new construction – 2,305
o Through rehab – 350
o Through incremental building – 12,215
o Through repair – 255
o Through market development – 61,910
 Volunteers engaged in FY2019 – 3,760
(Source: World Factbook, World Bank)

How Habitat addresses the need for safe, secure homes. Habitat works with its partners to
build, repair, and rehabilitate homes, and improve water and sanitation and educational facilities.
Besides rebuilding homes after disasters, Habitat trains people to prepare for and lessen the
impact of future disasters. Habitat Indonesia also aims to help 24,200 families through supporting
its partners to increase products, services, and financing for affordable housing. By 2020, Habitat
Indonesia aims to mobilize 20,000 volunteers in raising awareness of the need for adequate
housing. Habitat houses in Indonesia conform to national quality standards and come with a
reinforced concrete structure, brick walls, and a lightweight steel roof. Between 26 and 28 square
meters in size, each house has two bedrooms, a multi-purpose room, and a toilet.

Disaster response and preparedness. Since its response to the 2004 Indian Ocean tsunami,
Habitat Indonesia has been helping disaster-hit families to rebuild homes and lives. Rubble
removal kits and emergency hygiene kits were distributed, and transitional shelter and water and
sanitation facilities were built in response to the tsunami and earthquakes in Lombok, Central
Sulawesi, and Banten in late 2018. In early 2020, Habitat Indonesia provided clean-up kits and
rebuilt homes, helping over 1.000 flood-hit families in Greater Jakarta, West Java, and Banten.

Housing microfinance partnerships. By 2020, Habitat aims to help at least 20,000 families in
Indonesia access decent, affordable housing through partnerships. Microfinance institution
partners offer home improvement and water and sanitation loans while developers, government,
and other organizations provide affordable housing products and services.

Volunteer engagement. In 2019, global volunteers came from Australia, Canada, Hong Kong,
Japan, Korea, the Netherlands, Singapore, Europe, and the Middle East and Africa region. Local
volunteers from corporations, international schools, and universities also lent a hand at Habitat
 Appendix 1 43

Young Leaders Build, 28uild, and other events. Over at Batam island, Habitat Indonesia
continuously hosts weekend builds for volunteers from Singapore.

A.1.3 Cambodia

Country facts:

 Population: Over 16.2 million; Urbanization: 21.2 percent live in cities; Life
expectancy: 69.6 years
 Unemployment rate: 0.7 percent; Population living below poverty line: 17.7 percent;

Habitat facts: Habitat was established in Cambodia in 2003.

 Individuals served in FY2019 – 250,820

o Through new construction – 1,015
o Through incremental building – 175,930
o Through repairs – 1,010
o Through market development – 72,715
o Through civil society – 150
 Volunteers hosted in FY2019 – 9,483
(Source: World Factbook)

Cambodia as of 2019. While poverty has decreased significantly, many Cambodian families are
hovering just above the poverty line of US$1.25 a day. Nearly three-quarters of the population still
live on less than US$3 a day, based on World Bank’s data. Poverty is largely concentrated in the
rural areas though urban poverty is on the rise. Habitat for Humanity Cambodia seeks to break
the cycle of poverty through safe, durable, affordable housing solutions. Since 2003, Habitat
Cambodia has enabled over 22,000 families to build strength, stability, and self-reliance through
shelter.

Housing needs in Cambodia. Driven by garment exports and tourism, Cambodia’s economy is
among the fastest growing in the world. Having reached a lower-middle-income status in 2015, it
aspires to be an upper-middle-income country by 2030. Poverty has continued to fall, with the
official rate estimated at 13.5% of the population in 2014. A large majority of the poor live in rural
areas. About 4.5 million people are vulnerable to falling back into poverty when exposed to
economic and other external shocks. Two in three Cambodians need decent, affordable housing.
According to the government, Cambodia needs to build an additional 1 million homes by 2030 to
meet the demands of a booming population.

How Habitat addresses the need in Cambodia. Habitat for Humanity Cambodia works with a
diverse group of international and local non-governmental organizations, microfinance
institutions, corporate partners, and local and national authorities. Its holistic approach to housing
includes:

 Unique knowledge as well as valuable data and research on the housing sector for the
poorest segments of the population and low-income families;
 Technical expertise in the provision of housing solutions for the most vulnerable
individuals, including safe and affordable house designs as well as water and sanitation
interventions; and
 An innovative approach combining market development and experience in housing
finance and housing support services; advocacy for secure land tenure; and pro-poor
housing solutions in collaboration with other NGOs and community-based organizations.
44 Appendix 1

Housing for the most vulnerable groups. For 15 years, Habitat Cambodia has worked in
Phnom Penh, Siem Reap, and Battambang to provide holistic housing solutions and secure land
tenure for vulnerable groups such as informal settlers, those living with AIDS or disabilities, older
persons, and orphans. As part of a community-led total sanitation program in Siem Reap,
implemented in 2014, water and sanitation facilities were built and promoted behavioral change.
In Battambang, Habitat Cambodia works with the local and provincial governments to provide
secure land tenure and housing for informal settlers living on state land.

Advocacy and volunteer engagement. Habitat Cambodia engages young people in building
homes and communities, speaking out for decent shelter, and raising funds and awareness of the
need for better and decent housing in Cambodia. Annually, more than 1,200 Cambodian
volunteers partner with future homeowners to build their homes.

Disaster risk reduction and response. In rural and urban areas, local community members are
trained to better prepare for disasters under the community-led Participatory Approach for Safe
Shelter Awareness. Habitat Cambodia also responds to disasters through the distribution of
emergency shelter kits and by building back better.

Market development. Since 2012, more than 66,000 families have gained access to housing
finance loans through Habitat Cambodia’s partnerships with major microfinance institutions such
as Kredit, LOLC (Cambodia) Plc., First Finance, Sovannaphoum, and Hattha Kaksekar Limited.
These MFI partners have also been provided with grants, initially through the Swiss Capacity
Development Fund, to build their capacity and develop their products.

A.1.4 Thailand

Country facts:

 Capital: Bangkok; Main country facts: Constitutional monarchy; and

 Population: Over 68.2 million; Urbanization: 50.4 % live in cities; Life expectancy: 74.7
years; Unemployment rate: 0.9 %; Population living below poverty line: 12.6 %

Habitat facts:

 530 people served in FY18

 + 2,000 volunteers hosted
 Projects: renovation, disaster response, affordable housing, community development

Thailand has been tackling housing poverty in Thailand since the start of the project in the
northeastern province of Udon Thani in 1998.

Since July 2007, Habitat Thailand team has been operating through its national office in Bangkok
and resource centers located in the North, Northeast, and South.

Growth. With strong economic growth, Thailand has reduced poverty from 21% in 2000 to around
8% – or 5.4 million people – in 2009 (according to the local poverty line).

Inequalities. Thailand has met the majority of its Millennium Development Goals ahead of the
2015 deadline. However, vulnerable groups such as migrants, informal workers, and displaced
persons are not equally benefiting from Thailand’s economic successes.
 Appendix 1 45

Natural disasters. Disasters such as droughts and devastating flooding in 2011-2012 and the
subsequent flood in 2013 also affect many low-income families. Having lost their jobs and savings,
these families are unable to repair or rebuild their homes despite government assistance.

How Habitat addresses housing poverty in Thailand. Habitat is committed to providing

housing solutions with the support of volunteers and donors. Corporate partners include Dow,
Coca-Cola, HMC Polymer, Cargill, Ananda Development, Siam Commercial Bank, Seagate,
Caterpillar, Nissan, Cigna, Bank of America, P&G, and HSBC. International schools also lend a
hand. In recent years, the public sector support has come from the Government Housing Bank,
which funds the projects and sends their staff as volunteers on Habitat builds.

Building decent homes. Habitat partners with low-income families to build, repair or rehabilitate
their homes. Volunteer labor helps to reduce the cost of house construction. A Habitat home
partner saves 10-15% of the cost of the house before construction begins. Each home partner’s
monthly repayments enable Habitat to help other families build homes and hope.

Natural disaster relief. Since the devastating flooding of 2011, we have distributed clean-up kits
and emergency shelter kits to nearly 4,000 families in 11 provinces. HBH has also helped more
than 1,400 families to rebuild their homes and lives. In addition, 32 schools were rehabilitated,
and three multi-purpose buildings were built in Ayutthaya and Phitsanulok provinces.

Housing microfinance. In Maha Sarakham province, northeastern Thailand, HFH’s partner

organizations provide low-income families with housing finance education to help them save for
home improvements. HFH also helps families to improve their homes through construction
technical assistance.

Sustainable community development. In Galyani Vadhana district, northern Chiang Mai

province, HFH local team has rebuilt school dormitories and improve water and sanitation facilities
in a local school. An old government office building has been turned into a tourist information
center to promote the district’s attractions and Habitat’s work.

A.1.5 Myanmar

Financial inclusion in Myanmar has seen steady but slow progress. In Myanmar, 8.8 million of the
population are business owners. However, 56% of the businesses lack a savings account.
Unsurprisingly, a UNCDF study found that 52% of businesses reported difficulty in accessing
finance.

Hence, the scope to improve financial inclusion is huge. Taking note of this, the microfinance
institutions in Myanmar are now developing at a faster rate as opposed to earlier.

In the first quarter of 2019, a total of 5 million clients gets microloans worth 1.3 trillion kyats.
Undoubtedly, it’s a huge jump from 800 billion kyats from the previous year.

To provide more support, organizations like UNCDF Myanmar take many initiatives. For example,
EFA- a country program working towards increasing financial inclusion in Myanmar from 30% to
40% by 2020.
46 Appendix 1

Aim of MFIs

MFIs aim is to reach not just the MSMEs but also the smallholder farmers. Also, women
entrepreneurs and the youth of the nation. To make financial inclusion effective, MFIs follow
revised policies and regulations to allow an integrated approach in order

For example, the credit rating reporting system has been set to help financial institutions analyze
MFIs before enabling access to credit. This is a regulation that reinstates the growing support to
the industry. All of this shows that Myanmar slowly but surely is in the right direction with active
efforts towards financial inclusion.

With digitization taking over, access to microfinance in Southeast Asia, such as Myanmar, is
becoming simpler. Concepts of innovative technology with well-integrated policies and correct
implementation plans are finally being addressed and administered. Overall, the future looks
highly promising for Southeast Asia. The commendable performances of the respective countries
in terms of their economic growth and efforts to improve financial inclusion.

However, the country has been beset with an internal rift between the government and the
populace. Economic development is once again taking a downturn, and microfinance activities
have suffered a slowdown.

LESSONS LEARNED DRAWN FROM PARTNERSHIPS OF HFH WITH 11 MFIS:7

Land and location. A favorable condition for housing microfinance is a setting in which land
tenure is secure, and households feel confident of their property rights, even if they are not
formally registered and titled. These factors feed vibrant housing markets and stimulate
investment in improving homes, infrastructure, and public service. Zones at high risk of natural
disasters (e.g., hurricanes, earthquakes, landslides, flooding) are also difficult contexts for
housing microfinance, given the associated lending risks. Nevertheless, the effects of natural
disasters often present unique opportunities for housing microfinance, particularly in areas where
people are settling after a disaster.

Sociopolitical factors. Global urbanization presents a vast opportunity for housing microfinance
because urban areas experiencing significant growth and migration are often hosts to vibrant
housing markets where demand for financing far outstrips supply.

Economic environments. High-risk markets, in which capital is constrained and costly, are
difficult contexts for growing housing microfinance, as loan capital can become extremely
expensive, and the price increase of construction materials can outpace the clients’ borrowing
capabilities.

Microfinance markets and regulation. Where microfinance institutions are relatively mature,
the banking business is more sophisticated, and product diversification is commonplace, housing
microfinance appears to grow and diversify its offerings.

Government housing programs. Government housing programs, particularly subsidy-based

initiatives are perceived as having a negative effect on the housing finance markets of low-income
sectors.

7 Housing Microfinance Product Development A Handbook,3 rd Edition 2015, habitat.org/cisf.

 Appendix 1 47

Original case studies and detailed discussion of best practices contained in this chapter 6 are
presented in “Housing Microfinance Case Studies of 11 Habitat Partnerships.”8

A.1.6 Philippines

In May 2008, the Housing Microfinance Product Manual was launched by the BSP Monetary
Board, then Housing and Urban Development Coordinating Council (HUDCC), and the
Development Bank of the Philippines (DBP) to cover banking MFIs under the ADB-funded
Development of Poor Urban Communities Sector Project. The product launch encouraged both
the NGO and banking MFIs to offer housing microfinance loans to their clients. The Bangko
Sentral ng Pilipinas reports that the rural and thrift banking sector has disbursed P1.535 billion
housing microfinance loans as of the end of 2019. To date, CARD MRI, one of the country’s
leading MFI, has grown into a nationwide integrated microfinance NGO, insurance company,
bank, and microfinance training institute. Another player in the sector is the ASA Philippines
which operates nationwide for approximately 1.88 million members and a total portfolio of P307.78
billion as of 30 November 2020. Before the COVID 19 pandemic, collection efficiency was at
99.6%, which declined to 76.3% as of the end of 2020.

In 2019, Asian Development Bank (ADB) granted a regional technical assistance Advancing
Inclusive and Resilient Urban Development Targeted at the Urban Poor Project (Asian
Development Bank Regional Technical Assistance (RETA) 9513 covering Bangladesh,
Indonesia, and the Philippines. The
Department of Human Settlements
and Urban Development (DHSUD)
has an ongoing study: Scaling Up
Green Inclusive Housing Box 3. Key Features of Housing Microfinance Product
Microfinance. The study aims to 1 Loan amount: based on cost, term of loan, interest rate,
draw up a roadmap to support the capacity to pay, ceiling of DHSUD socialized housing
expansion and strengthening of the package;
2 Security or collateral: collateral substitutes such as
housing microfinance sector individual or group guarantors, lease variants, certificate
involving multi-stakeholders from of entitlement and lot award, or title;
the public and private sector, 3 Borrower eligibility: good credit standing with past
NGOs, CBOs, banking sector, key microenterprise loan/s, adequate income as basis of
shelter agencies, and private sector capacity to pay; and
developers. The study will 4 Capital build-up: has savings for additional collateral
culminate by June 2021, with the substitute and source of funds for home improvement.
consolidated inputs culled from the
series of consultative meetings
conducted with the identified role that the multi-stakeholders may take on in the future.

In 2018, Habitat’s Terwilliger Center conducted a study with the MCPI on about 15 NGO MFIs
with an HMF window. One of the major findings is that there was relatively low borrowing by
members for HMF. Approximately 5% of total membership availed of a housing loan, which
comprised 6% of the total loan portfolio of the MFIs. Average borrowing was also at P8,000 per
loan. Interested or demand for housing microfinance was at 85% of the members, and thus, the
initial findings showed the huge gap between demand and supply. After evaluation of study
results, it was NWTF that decided on the development of a client-centric solution to the problem.

8 Lessons from 11 Partnerships of Habitat for Humanity. habitat.org/cisf.

48 Appendix 1

HFH Philippines, under its Terwilliger Center, through a Credit Suisse APAC Foundation grant,
worked closely with Negros Women for Tomorrow Foundation (NWTF) to develop a housing
product geared toward the poor and their difficulties in access to finance. This case study
showcases the journey from product design and training to the pilot program’s end, highlighting
its challenges, achievements, and opportunities. This case study is useful for all market actors
such as financial intermediaries, investors, regulators, business consortiums, and others
interested in identifying alternative and innovative market solutions to help households build and
improve their homes.9

Lessons learned and best practices gained by NWTF from previous experience in HMF include:

 Quick response to disasters. In 2014, in response to Typhoon Haiyan devastation,

which brought massive devastation, NWTF developed a temporary Housing
Reconstruction Loan product to support low-income households in rebuilding homes.
Later, NWTF partnered with a leading cement manufacturer to simultaneously offer
access to high-quality materials and credit solutions. However, the gap remained
untouched as the cement company could only bring the materials to areas where delivery
points were available. Members had their individual choice of materials and design
options.
 Extensive market research. NWTF head and regional officers, loan officers, field staff,
went through an exercise of ‘Know your client’ using the customer experience toolkit
developed by Consultative Group to Assist the Poor (CGAP). From this exercise, the
NWTF internal organization reached a uniform identity of low-income households’
characteristics, including their housing needs, motivations, dreams, pain points, and
financial behavior. This deeper understanding of clients’ needs provided a strong
foundation for establishing HMF product design suited to their clients’ needs.
 Policy and institutional reforms agenda. Institutional reforms had to be adopted by
NWTF on the internal workflows and refined lending processes to deliver the newly
designed product successfully. The new processes required changes in NWTF’s
management information systems and core banking solutions for efficient monitoring of
product performance. To build staff capacity in effective delivery of the new product, a
training module was developed that clearly outlined product details, all processes in the
lending cycle, and the staff roles and responsibilities. Employees from pilot branches and
operations and product development teams received a detailed orientation on the new
product before the launch.
 Pilot testing new loan products in a manageable environment and number of
branches and clients. Pilot testing of the new Dungganon Housing Loan product in
selected branches enabled the NWTF team to spot the pain points of prospective clients
and resolve them efficiently. Within 7 months of pilot testing and 868 families already
benefitted with home improvements, NWTF rolled out the housing product and as of June
2020, the facility is now available for its members in more than 30 branches. The loan
product is now part of the NWTF portfolio and business plan.
 Business strategy and planning. Part of NWTF’s business expansion strategy will cover
the development of a product for new house construction involving much higher loan sizes
and longer maturity, and a mortgage solution supporting the purchase of new homes and
lots,
 Strategic management of disruptive events. During the significant disruption due to
COVID-19, NWTF had to halt the disbursement of housing loans temporarily. The focus
moved to provide emergency and income-generation loans to low-income families to
restore their livelihoods. However, the “shelter in place” directions from the local

9 Case study: Improving access to housing microfinance solutions among low-income households in the Philippines,
October 2020, habitat.org/cisf.
 Appendix 1 49

governments also reiterated how adequate and safe housing could act as the first line of
defense in public health crises. Thus, NWTF reopened the window for Dungganon housing
loans in July 2020.

The USAID Philippine Water Revolving Fund (PWRF) Support Program aided in the publication
of a “Guide to Developing Microfinance Programs for Water Supply and Sanitation (WSS) For
Microfinance Institutions, Water Service Providers and Other Development Institutions.” The
PWRF support program established a co-financing facility that combines Overseas Development
Association and Japan International Cooperation Agency resources with PFI funds for
creditworthy water service providers, using a financial structure that allows affordable loan terms
without sacrificing the viability of PFIs. PFIs have access to credit risk guarantees provided by
Local Government Units Guaranty Corporation (LGUGC) and USAID’s Development Credit
Authority.10

Case Study No. 1: Environmental Services Program (ESP) in Indonesia

ESP ran a Micro Credit for Water Connection Program from 2005 to 2010. A partnership
arrangement between water utilities and domestic microfinance institutions was developed to fund
household water connection charges. The objective was to provide poor households, which
generally cannot pay in cash, access to microcredit that allowed them to amortize the fees over
a period of time, thus ensuring affordability.11

Lessons learned. The principal reason for the microcredit program’s success in installing new
connections is that each stakeholder — bank, water utility, and client — receive benefits.

 Benefits to the utility. The direct benefit to the utility is the attraction of new customers,
which increases its service base and revenue flow. The microcredit option allowed the
utility to fulfill its public service obligations to provide service to households from the lower-
income bracket.
 Benefits to the bank. Bank will benefit from the partnership with the addition of new
customers, thereby resulting in more loans and more interest revenues, though small as
initial loans. Even though the loans may be small, it is important to see them as just that:
initial loans. However, bigger credit availment may follow as clients start their good
standing record.
 Benefits to the customer. Documents on the importance of access to clean water. The
benefits related to improved living standards, health and hygiene practices, and the
substantial time and financial savings resulting from connection to piped water are well
documented. ESP’s research shows that poor households without access to tap water
often pay five to 10 times more per liter than wealthier households with a utility connection.
Not only is water purchased off the street more expensive, but it is also of poor quality
given the various unsanitary sources used by informal vendors.

Case Study No. 2: IPD’s Cooperative Model for Last Mile Water Services

The project seeks to develop, demonstrate, and document new solution concepts in delivering
quality water services in commercially unviable urban poor communities, specifically in terms of
(i) community risk-taking, mobilization of capital, and self-management through a community
water service cooperative entering into a sub-distribution business partnership with the central

10 Guide to Developing Microfinance Programs for Water Supply and Sanitation (WSS), www.usaid.gov, October
2011.
11 The case study was lifted from 2 reports of the USAID’s Environment Services Program, namely: Guideline on Micro-

Credit for Water Connections and Micro Credit Finance for Water Connections, 2009.
50 Appendix 1

water utility; (ii) regulatory support and performance-based capital grants by local governments
to community water service cooperatives, and (iii) co-financing schemes and building-up of water
revolving funds for capital expansion and technical support funds for community capacity-building.
Despite the concession agreements, many urban poor residents do not have access to a safe
and sustainable water supply. Without regular water supply (level 3, individual metered
connections to households), low-income families face inordinately high costs procuring water
compared to the minimum charge for level 3 connection), and long queue time and distance in
fetching water from vendors (commercial taps and water lorries). This case study will cover the
City of Bacolod and Recomville community, TSPI as a microfinance institution, was tapped to
provide loans for connection fees to several eligible low-income families within the water
cooperative service area. Arrangements between IPD and TSPI were formalized with a
Memorandum of Agreement (MOA) which provided that IPD should provide TSPI at least 25
potential clients for the Waterline Connection Loan based on Credit Water Service Cooperative
pre-qualification criteria for Cooperative membership and deposit a guarantee fund of
PHP324,000 with TSPI for 12 months allowing TSPI to draw from this fund for any defaults on the
loan. TSPI, on the other hand, was obligated to develop a waterline connection loan program,
conduct orientation on the said program for potential clients and process loan applications, make
available a corresponding amount of PHP324,000 to match IPD’s guarantee fund so that the
maximum loan portfolio will be PHP648,000 at any given time, and pay IPD an interest of 2.5%
per year for the guarantee fund net of guarantee obligations, among other things.

Lessons learned:

 the cooperative formation strengthened the trust and solidarity of the communities in
various project areas in Caloocan and Bacolod;
 existence of guidelines, governance and management standards covered by Republic Act
No. 9520 (Philippine Cooperative Code of 2008) and CDA rules and regulations facilitated
the establishment of cooperatives in the subject communities; and
 sense of ownership of the project, the water system installed the sense of responsibility
amongst the cooperative members and encouraged serious peer monitoring to prevent
water supply pilferage and proper operation and maintenance of the water system by the
residents.

Case Study No. 3: ASKI-CCWD Water Kiosk Project

ASKI was linked with the Cabanatuan City Water District (CCWD) by the PWRFSP in July 2010
to test the partnership arrangements. Initially, the model under study was the establishment of
individual connections in the Amihan district. CCWD and ASKI explored the feasibility of
establishing water kiosks in other barangays where piped connections are not financially viable
(areas far from existing main lines and sources). From the list of 15 un-served barangays given
by CCWD, ASKI chose six barangays wherein ASKI had operations, existing client centers, and
community associations. ASKI was responsible for community preparation, training, and capacity
building of the kiosk operator. CCWD and ASKI pilot-tested the scheme for one year to test the
viability of the kiosk operation and, after that, agreed on revenue sharing. Annual projections on
the volume of consumption, O&M and tariffs will be agreed upon amongst the stakeholders.

Case Study No. 4: TSPI’s Sanitation Loan Program for the Poor

TSPI offered social development loan products aimed to respond to the poor households’ basic
needs such as health, education, housing, and sanitation. These loan products were made
available to existing clients of TSPI, who have demonstrated the credit and social discipline as a
borrower for at least one year at an interest rate 40% to 50% lower than livelihood loans. These
 Appendix 1 51

loans though non-revenue generating, contribute to productivity and address the vulnerability of
poor households.

Lessons learned:

 Pro-poor sanitation loans still required a marketing campaign as the members have other
priorities such as livelihood, education, and home improvement loans. A sanitation loan
bundled with the housing renovation/repair loan makes the program more attractive to
clients and keeps operating costs at a minimum.
 The low-interest-rate (compared to the interest rate on microenterprise loans) and the
long-supervised process of the sanitation loan make the toilet loan program non-viable if
it is a stand-alone microfinance product.
 It is best to avoid partnerships with LGUs during election time due to implementation
delays.
 Clarification and understanding of stakeholders’ responsibilities through regular meetings
and monitoring reports are beneficial to all parties involved.

Latest developments in the region are capped by the following latest news release on the ADB
initiatives to support Housing Microfinance in partnership with Habitat for Humanity International.

ADB, Habitat for Humanity to Support Housing Microloans for Vulnerable Communities12

The Asian Development Bank (ADB) has teamed with Habitat for Humanity International to help
microfinance institutions (MFIs) deliver housing loans to low-income families in rural and peri-
urban areas of Bangladesh, India, Indonesia, and the Philippines.

The collaboration will expand ADB’s Microfinance Risk Participation and Guarantee Program to
include microloans for housing, home improvement, and water and sanitation for vulnerable and
climate change-exposed communities. ADB will help MFIs obtain financing for these purposes
from commercial banks of up to $30 million in the first phase. Habitat for Humanity will build the
MFIs’ capacity to design, pilot-test, and roll out the loans, with technical assistance from ADB.

“Low-income families find it difficult to build resilient houses as they lack adequate and affordable
financing options due to the collateral requirements of commercial banks,” said ADB Private
Sector Financial Institutions Division Director Christine Engstrom. “MFIs have the networks to
reach these communities but often lack the technical capacities to deliver housing microloans to
them. Building on Habitat for Humanity’s technical and training expertise, this inaugural
partnership will enable ADB’s Microfinance Program to better address this market gap.”

"The demand for urban housing in Asia remains largely unmet, giving the private sector a critical
opportunity to deliver affordable materials, construction quality, access to energy, gender equity,
water supply, and sanitation services while supporting greater gender equity," said Habitat for
Humanity International Chief Operating Officer Patrick Canagasingham. “With ADB, we will create
enabling environments for MFIs through risk-sharing and capacity building, helping unlock local
private sector capital for housing.”

“This partnership is timely, as micro-housing for the poor and investing in community resilience
are key drivers of economic recovery from the pandemic,” said Lead of ADB’s Microfinance
Program Anshukant Taneja.

12 News release, MANILA, PHILIPPINES (19 April 2021), www.adb.org.

52 Appendix 1

An expected 20,000 households will receive housing microloans from partner MFIs in the
program’s first phase to enhance construction quality and climate resilience, including upgrading
semi-permanent structures and installing sanitation and water connections. ADB also aims to
encourage private sector financing through risk-allocation and guarantees. The collaboration will
help to empower women, with 90% of financing targeted for women micro-borrowers.

Habitat for Humanity began in 1976 and has grown into a leading global non-profit, working in
more than 70 countries. Habitat’s Terwilliger Center for Innovation in Shelter works with the
private sector to pilot new products and approaches for housing finance, materials, and services.
From July 2019 to June 2020, Habitat helped more than 1.9 million people in Asia and the Pacific
gain access to better housing.

ADB’s Private Sector Operations Department will also explore opportunities to work with Habitat
for Humanity to scale the organization’s catalytic initiatives, including the MicroBuild Fund, which
has deployed over $140 million in housing finance loans through MFIs, with 19% allocated in Asia
and the Pacific. ADB’s Microfinance Program has helped more than 6 million borrowers gain
access to microloans.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the
Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned
by 68 members—49 from the region.

B. Housing Microfinance in South Asia: Focus on India

B.1 Birthplace of Microfinance Movement in South Asia

In its 2005 publication entitled “Microfinance in South Asia: Toward Financial Inclusion for the
Poor,” the World Bank stated that the modern microfinance movement in South Asia was born in
Bangladesh in the 1970s as a response to the prevailing poverty conditions among its vast rural
population. Other countries of the region like India, Sri Lanka, and Pakistan followed (some
sooner than others) but have since established active microfinance sectors.

Remarkable growth rates in Bangladesh, particularly during the 1990s, created a new dimension
for microfinance worldwide as microfinance institutions grew to include millions of clients. For the
first time, a substantial proportion of the low-income families of a major developing country were
served by the activity. The start of the 21st century reinforced this trend as the Bangladesh
numbers continued to grow impressively. In India, a substantial microfinance system based on
Self-Help Groups (SHGs) was developed.
 Appendix 1 53

Box 4. THE SEWA Bank: India’s First Microfinance Institution

India’s first microfinance institution, Shri Mahila SEWA Sahkari Bank, was set up as an urban co-
operative bank, by the Self-Employed Women’s Association (SEWA) soon after the group founded by
Ms. Ela Bhatt was formed in 1974.
The first official effort materialized under the direction of National Bank for Agriculture and Rural
Development (NABARD). The Mysore Resettlement and Development Agency (MYRADA) sponsored
project on “Savings and Credit Management of SHGs” was partially financed by NABARD during 1986-
87.

At present, South Asia is recognized as one of the leading markets in the global microfinance
industry. In 2018, it had the largest number of borrowers at 85.6 million, and its growth rate of
13.8% is much higher than that of other geographies.13

B.2 India’s Microfinance: Started and Led by a Women’s Association

The beginnings of microfinance in India can be traced back to the early 1970s in Gujarat, a state
in the western coast and the 5th largest in the country. The initiative was first made by the Self-
Employed Women’s Association (SEWA) when it established SEWA Bank in 1974. The main
objective was to provide banking services to poor women employed in the informal sector in
Ahmedabad City, Gujarat.

Since then, this bank has provided financial services to individuals in rural areas who wish to grow
their enterprises. The microfinance sector evolved in the 1980s around the concept and with the
formation of self-help groups (SHGs) started by SEWA. Working with poor, self-employed women
in the informal sector, the SHGs would provide their members with much-needed savings and
credit services to empower and help them get work, income, food security, and as a solution to
poverty. The SHGs, typically groups of 8 to 10 women, met once a week to collect money from
their members, connected them to banks, and loaned them money at low interest rates.

B.3 Cornering a Notable Portion of South

Asia’s Microfinance Industry
Box 5. India’s Microfinance Share in
From its humble beginnings, India’s microfinance South Asia
sector has grown significantly over the years to In FY19, the loan portfolio of the Indian
become a multi-billion-dollar industry, with bodies microfinance industry has grown at a rate of
such as the Small Industries Development Bank 40% YoY, with an outstanding loan portfolio
of India (SIDBI)14 and the National Bank for worth INR 1.785 trillion and 64.1 million
Agriculture and Rural Development (NABARD) unique live borrowers.
devoting significant financial resources to This growth has been fueled by a landscape
microfinance. of diverse microfinance providers and varied
microlending models.

13 SIDBI & PwC; Vision of Microfinance in India; 2019, p. 6

14 SIDBI was established on 2nd April 1990 under an Act of Indian Parliament and functions as the apex regulatory
body in India for overall regulation and licensing of microfinance institutions in India. It is the principal financial
institution for promotion, financing, and development of the Micro, Small and Medium Enterprise (MSME) sector as
well as for co-ordination of functions of institutions engaged in similar activities. SIDBI is under the jurisdiction of
Ministry of Finance, Government of India headquartered at Lucknow and has offices throughout the country.
54 Appendix 1

A notable portion of the more than 85 million borrowers in South Asia are in India (Box 5).

Today, the combined outreach of the top five private sector MFIs is more than 20 million clients
covering nearly every state in India, and many Indian MFIs have been recognized as global
leaders in the industry.

B.4 Multiple Players Enabling Microfinance Lending in India

Different players like banks, small finance banks (SFBs), MFIs, non-banking financial companies
(NBFCs), and not-for-profit MFIs enable microlending in India. MFIs hold the largest share of the
loan portfolio, which stands at INR 681 billion and accounting for 38% of the total industry
portfolio.15 This suggests that borrowers are more inclined to take loans from MFIs (Figure 1).

Figure 1: Market Shares of FIs in Outstanding Loan Portfolio

1%

10%

34%

38%

17%

Banks SFBs MFIs NBFCs Not for profit MFIs

The preference for MFIs over banks and other financial institutions by 60% of borrowers also
came out in a Microfinance Borrowers Survey done by PricewaterhouseCoopers (PwC) India in
2019.

According to the PwC Microfinance Borrowers Survey, 2019, approximately 30% of the borrowers
claim that their preference for MFIs and NBFCs was due to instant access to credit. Though
interest rates play a significant role in the choice of a financial institution, around 20% of MFI and
NBFC borrowers also cite flexible repayment schedules as a major decision parameter, indicating
their willingness to take credit at higher interest rates in their hour of need.

B.5 Performances of the Different Providers Vary

Similarly, PwC reported that among these players, banks have seen stable growth due to the
following factors: (i) ease of access to funds, (ii) highest average loan ticket size, and (iii) low
delinquency ratios.

15 SIDBI & Equifax Microfinance Pulse report, 3rd edition, June 2019
 Appendix 1 55

While the MFIs hold the largest share of the loan portfolio, their growth is adversely affected by:
(i) limited fund availability and (ii) high customer acquisition and servicing costs arising from
operations in remote geographies. This has resulted in MFIs offering rates ranging from 24% for
larger NBFC-MFIs to 35–45% for smaller MFIs, making it unaffordable for end customers, leading
to large NPAs for microfinance providers.

In terms of portfolio outstanding, the NBFC-MFIs continued to dominate the industry with a 37%
market share as of June 30, 2018, and increased to 38% a year later.

The SFBs are key emerging players in the current microfinance landscape and provide high-ticket
loans giving them an edge over NBFCs and MFIs.16 SFBs are not constrained by MFI guidelines,
which allows them to offer higher ticket size loans. As the market share of SFBs increases from
the current 17%, they are expected to penetrate further and provide competitive products to
borrowers.

B.6 Collaboration and Regulation for Higher Growth and Outreach

With multiple players on the scene having their distinctive strengths and weaknesses, the need
for a more collaborative approach for higher growth became evident. This has prompted the
Reserve Bank of India (RBI) to issue a circular in September 2018 covering the co-origination of
loans by banks and NBFCs/MFIs.17 This called for a joint arrangement between banks and
NBFC/MFIs for credit and risk-sharing (Box 6).

The interventions by the government and the

Reserve Bank of India (RBI) have also played a
significant role in enabling the microfinance
sector to reach out to new geographies. The Box 6. RBI Interventions
Public Credit Registry (PCR) initiated by the RBI Co-lending is expected to mitigate the risk of
is a step in this direction, aimed at formalizing lending for NBFCs, with a major portion of the
credit and helping the sector conceptualize an credit risk borne by the participating bank. The
optimized underwriting process and make bank is also expected to benefit from the
widespread network of the NBFC/MFIs
decisions based on critical data points. Recently, responsible for the sourcing and servicing of
the Government of India has also increased the loans under this arrangement.
microlending limit of borrowers to INR 1.25 lakh
with the aim of expanding the reach of the
microfinance sector.

This underlines the importance of RBI regulations to empower the industry, create a healthy and
competitive environment, and provide the momentum to push the industry towards a stable and
sustainable position.

B.7 Two Prevailing Microfinance Disbursement Models

A majority of the microfinance players in the Indian market disburse loans either through the Joint
Liability Group (JLG) or Self-help Group (SHG) model. The choice of disbursement model
depends entirely on the viability of the model and the organization strategy of the institution (Table
1).

16 In FY19, the average ticket size disbursed per client by NBFC and MFIs was INR 25,850, while that disbursed by
SFBs was INR 30,780. (MSME Pulse Report, June 2019)
17 https://www.rbi.org.in/scripts/PublicationsView.aspx?Id=18715
56 Appendix 1

Table 1: Comparative Analysis of the Two Models

Parameters JLG SHG
Greater focus on savings
Underlying strategy Greater focus on credit generation
generation
Scalability Have faster turnaround and are more Less scalable
scalable
Average group size 3-10 members per group 10-20 members per group
Associated non-performing assets Less than 1%, which is quite low Vary from 7-8%
(NPAs)
Future landscape NBFC-MFIX prefer this model as it is Capacity building for partner
more commercially viable and institutions
scalable
Greater focus on savings
Underlying strategy Greater focus on credit generation
generation
Source: PWC & SIDBI, Microfinance Vision for India, 2019, p. 8

B.8 Challenges Amid the Growth and Potential

The presence of multiple players, the existence of mature models of microlending, and the
significant portion of its population being in the low-income bracket all point to a huge opportunity
for the microfinance sector. Despite its strong potential, however, the microfinance sector faces
challenges related to accessibility in rural India.

Bridge India, a progressive and inclusive non-profit think tank dedicated to discourse on public
policy, has identified major issues facing the microfinance sector in India and what needs to be
done.18

 Does not reach the deserving poor. The microfinance delivery models fail to focus on
people below the poverty level as they are deemed risky. There is a bias in selecting
beneficiaries for the scheme. To run the program successfully and to attain higher
repayment rates, the providers tend to select economically stable individuals as the
program beneficiaries. The core poor are too risk-averse to borrow for investing in the
future. They will, therefore, benefit only to a limited extent from the microfinance schemes.

Box 7. Mapping the MFIs

Based on the Microfinance Pulse Report (3rd Edition) of Equifax in collaboration with SIDBI, as of June
2019, majority of extreme east zone states and Jammu & Kashmir from north zone show low presence of
MFIs, while only 3 states - Maharashtra, Uttar Pradesh, Bihar show institutional concentration ranging
between 80 -100 institutions.
States such as Orissa, Chhattisgarh, Jharkhand, and Madhya Pradesh lag in implementing microfinance
schemes. These are states where a large percentage of the population lives in poverty, yet coverage of
microfinance program is low.

 Limited spread in the poorer states. India saw a substantial increase in the outreach of
microfinance services in recent years because of the phenomenal growth of the bank-
SHG link program and the substantial growth of NGO-MFIs. This outreach, however, is
concentrated in a few southern states (Box 7).

18 https://www.bridgeindia.org.uk/the-story-of-microfinance-in-india/
 Appendix 1 57

Findings by KIVA Fellows19 show that there is extreme concentration in the Indian microfinance
industry – approximately one-third of all outstanding microloans and borrowers are from the state
of Andhra Pradesh. They noted that despite the industry's recent growth, around 90% of the Indian
population remains without access to financial services.20

The successful distribution of microfinance programs depend on the support extended by the
respective state governments, the local culture and practice, and the concentration of MFIs in
these states.

 High-interest rates. Borrowers are interest-sensitive, so the capacity of borrowing

decreases with an increase in interest rates. Thus, high-interest rates are
counterproductive and weaken the economic status of poor clients. It is also exploitative
to charge very high-interest rates from poor clients. The interest rates do not seem to be
well-regulated in the microfinance sector. Some MFIs have regulated interest rates.
However, they may impose transaction costs that increase the burden of borrowing and
make it less attractive. Whereas the banking sector charge 9% - 10% annual interest rate,
MFIs may charge 11-24%. However, these rates of interest vary with the lending
conditions and policies of the MFI.
 Low depth of outreach. The outreach of the program is expanding but the number of
loans taken remains small. This amount isn’t sufficient to satisfy the financial needs of
poor people. The duration of the loans rarely extends over a year. The insufficient loan
size and the short period of lending available restrict borrowers from using the loans for
productive purposes. They generally use these small loans to address liquidity issues,
rather than borrowing to invest.

B.9 Housing Microfinance Trends

In his study (undated) entitled “Microfinance for Housing in India,” Dr. Basanta K. Sahu21 pointed
out that in the Indian context, there are few studies available on housing microfinance and its
outreach is limited. His study attempted to analyze the current situation of microfinance for
housing in India, focusing on select locations and functioning of different housing microfinance.

Dr. Sahu’s study was based on two different housing microfinance programs in India:

 a state government initiated and community-based microfinance for housing program

financed by commercial banks in Kerala Bhavansree.
 An MFI initiated microfinance for housing in Karanataka: Sanghamithra Rural Financial
Services (SRFS).

These two MFH programs differ in product design, housing loan terms and conditions, selection
of beneficiaries, pattern of loan repayment and source of fund for the lending institutions.

B.10 Key Findings of the Study

Housing microfinance is found to be an appropriate housing credit lending method than traditional
mortgage lending to serve low-income and poor families. It is more suitable for existing microcredit

19 The Kiva Fellows Program offers individuals a rare opportunity to travel abroad and witness firsthand the impact and
realities of microfinance, by working directly with a host microfinance institution (MFI). The Kiva Fellow is an unpaid,
volunteer-based position designed to increase Kiva's impact and to offer participants a unique insider experience.
20 https://www.kiva.org/blog/part-1-current-state-of-microfinance-in-india
21 Senior Research Officer; Centre for Microfinance Research (Main Centre), Bankers Institute of Rural Development

(BIRD) Lucknow
58 Appendix 1

clients because their demand for housing finance can be met in a similar way as it is in microcredit
lending. It will also reduce time and resources for selecting and extending credit, often used in
mortgage financing.

Unfortunately, microfinance for housing in India is not well discussed and debated at a policy
level. Despite the rapid growth of the microfinance sector in the country, the potential role of
microfinance for housing has not been recognized. There have not been many efforts to study
the potential size of India's low segment housing finance markets. Interestingly, while
microfinance for housing is already developed in other countries and getting popularized in India,
not much is known about it.

From their analysis, however, it is evident that while the housing microfinance program has the
potential to achieve desired objective and scale, there is a need to understand the nature, pattern
and size of demand and supply of housing credit for low-income groups. An estimation of the
potential demand for housing microfinance has to be made to better understand the low segment
housing sector.

 Demand for housing finance is very high and increasing among low-income groups.
However, the nature and potential size of the housing microfinance market is not
adequately documented.
 Understanding the housing demands and priorities of low-income groups, the housing
portfolio of lending agencies and overall housing infrastructures are key areas for policy
interventions to make housing microfinance more effective to address the problem of
housing.
 Gap between the demand and supply for housing microfinance. Demand for housing credit
varies across regions and income size groups, but it is pronounced for new house
construction and additional rooms, which requires higher funding than what is available
for housing loans.
 Housing microfinance loan constitutes only a limited portion of total portfolios of financial
institutions such as banks and MFI.
 The nature and pattern of housing activities and priorities of low-income groups for such
activities do not match the functions of housing microfinance.
 Lack of qualified manpower/staff of lending institutions to operate a housing microfinance
program was found to be one of the major supply-side factors. In the case of SRFS, credit
officers were not adequately trained to assess clients' credit and technical needs but follow
more or less similar processes as the case of microcredit loan. There was also serious
concern regarding poor monitoring, supervision and evaluation of the housing
microfinance program. The focus was only on regular loan repayment and selection of
new clients based on record. It was also a big problem for the Bhavanshree program in
Kerala, where field officers/staff of the respective banks had to perform technical
evaluation, monitoring and supervision without expertise.
 Extending a housing loan as a stand-alone product without any technical support
sometimes resulted in delays, increasing costs, multiple borrowings, unhygienic
conditions and poor space management. In addition, lack of proper housing design, wrong
cost estimations, lack of skilled workers and housing materials were major problems in the
study areas.

B.11 Policy Recommendations

1. Intermediary model of housing microfinance: Instead of an individual housing

microfinance model as followed by MFIs and commercial banks, an intermediary model for
delivery of housing microfinance would be better in terms of operations and fund
 Appendix 1 59

management, wherein MFI will service the microfinance portfolios of established commercial
banks. The example of ICICI Bank, which has formed partnerships with some MFIs to service
its specialized microfinance product lines, including housing microfinance, may be followed
by other financial institutions.

2. Housing subsidies: Findings of the study support the argument that housing microfinance
can be a viable option to improve pro-poor housing without liability of housing subsidy. For
many low-income but economically active households, housing microfinance could be a better
option than extending housing subsidy, which involves a lengthy selection process, to improve
their housing condition. It will also make them bankable in the line of conventional mortgage
finance and the creation of assets. However, wherever possible, housing subsidies may be
used to reduce the cost of funds for credit lending institutions like MFIs, NGOs involved in
MFH. In this regard, the case of Bhavanshree is exemplary.

3. Measuring Housing Demand and Priority: There is a need to measure and document
housing demand and priority among different low-income groups and sub-groups. In this
regard, the focus should be given on current housing condition, family structure, asset holding,
income and occupation, alternate sources of credit and other indicators to assess the actual
housing credit need. For this, different housing measure indexes such as the housing index
developed by Cashpor can be used. This is important from a policy point of view.

4. Product design: The analysis shows a wider gap between housing credit demand and
supply, where it appears that current housing microfinance products fail to cater to the needs
of target groups with diverse housing demand and activities. So, there is a need to categorize
housing credit demand based on the nature of housing activities, repaying capacity, source
of income, and other suitable criteria. Variety of housing microfinance product lines should be
followed than single product lines that have uniform loan amounts and loan terms.

5. Scaling-up housing microfinance: Scaling up housing microfinance programs to reach

potential clients remains a major challenge for credit lending institutions. Since the client base
of housing microfinance programs is generally lower than the microcredit, there is huge scope
for expansion and growth in housing microfinance programs. The focus should be given to
the often-excluded clients such as landless, moderate-income households and others. A
special package that includes subsidized fund supply for housing microfinance lending, low-
cost housing technology, and other supports, relaxation in fundraising, etc., can help the
development of housing microfinance with wider impacts. Including some moderate-income
clients that are not part of the microfinance programs can improve the financial and
operational base of the MFIs.

6. Partnership between banks and MFIs: An effective partnership between different

stakeholders, particularly financial institutions is required for the success of housing
microfinance program. It is expected that housing microfinance will grow in India if credit
lending institutions expand their operation on the same scale as microenterprise credit. In
particular, there is a need to develop partnerships between banks and microfinance
institutions for financing and implementing housing finance programs. To use comparative
advantages of different stakeholders in housing microfinance, an effective partnership
between banks and MFIs partnerships is urged for development and functioning of low
segment housing finance market is crucial.

7. Housing plan with low-cost housing technology: Suitable housing plan and provision of
technical assistance should be a part of the housing microfinance program. Efforts should be
made to document and make available suitable housing technology matching the local
60 Appendix 1

conditions. Capacity building of the lending institutions in terms of training and other support
to their staff should be made on a regular basis. Demonstration of new housing technology,
better house construction practices, repair and maintenance should be conducted in the
client’s villages. The selection of such technology needs to be justified by simplifying it with
the local condition.

C. Housing Microfinance in Latin America: A Review

Latin America and the Caribbean (LAC) were early adopters of housing microfinance products.
The financial service providers of the region led the introduction of housing microfinance products,
where the oldest available record in the dataset was in 1992 in El Salvador. When housing
microfinance peaked in 2012, Asia and the Pacific quickly followed. From 1992 up to 2011, Latin
America continued to be the region with the highest housing microfinance products introduced,
but from 2012 onwards, Asia and the Pacific region took the lead. Housing microfinance grows
strongest in Asia and the Pacific, mostly in Cambodia, Philippines, and India. As for Latin America,
strong growth is reported from numerous countries, but Peru stands out.

According to a study conducted by Habitat for Humanity22, where they surveyed financial service
providers from different regions, the market constraints to scaling housing microfinance products
in the LAC region include:

 Unavailability of land/ formal title documents for clients;

 High demand, low eligibility of potential clients;
 Other government regulations;
 Externally imposed cap on client borrowing;
 Externally imposed cap on interest rates; and
 Externally imposed cap on housing portfolio.

Some regulatory constraints facing housing microfinance providers in Latin America include
government regulations, externally imposed cap on client borrowing (amount limit), changes in
capital requirement ratios, externally imposed cap on housing portfolio, externally imposed cap
on interest rates, and direct intervention in product terms by the central bank or other government
entity with oversight.

Commonly available housing microfinance products offered by financial service providers in the
LAC region include the following:

 Small construction loans;

 Home purchase or construction loan;
 General housing-related microfinance loan;
 Energy efficiency loans;
 WASH (water, sanitation, and hygiene) loans; and

22 Habitat for Humanity. The 2016–17 State of Housing Microfinance: Understanding the Business Case for Housing
Microfinance. Terwilliger Center for Innovation in Shelter. (2017, November).
https://www.habitat.org/sites/default/files/documents/The-2016-17-State-of-Housing-Microfinance-Understanding-
the-Business-Case-for-Housing-Microfinance.pdf
 Appendix 1 61

 Tenure-related loans.

Box 8. World Bank - Building More Affordable and Disaster-Resilient Housing in LAC
One quarter of the population of Latin America and the Caribbean (LAC) region live in slums. Between
2010 and 2017, Chile alone was struck by 10 major natural hazard events. According to the Ministry of
Housing and Urbanism of Chile, these disasters affected as many as 340,583 houses, costing $3.6 billion
in reconstruction. Post-disaster assessments recognize housing as one of the most affected sectors in
the wake of climate-related and other natural hazards. In a 22-year period (1990-2011), minimum losses
in the housing sector for 16 countries in LAC amounted to $53 billion.

In the same study conducted by Habitat for Humanity, the number one reason for offering housing
microfinance listed by Latin American financial institutions is social impact. This pertains to
improved quality of life/happiness, improved economic opportunities, and health and sanitation.
Other top reasons listed include responding to demand from loyal clients and tapping into a new
market or grow clientele base. Profitability and portfolio diversification are also reasons listed by
the LAC financial service providers.

C.1 The Microfinance Programs in Peru (BanMat, MiVivienda, MiCasa)

Peru is particularly fertile ground for a small serial home credit. A conservative estimate is that
pent-up market demand totals US$1.1 billion for housing microfinance loans from 550,000
existing low-income households and is increasing at $20 million annually from 9,000 new low-
income families.

The Peruvian government has a number of housing programs. BanMat makes loans for building
materials, although arrears rates are about 80% on these credits. MiVivienda23 is funded by a 5%
tax on salaries and channels these monies through a second-tier finance institution, COFIDE, to
first-tier housing lenders that – in turn – extend below-market-rate credit to around 14,000 middle-
income households per year for the purchase of new developer-built homes costing US$25,000
to $50,000. Techo Propio operates by joining a direct demand subsidy (i.e., a grant) with the
household's down payment and a loan for the purchase, construction, or rehabilitation of
homes. The subsidy amount varies from US$1,200 for home improvement to US$3,600 for the
purchase of a new home. In 2008, Techo Propio currently delivered around 3,000 subsidies per
year to households earning around US$400-$500 per month.24

Peru has housing conditions and a set of government housing programs fairly typical of Latin
American countries. The great bulk of the housing subsidy and finance system focuses on
middle-income families and fuels the commercial homebuilding and mortgage industries. These
programs contain significant subsidies per unit that limit their scope and production to a small
share of the population, mainly middle-income families. The implicit government policy for the
low-income majority is for these households to invade land or purchase a lot in a clandestine
subdivision or low-income community and build their homes over many years without formal-
sector support.

23Micro-Financed Loans Unlock Affordable Housing. Global Opportunity Explorer, 24 June 2019, goexplorer.org/micro-
financed-loans-unlock-affordable-housing/.
https://www.mivivienda.com.pe/PORTALCMS/archivos/documentos/8587590929771964558.PDF
24 Ferguson, B. (2008, November). Housing Microfinance: Is the Glass Half Empty or Half Full? Global Urban

Development Magazine. https://www.globalurban.org/GUDMag08Vol4Iss2/FergusonHousingMicrofinance.htm

62 Appendix 1

MiBanco, the largest microfinance institution in Peru and Latin America, has responded by
creating one of the largest and fastest-growing housing microfinance businesses in emerging
countries. MiBanco was formally launched in 1998 as a licensed bank when it assumed the loan
portfolio of Accion Communitaria del Peru, a nonprofit NGO operating in Lima. Today, MiBanco
is the largest microfinance bank in Latin America and one of the largest banks in Peru. MiBanco
was awarded as one of Latin America's most successful commercial banks.

The motivation for creating a housing

product dates back to the experience of
senior management in helping to finance Box 9. Peruvian MFIs and Housing
and rebuild houses in northern Peru Microfinance Loans
destroyed or damaged by an earthquake in In 2008, Global Urban Development Magazine
the early 1970s (Brown, 2003). Funding published an article on the changing housing
limitations precluded extending credit markets and context for housing microfinance,
market-rate finance of home improvement, analyzing HMF programs in Mexico, Chile, and
called MiCasa. Management decided that Peru. “Out of the three countries studied, Peru
represents the ‘best case’ for the argument that
the MiCasa loans would be offered through housing microfinance can become relevant to the
the same branch network with the same staff scale of the urbanization/low-income housing
as their other loan products. The core part of challenge.”
the credit process—the evaluation of the
client's capacity to repay—would be
essentially the same for housing as the bank's micro-enterprise loans. There were two targets for
MiCasa loans: MiBanco's traditional customer base of micro-entrepreneurs, and low-income,
salaried workers living in the same communities. By adding low-income workers to its target
market, however, MiCasa has served poorer households than the micro-enterprise portfolio of the
institution.

MiCasa was envisioned as a microcredit product without technical assistance for construction,
however, this program now assists households with the construction process through an initial
design and budget, one visit at the start of construction to help orient the work, and a technical
report on the feasibility of construction. MiCasa serves households, extends credit, and collects
repayment through its regular system of loan officers paid largely on commission based on loan
origination and collection performance.

Loans are secured mainly by cosigners, personal collateral, and temporarily taking custody of
households' proofs of ownership until credits are paid off, rather than mortgages (only about 10%
of MiCasa loans are secured by a mortgage), which are time-consuming and expensive to secure
and impractical to execute in low-income areas where home resale markets are thin. The main
incentives for repayment include diligent methods of loan collection and maintaining good credit
to get access to more finance.

MiCasa has grown rapidly. In 2001, its first full year of operation, MiCasa made 5,000 loans. In
2006, MiCasa made 13,498 loans. As of April 2007, MiCasa had 20,903 loans outstanding in
total and was making new loans at the rate of US $2.5 million per month. Arrears exceeding 30
days were 1.81%—low by Peruvian and international standards. Return on equity was 7% to 9%
per annum, which when leveraged by the institution's capital-to-asset ratio, resulted in profits of
over 20% per year. From April 2006 to April 2007, the MiCasa loan portfolio grew at virtually the
same rate (42%) as that of the loan portfolio of MiBanco as a whole (40%). MiCasa constituted
12% of the total portfolio of MiBanco.
 Appendix 1 63

According to the manager of MiCasa, effective demand for these micro-housing loans is huge
and far exceeds the supply of loans under the MiCasa program. This manager notes that the
priority of MiBanco as a whole continues to be microenterprise lending, although the institution
also actively markets MiCasa.

MiCasa has a pilot urban upgrading loan project. Under this program, loans have been extended
for a total of around US$300,000 for infrastructure provision, including installation of water and
electric networks, to six groups of households in various low-income communities, which
collectively agree to repay the loan. These loans are being repaid on time, and two of the six
households have repaid their loans fully.

With the success of MiCasa, a number of other local financial institutions, particularly cooperative
credit societies (Casas Municipales) and other MFIs, have now introduced housing products
similar to MiCasa and are beginning to explore this market. This competition has forced down
interest rates on housing microfinance loans, from around 70% per annum in 2005 to 45% in
2008.

C.2 Mexico’s Microfinance Program (CEMEX Patrimonio Hoy)

Cemex is a company focused on creating sustainable value by providing products and solutions
to satisfy the construction needs of our customers around the world. Patrimonio Hoy is a program
offered by Cemex and is a financing and development program for low-income families in Latin
America who want to build their own homes. The program offers technical assistance, financing,
building materials, and construction services to low-income families. Offices are currently located
in 56 cities in five countries, and they employ local architects as well as a network of local
promoters. The promoters have often benefited from the scheme before, and are usually trusted,
well-known members of their communities. 25

As long as families have a building plot, those interested in participating in Patrimonio Hoy receive
comprehensive advice from an architect who works directly with them to design a custom house
plan. Micro-financing options are tailormade to suit the needs of the families so that they can
include weekly or bi-weekly loan payback options, allowing low-income families to access
financing for housing previously unavailable to them.

The Patrimono Hoy Program of CEMEX, the giant Mexican cement maker, serves do-it-yourself
homebuilders, who account for 40 percent of cement consumption in Mexico. CEMEX research
showed that low-income homebuilders in Mexico take four years to complete one room and 13
years to complete a 4-room house. This slow rate largely reflects the lack of formal-sector
support. So, many households join informal savings clubs (tanda) in which each family pays
US$10 to a pool, and one member is selected each week by lottery until all have received the
money. However, this informal savings and self-help construction has strong drawbacks when
unguided. Building materials dealers often sell these households poor quality materials leftover
from large customers at high prices. Homebuilders who lack construction skills often waste
materials by buying too much or too little. They also hoard these materials, which leads to their
deterioration by weather and loss from theft. Home design and construction are often poor quality,
and tanda savings often end up getting used for festivities rather than invested in construction
materials.

25 Ferguson, B. (2008, November). Housing Microfinance: Is the Glass Half Empty or Half Full? Global Urban
Development Magazine. https://www.globalurban.org/GUDMag08Vol4Iss2/FergusonHousingMicrofinance.htm
64 Appendix 1

The CEMEX Patrimonio Hoy program addresses these problems with self-help construction with
the business goal of expanding CEMEX sales in this market. It first organizes small groups of
families who commit to a 70- to 86-week saving program. As informal tanda, each group's
members take turns collecting payments and playing the role of enforcer. However, to ensure
that savings get spent on construction materials, families receive raw materials rather than
cash. Deliveries start only two weeks before families have saved much, and subsequent
deliveries are made every 10 weeks. Thus, CEMEX is, in effect, advancing microcredit to these
families in the form of building materials. CEMEX operates this program through establishing
"cells" – four-member offices – located in low-income communities. CEMEX arranges with local
building materials suppliers to deliver high-quality products and uses its cells to orient households
in the construction process. Rather than use advertising, CEMEX hires local "promoters" – 98
percent of them women – to inform local households about the program. These local women are
the key to establishing the relationships and developing the trust necessary for the program to
work in the challenging environment of informal communities. The program sponsors parties and
other events to celebrate the completion of a room or a house.

Up to 1.6 billion people in urban areas could struggle to secure decent housing by 2025. According
to their housing needs and repayment abilities, Cemex is addressing this challenge and has
benefited over 2.3 million people in Latin America with decent housing through Patrimonio Hoy.
Families can completely transform their housing situation through a micro-credit scheme without
prerequisites and with comfortable repayment options.

C.3 Housing Microfinance Experience in Brazil

In contrast to Peru and Mexico, Brazil has virtually no commercially viable microfinance
institutions. Nonetheless, small credit for housing is a huge industry. It finances roughly one-
fifth of housing units in the Sao Paulo area, comparable to the number of units funded by Brazilian
institutional mortgage finance in this metropolis.26

These small housing loans mostly take consumer credit channeled by building materials retailers
to purchase their products. However, this building-materials consumer credit industry is
fragmented, disorganized, and charges relatively high interest rates. Examining Brazilian housing
finance and its building materials consumer credit industry provides important insights into small
serial credit for progressive housing in an environment without microfinance institutions.

One million Brazilian households form each year and enter the market for housing (Ferguson,
Cherkezian, and Motta, 2007). Over half of this demand for new housing comes from low and
moderate-income households earning below five minimum wages – about US $650 per month.
Self-financed progressive housing accounts for 62% of new Brazilian housing investment. Much
of this self-financed progressive housing development occurs in the informal sector.

As in Peru and Mexico, economic growth joined with social support programs have expanded the
lower-middle-class and decreased the number of households in abject poverty over the last three
years, stimulating demand for housing investment. According to The Economist, "between 2000
and 2005 the number of Brazilian households with incomes of US$5,900 to $22,000 grew by half,
from 14.5 million to 25.3 million, while those receiving less than US$3,000 a year fell sharply to
just 1.3 million."

Although growing rapidly recently, mortgage finance is still small in Brazil, both relative to the
share of housing funded and to GDP. Table 2 compares mortgage finance as a share of GDP in

26 Ferguson, B. (2008, November). Housing Microfinance: Is the Glass Half Empty or Half Full? Global Urban
Development Magazine. https://www.globalurban.org/GUDMag08Vol4Iss2/FergusonHousingMicrofinance.htm
 Appendix 1 65

Brazil with that of other countries. Partly because of the low penetration of institutional mortgage
finance, many Brazilian households pay for a surprisingly large share of their housing in
cash. Down payments of 30% to 50% are common. A wide variety of "alternative" sources of
housing finance have also developed.

Table 2: Mortgage Finance as a Share of GDP

Country Mortgage Finance as a Share of GDP
Argentina (2001) 4%
Brazil 2%
Bolivia (2001) 8.6%
Chile (2001) 10.8%
Columbia (2001) 7.0%
Indonesia (2007) 3%
Malaysia (2007) 25%
Mexico 2%
Panama (2002) 24.4%
Peru (2001) 2.9%
Uruguay (2001) 7.0%
United States 79.6%
European Union 42.6%
Source: Global Urban Development Magazine, November 2008.

The main sources of institutional mortgage finance are the SBPE (Sistema Brasileiro de
Poupanca e Emprestimo) (averaging about 20% of mortgages for the purchase of new homes)
and the CEF using FGTS funds (averaging about 60% of mortgages for the purchase of new
homes).

C.4 Housing Microfinance Experience in Other South Latin and the Caribbean

Another approach is that of the Kuyasa fund of Cape Town, South Africa. This organization makes
loans to families that have received a government housing subsidy that allows them to increase
the size of their unit from an average of 23 square meters to 54 square meters (Unitus/Lehman
Brothers, 2007). They also provide technical assistance to financial institutions for HMF and
appropriate funding mainly from domestic sources and international groups with experience
across countries and regions.27

The GmbH survey of 25 Latin American MFIs found that appropriate funding is the main factor
necessary to increase their housing lending. However, with some frequency, declarations of "lack
of appropriate funding" indicate deficits in the know-how, information systems, and business
alliances necessary to engage in low-income home lending. Packages of funding and technical
assistance from international sources with experience in various countries have an important role
in supporting HMF. Such international support can disseminate important innovations. As
capacity develops, this funding and TA best comes mainly from local sources.

27 Ferguson, B. (2008, November). Housing Microfinance: Is the Glass Half Empty or Half Full? Global Urban
Development Magazine. https://www.globalurban.org/GUDMag08Vol4Iss2/FergusonHousingMicrofinance.htm
66 Appendix 3

BSP APPROVAL OF HOUSING MICROFINANCE

Since 2000, the Bangko Sentral ng Pilipinas (BSP) has been issuing circulars and issuances to
support microfinance initiatives pursuant to the General Banking Law of 2000, which recognized
microfinance as a legitimate banking activity. On February 14, 2008, the BSP’s Monetary Board
took a step further to enable housing microfinance in the Philippines with the issuance of
Memorandum Circular (MC) M-2008-215. In a groundbreaking move, BSP approved the
application of microfinance best practices in the delivery of adequate and appropriate housing
finance for microfinance clients through the issuance of a housing microfinance product manual
contained in MC M-2008-215.

The housing microfinance product manual, designed by the ADB-funded Development of Poor
Urban Communities Sector Project (DPUCSP), jointly executed by the Housing and Urban
Development Coordinating Council (HUDCC) and the Development Bank of the Philippines
(DBP), addressed the housing finance needs of low income and urban poor households for home
improvements, house construction, and house as well as lot acquisition. With the approval of the
housing microfinance product manual, more liberalized collateral requirements in lieu of titles or
the acceptance of collateral substitutes in the form of rights-based secure tenure instruments, as
well as simpler documentary requirements were adopted to broaden and deepen the access by
poor and low-income households to affordable housing finance products and services. In the
absence of a land title, other forms of tenurial security conferring a bundle of property rights to
the poor and informal settler families were recognized as legal instruments eligible for use as loan
collateral. The housing microfinance product manual embodied in the agreement between
HUDCC and the BSP included the (i) basic features of the microfinance bank facility, (ii) appraisal
and loan valuation methodologies to be applied, and (iii) matching cash flow credit guaranty
program under the Home Guaranty Corporation (HGC). Prior to seeking approval for a housing
microfinance facility with the BSP, a bank was expected to submit its proposed housing
microfinance product manual to HUDCC for accreditation purposes.

In 2010, as part of the government’s efforts to strengthen the expansion of housing microfinance
among banks, BSP issued Circular 678. The circular was based on the previously approved
housing microfinance product manual and expanded the definition of microfinance by allowing
qualified housing microfinance loans up to P150,000 for home improvement and up to P300,000
for lot acquisition and house construction. The circular includes (i) the minimum criteria to ensure
that banks have the capability and technical capacity to offer housing microfinance, (ii) the basic
housing microfinance characteristics; (iii) appropriate risk management, (iv) the application
procedure for BSP approval, and (v) the regulatory treatment of housing microfinance loans.

Table 1 below summarizes the key provisions of Circular 678, including the prerequisites to BSP’s
approval of a bank’s housing microfinance lending facility.

Table 1: Prerequisites to BSP Approval of a Housing Microfinance Lending Facility

Item Guidelines
1. Microenterprise Loans-experience • 2 years of operation
• Collection efficiency
2. Portfolio at risk (PAR) The bank must have a track record of at least
two years in implementing sustainable
microfinance programs, including acceptable
portfolio at risk (PAR) levels as evaluated
against prevailing BSP standards.
3. CAMELS Rating Latest CAMELS rating of at least 3 and a
management score of at least 3
 Appendix 3 67

Item Guidelines
4. Capital Adequacy Ratio (CAR) Not lower than 12
5. No Prompt Corrective Action Issued No major supervisory concerns as to warrant
on PRBI initiation of Prompt Corrective Action (PCA)
under existing regulations
6. Features of HMF Lending Facility
A. Maximum Loan Amount a.1 Up to P300,00 for house construction
and/or lot acquisition (must show tenure
security)
a.2 Up to P150,000 for home improvements or
repairs
a.3 Incremental loan amounts to support
incremental building
B. Collateral Substitutes Rights-based secure tenure instruments.
(See Table 2 for the detailed list.)

C. Loan Value c.1 Up to ninety percent (90%) of the appraised

value in case of REM
c.2 Acceptable valuation in cases of usufruct,
lease, etc.
c.3 Capacity to pay based on household cash
flow analysis
D. Loan term d.1 Up to fifteen (15) years for house
construction and house and/or lot
acquisition subject to bank’s credit policies
d.2 Up to 5 years for home
improvements/repairs
E. Risk Cover e.1 The loans shall have an assigned risk-
weight of 50% risk when not guaranteed;
and
e.2 as low as 0% when guaranteed by HGC
F. Benefits of HGC guaranty cover f.1 Loan Value - 90% of the maximum loan to
collateral ratio or loan value prescribed by
BSP Circular 678, whichever is lower,
depending on collateral;
f.2 HGC pays 100% of the outstanding principal
obligation plus interest up to 11%.
f.3 Tax shield - Interest income on guaranteed
loans shall be exempt from all taxation to
the extent of eleven percent (11%)
f.4 Type of guaranty – cashflow guaranty
coverage - payment of guaranty claim shall
follow the amortization schedule of the
defaulted borrower, but the interest
component shall be limited to the
guaranteed rate.
7. Additional Incentives Alternative compliance to mandatory credit
allocation to agrarian reform and other
agricultural credit. These are also eligible for
rediscounting with the BSP subject to existing
rules and regulations governing rediscounting.
 68 Appendix 3

Item Guidelines
8. Other Requirements • Bank must maintain subsidiary control ledger
for the HMF
• HMF portfolio must not exceed 30% of bank
loan portfolio
• Compliance with BSP rules on PAR and
related regulations

Acceptable forms of secure tenure instruments with the applicable appraisal methodology and
loan valuation are summarized in Table 2 below.

Table 2: Secure Tenure Instruments Acceptable as Collaterals in Housing Microfinance

Form of Secure
Nature and Description of Acceptable Terms and Appraisal
Tenure or Loan Valuation
Instrument Conditions Methodology
Property Right
Usufruct Usufruct agreement or contract- Duly The Term of Lease Valuation of 70% of the
executed contract executed by the owner must not be less Leasehold Interest appraised value
of the property granting the usufructuary/ than the term of the of the collateral
beneficiary/client the right to use, possess loan
and enjoy the real property, including its
fruits and other rights or benefits
Lease Lease agreement or contract-Duly The Term of Lease Valuation of 70% of the
executed contract granting the lessee the must not be less Leasehold Interest appraised value
right to use and possess the real property than the term of the of the collateral
for a fixed long–term period in loan
consideration of rental payments
Freehold 1. OCT/TCT – Torrens title issued by the Market Data 90% of the
Register of Deeds evidencing absolute Approach appraised value
ownership of real property of the collateral

2. Interim Title, Contract to Sell, or Adjustment of Market Data 90% of the

Conditional Sale- Duly executed appraisal value due Approach appraised value
contract or other legal instrument to documentary of the collateral
issued by the appropriate government nature or status of
agency indicating full payment for the instrument must be
purchase of the property or its taken into account
conditional sale or conveyance to be
perfected upon full payment of the
purchase price and/or the fulfilment of
other conditions
Right to occupy o Certification validity issued by the Adjustment of Market Data 70% of the
and/or build appropriate government agency appraised value due Approach (as to appraised value
stating that the borrower/client has the to documentary the improvement of the collateral
right to occupy, build and/or acquire nature or status of or housing unit)
the property he/she is possessing instrument must be
being an eligible beneficiary of a public taken into account
or private social housing program or a
Presidential proclamation, or
o Certification or written
acknowledgment from the owner of
the property that the borrower/client
has the owner’s consent and
permission to occupy and build on
such property (includes CELA or
Certificate of Lot Assignment, which is
issued by NHA, SHFC, relevant
government agencies)
 Appendix 3 69

REGULATION AND SUPERVISION OF MICROFINANCE BANKS

The Bangko Sentral ng Pilipinas (BSP) was established on 3 July 1993 in accordance with the
provisions of the 1987 Philippine Constitution and the Central Bank Act of 1993. It is the country's
central monetary authority, replacing the Central Bank of Philippines, which was set up in January
1949, more than four decades earlier. The BSP enjoys fiscal and administrative autonomy from
the National Government in carrying out its vision, mission, and mandates (Box 1).

Box 1. Vision and Mission of the Bangko Sentral ng Pilipinas

Vision: The BSP aims to be recognized globally as the monetary authority and primary financial system
supervisor that supports a strong economy and promotes a high quality of life for all Filipinos.
Mission: To promote and maintain price stability, a strong financial system, and a safe and efficient
payments and settlements system conducive to a sustainable and inclusive growth of the economy.

The Bangko Sentral has oversight over the operations of banks, finance companies, and non-
bank financial institutions performing quasi-banking functions. It exercises such regulatory and
supervisory powers as defined by R.A. 8791, known as "The General Banking Law of 2000."

Inclusive Finance: Providing Access to a Wide Range of Financial Services for All

The BSP has a strategic mandate to promote broad and convenient access to high-quality
financial services and consider the
public's interest. To achieve this, the BSP
undertakes various programs and policy
initiatives aimed at enhancing financial Box 2. Defining Financial Inclusion
inclusion, financial education, and The BSP defines financial inclusion as a state
consumer empowerment (Box 2). wherein there is effective access to a wide range of
financial services for all, especially the vulnerable
In their 2020 Financial Inclusion Initiatives sectors.
report, the BSP highlighted the significant Effective access does not only mean that there are
role of microfinance institutions (MFIs) in financial products and services that are available.
promoting financial inclusion, given their These products and services must be appropriately
considerable presence in the countryside designed, of good quality and responsive to the
and their target market. varied needs of individuals and businesses – whether
for saving, payments, financing, investing, or getting
insured.

Microfinance as a Legitimate Banking Activity

Section 40 of the General Banking Law (GBL) of 2000 mandates the BSP to "recognize the
peculiar characteristics of microfinancing, such as cash flow-based lending to the basic sectors
that are not covered by traditional collateral" when formulating rules and regulations for the grant
of loans or other credit accommodations.

Two other provisions (Sections 43 & 44) in the GBL recognize microfinance as a legitimate
banking activity having distinct characteristics. This recognition is consistent with the National
Strategy for Microfinance crafted by the National Credit Council in 1997.
70 Appendix 3

Thus, in 2000, the BSP declared microfinance as its flagship program for poverty alleviation. Since
then, the BSP has been proactive in the development of microfinance using a three-pronged
approach:

 Provide the enabling policy and regulatory environment

 Increase the capacity of the BSP and banking sector on microfinance operations
 Promote and advocate for the development of sound and sustainable microfinance
operations.

Enabling Policy and Regulatory Environment

An enabling policy and regulatory environment are essential in promoting the development of
microfinance in the country, particularly in the banking system. The BSP has taken deliberate
steps to ensure that this type of environment is in place. Since 2001, the BSP has issued various
circulars that provide incentives for banks to engage in microfinance while at the same time
ensuring that it is implemented in a viable, sustainable, and prudential manner.

The policies also provided a framework and opportunity for banks to service the needs of millions
of our country's unbanked yet bankable microentrepreneurs (Tables 1 and 2).

Table 1: List of BSP Regulations

Microfinance Loans Circulars 272, 282, 324,364, 409, 549, 607, 608, 746

Microfinance Products Circulars 678, 680, 748,683, 694, 744, 796

Liberalized Branching for Circulars 273, 340, 365, 369, 505, 624, 669, 694
Microfinance Banks
Governance on Microfinance Circular 725
Banks (Bank-NGO relationship)
Microfinance Rating Agencies Circular 685

Table 2: Summary of Provisions

Item Key Provisions
Microfinance Loan • Circular 272 defines microfinance loans and recognizes cash-flow-based
Regulations lending as its distinct feature of microfinance.
• Circular 364 reduces to 75% the risk weight applicable to loans to small and
medium enterprises (SMEs) and microfinance loan portfolios that meet
prudential standards.
• Circular 409 provides the rules and regulations for determining the portfolio-
at-risk (PAR) of microfinance loans and the loan loss provision
Rediscounting for • Circulars 282 and 324 open a rediscounting facility for rural, cooperative, and
Microfinance Loans thrift banks engaged in microfinance.
Reporting Requirements for • Circular 607 contains reportorial requirements of banks' microfinance loans
Microfinance Loans (Amended by Memorandum No. M. 2012-03 to include new microfinance loan
products.).
Documentary Requirements • Circular 746 exempts microfinance from the required submission of additional
for Microfinance Loan documents. (income tax returns; financial statement) for the granting of loans.
Clients
Types of Microfinance Loans • Circular 678 provides rules and regulations that govern the approval of banks'
housing microfinance products.
• Circulars 680 and 748 provide rules and regulations that govern the approval
of banks' micro-agri loans.
• Circular 744 defines microenterprise loan plus of "microfinance plus"
 Appendix 3 71

By 2008 the policy and regulatory environment for microfinance within the banking sector has, to
a large extent, already been set in place. Hence the focus has shifted primarily to further improving
past issuances and expanding the same, when necessary. The issuances and guidelines were
also focused on innovations in microfinance products and service delivery that were currently
taking place. Driving much of the microfinance developments in the country were new players, a
wider range of products and services, technological innovations, and applications.

One notable approval by the BSP was the Housing Microfinance Product in February 2008. The
Monetary Board recognized the application of microfinance best practices in the delivery of
adequate and appropriate housing finance for microfinance clients.

In 2009, the First Annual Global Microfinance Index and Study declared the Philippines as the
best in the world in terms of its microfinance regulatory framework. The recognition continued in
2010 when the Economist Intelligence Unit (EIU), in its "Global Microscope on the Microfinance
Business Environment," ranked the Philippine regulatory environment for microfinance as the best
among 54 countries worldwide.

The BSP is continuously reviewing and amending its policies and regulations to ensure that they
remain responsive to the growing needs of the microfinance sector.

For instance, in Resolution 893 dated 5 June 2014, the Monetary Board approved Circular 836
that amended the reportorial requirements on microfinance operations issued under Circular 607
on 30 April 2008. It also redefined "microfinance loans" accounts under the Financial Reporting
Package (FRP).

Growth in the Sector

The Bangko Sentral's enabling environment for microfinance has yielded much fruit. In 2001,
shortly after the initial issuance of circulars for microfinance, there were 119 banks with
microfinance operations serving 390,000 clients with an outstanding portfolio of PhP 2.6 billion.

In 2005 the number increased to 195 banks engaged in microfinance serving over 600,000
microfinance clients. This year marked the transformation of two of the country's largest non-
governmental organizations (NGOs) to become microfinance-oriented thrift banks. These are the
Dungganon Bank and Kauswagan Bank which were previously the Negros Women for Tomorrow
Foundation (NWTF) and Taytay Sa Kauswagan, Inc. (TSKI)

The BSP's Financial Inclusion Dashboard for the 3rd quarter of 2020 (Table 3) provides
microfinance status in the banking system.

Table 3: Financial Inclusion in the Philippines

As of Third Quarter 2020
Microfinance in the Banking System
2019 Q3 2020 Q3 Growth
Banks 160 149 -6.9%
Borrowers 2,012,517 1,963,637 -2.4%
Microfinance
Amount (in million 24,914.8 24,877.9 -0.1%
pesos)
Microenterprise Banks 147 137 -6.8%
Loans Borrowers 1,691,982 1,650,606 -2.4%
72 Appendix 3

Amount (in million 20,841.9 21,100.7 1.2%

pesos)
Banks 39 35 -10.3%
Borrowers 10,141 16,626 63.9%
Microfinance Plus
Amount (in million 1,065.0 1,044.8 -1.9%
pesos)
Banks 23 22 -4.3%
Borrowers 96,465 92,532 -4.1%
Micro-Agri Loans
Amount (in million 1,169.5 1,047.2 -10.5%
pesos)
Banks 14 13 -7.1%
Housing Borrowers 138,951 134,257 -3.4%
Microfinance Loans Amount (in million 1,417.2 1,433.1 1.3%
pesos)
Source:https://www.bsp.gov.ph/Media_And_Research/Financial%20Inclusion%20Dashboard/2020/FIDash
board_3Q2020.pdf

BSP Regulation on Microfinance-Oriented Thrift and Rural Banking Institutions

The Monetary Board, in its Resolution No. 327 dated 27 February 2020, approved the adoption
of the Bangko Sentral ng Pilipinas’ (BSP) Supervisory Assessment Framework (SAFr). The SAFr
will be adopted in the assessment of BSP-supervised financial institutions, including commercial,
thrift and rural banks. It will replace the various rating systems currently employed by the BSP,
including the CAMELS rating system effective 1 July 2020.

The SAFr Framework

The SAFr is a risk-based supervisory framework aimed to facilitate assessments of BSP-

supervised financial institutions (BSFIs). It explicitly links the systemic importance and risk profile
of a BSFI to the crafting of supervisory plans for each supervised institution such that: (i)
supervisory attention continues to be proportionately focused on financial institutions that are of
greater impact and higher risk; and (ii) prompt and calibrated enforcement actions are deployed
to reinforce prudent risk-taking behavior. The principles, concepts and processes of the SAFr
apply to all BSFIs, regardless of size and risk profile. It also facilitates the conduct of consolidated
supervision, where impact and risks are viewed on a group-wide basis. The principles, concepts
and processes of the SAFr apply to all BSFIs, regardless of size and risk profile.1

SAFr primary elements include: (a) the BSFI’s impact to the financial system, (b) the BSFI’s risk
profile, and (c) supervisory intensity as defined below.

A. Impact Assessment

The assessment of impact reflects the importance of a BSFI and its potential impact to the
financial system in the event of distress and apparent problems in solvency, prolonged business
disruption, or major conduct of business. This assessment factor of a BSFI will enhance BSP’s
practice of risk-based supervision by adjustment of its supervisory focus and re-allocation of BFI’s
resources. A BSFI’s impact will be assessed as Low, Moderate, Above Average or High.

1 Bangko Sentral ng Pilipinas Supervisory Assessment Framework (SAFr), Monetary Board Circular Resolution No.
327 dated 27 February 2020.
 Appendix 3 73

B. Risk Assessment

Assessment of risk solidifies strength of the BSFI’s resilience to withstand adverse business and
economic conditions. It signals BSP’s evaluation of the safety and soundness of the BSFI
considering: (a) how effectively critical risks stemming from significant activities are managed and
controlled; and (b) how strongly capital adequacy, earnings, liquidity and governance support the
institution’s overall net risk.

BSP Examination of a BSFI’s risk profile will focus on its major business activities, which reflect
the BSFI’s key risk drivers. These business activities can be (a) a line of business or banking
services, retail or commercial banking services or product lines), (b) an institution wide process
(e.g., asset liability management, management of bank-wide risk such as information technology
(IT) and money laundering/terrorist financing (ML/TF) risk), and/or (c) a business arm (e.g.,
subsidiaries).

Excerpts from the BSP Circular No. M-2020- 005 on Risk Assessment and rating system covering
risk categories and matching causes (Table 4), BSFI’s risk-mitigating measures, overall net risk
assessment, composite risk rating (Table 5) and definition of composite risk rating levels (Table
3) are show below:2

Table 4: Risk Type and Causes of Risk and Material Loss

Risk Type Factors that give Rise to the Risk of Material Loss

Assessed by significant activity

Arises from a counterparty’s failure to meet the terms of any contract with the
Credit risk
BSFI or otherwise perform as agreed
Arises from adverse movements in factors that affect the market value of both
Market risk on- and off-balance sheet instruments, products, and transactions in an
institution's overall portfolio
Arises from inadequate or failed internal processes, people and systems, or from
Operational risk
external events; includes legal risk, but excludes strategic and reputational risk
Arises from actions or activities that are unethical and detrimental to the
Market conduct risk welfare customers and/or market counterparties, or activities that undermine the
integrity of the market
Assessed across the BSFI
Arises from BSFl's inability to meet its obligations when they become due
Liquidity risk without incurring unacceptable losses or costs; includes the inability to
manage unplanned decreases or changes in funding sources
Interest rate risk in the banking Arises from adverse movements in interest rates that affect a bank's/quasi-
book bank's banking book positions
Arises from adverse outcome, damage, loss, violation, failure or disruption
Information technology risk
associated with the use of or reliance on IT platforms, network and systems
Arises from a covered person’s failure to prevent itself
Money laundering/terrorist
from being used as a money laundering site and conduit for the proceeds of
financing risk
unlawful activities as well as financing the act of terrorism

A net risk rating shall be assigned to each risk category, which pertains to the residual risk after
considering the mitigating effect of risk management. The rating will be Low, Moderate, Above
Average or High.
2 Bangko Sentral ng Pilipinas Supervisory Assessment Framework (SAFr), Section B. Risk Assessment, Monetary
Board Circular Resolution No. 327 dated 27 February 2020.
74 Appendix 3

Separate ratings (Strong, Acceptable, Inadequate or Weak) for compliance and internal audit
are assigned to capture the extent of their effectiveness.

The net risk assessments and the assessments of the compliance and internal audit functions
are taken together in order to come up with an assessment of the BSFI’s overall net risk. This
will either be Low, Moderate, Above Average or High.

Institutional Level Support

The BSFI’s risk buffers or institutional level support consist of capital, earnings, liquidity and
governance. They are assessed as Strong, Acceptable, Inadequate or Weak. Earnings, capital
and liquidity are sources of financial strength of the BSFI and underpin its safety and soundness.
Earnings is assessed on the basis of its quality and sustainability to support daily operations
and provide for capital accretion, while capital is evaluated based on its quality and adequacy
to support the BSFI’s current and prospective risk profiles under both normal and stressed
conditions. The effectiveness of the BSFI’s capital management processes for maintaining
adequate capital relative to the risks across all significant activities is also considered in the
assessment. In the case of foreign bank branches (FBBs), their viability is assessed through
the ability and willingness of their head office and parent company to support Philippine operations.

Liquidity strength, on the other hand, is determined based on the ability of the BSFI to
withstand shocks to its liquidity position. Lastly, the effectiveness of the BSFI’s board and
management in providing stewardship, oversight and governance is assessed. Strategic and
reputational risks, as well as parental support and oversight in the case of FBBs, are likewise
evaluated.

Composite Rating

The assessments of overall net risk and institutional level support are combined to determine
the Composite Rating of the BSFI. The Composite Rating of the BSFI represents a judgment
of the resilience of the BSFI to adverse business and economic conditions. The composite risk
rating ranges from 1 to 4, with BSFIs rated 4 being those that are deemed most resilient to adverse
events. In principle, between two BSFIs with the same overall net risk, the BSFI with the better
institutional level support rating would be more able to withstand shocks and therefore would
merit a stronger composite rating.

The table below summarizes the risk areas, independent assessment functions, and the
institutional support components that are rated under the SAFr and the corresponding ranges
of ratings accorded to each component:

Table 5: Risk Area and Composite Risk Rating Levels

Risk Area/Component Rating
Credit Risk
Liquidity Risk
Net Risk: Low, Moderate, Above
Interest Rate Risk in the Banking Book
Average, High
Market Risk
Operational Risk
Risk Area/Component Rating
Technology Risk
Money Laundering and Terrorist
 Appendix 3 75

Financing Risk
Market Conduct Risk
Compliance
Strong, Acceptable, Inadequate, Weak
Internal Audit
Overall Net Risk Low, Moderate, Above Average, High
Institutional Level Support Rating
Earnings
Capital
Liquidity Strong, Acceptable, Inadequate, Weak
Governance
Overall Support Strong, Acceptable, Inadequate, Weak
Composite Rating 4, 3, 2, 1

Table 6: The Descriptions of the Composite Ratings

Composite
Description
Rating
The BSFI is robust. Risks are well managed across the organization. There
4 are no imminent threats to its safety and soundness. It has ample buffers
and can withstand most adverse events.
The BSFI is stable. Risks are adequately managed across the organization.
Supervisory concerns are within the ability of the board and management to
3
address. The BSFI’s buffers will enable it to withstand most adverse
events.
The BSFI is vulnerable. Risks are not well managed in the organization.
Supervisory concerns are not immediately given attention. The BSFI has
2
minimal buffers, and the occurrence of an adverse event is likely to pose a
threat to its safety and soundness.
The BSFI is distressed. Risks are beyond the capability of the board and
1 management to address. The BSFI’s inherent risks pose a threat to its safety
and soundness. It is not likely to withstand adverse events.

C. Supervisory Intensity

Supervisory intensity, the third primary component of the SAFr framework refers to the depth of
BSP supervision required for and applied to the BSFI as the integral result of the BSP audit on
the BSFI. The required supervision is anchored on the BSFI’s rating on its impact on the financial
system and risk profile as signified by the resultant BSFI’s Composite Rating.

The main supervisory activities to be applied by the BSP are presented in Table 7 below:

Table 7: Supervisory Activities and Detailed Actions3

Supervisory Activities Particulars

Additional reports may be required from the BSFI to facilitate further

Requirement for Additional Reports monitoring by the BSP of emerging or key supervisory concerns, and/or in
aid of industry- wide studies or surveillance.

3 Bangko Sentral ng Pilipinas Supervisory Assessment Framework (SAFr), Section C. Supervisory Intensity, Monetary
Board Circular Resolution No. 327 dated 27 February 2020.
76 Appendix 3
Meetings with the Board/Senior Management, Independent
Meetings with Pertinent
Directors, Internal Auditor/Audit Committee, External Auditor and Home
Stakeholders
Regulator (for branches of foreign banks) may be conducted.
On-site reviews may take the form of overseeing, regular examination,
On-site Examination
special examination, or thematic review.
A BSFI’s risk assessment is updated based on regular monitoring and
Periodic Risk Assessment
the results of the conduct of supervisory activities.
 Appendix 4 77

THE MICROFINANCE COUNCIL OF THE PHILIPPINES

About MCPI

The Microfinance Council of the Philippines, Inc. (MCPI) is the national network of microfinance
institutions working towards sustainable, innovative, and client-responsive solutions to poverty in
the country. MCPI currently consists of 57 institutions, including 47 practitioners and ten support
institutions. Its regular members include 26 non-government organizations, 13 banks, six
cooperatives, and two regional networks.

The key programs of MCPI include advocacy, capacity building for microfinance institutions, social
performance management, performance monitoring and benchmarking, the establishment of a
knowledge and resource center, and network strengthening.

Introduction on Green Inclusive Finance

The Philippines has long been vulnerable to extreme weather events, having an average of 20 to
21 typhoons each year, with 8 to 9 making landfalls. However, over the past few years, these
typhoons (i.e., Super Typhoon Haiyan) have struck the country more often with severe damages
to lives and properties, and such events are claimed to be caused by climate change.

While this phenomenon is seen as a threat to the country, it may also be seen as an opportunity
for each stakeholder to initiate programs to minimize climate change impacts and contribute to
the 2-degree Celsius target.1 This opportunity is also relevant to microfinance institutions (MFIs)
as they embark on programs to achieve environmental sustainability.

Green Inclusive Finance (GIF) is one of the emerging approaches in finance that attempts to fully
address the three pillars of sustainability. Based on the recent IFC report, GIF comprises financial
services that support economic growth in a clean, resilient, and sustainable manner and focus on
the base of the pyramid (BOP), including micro, small, and medium-sized enterprises in low-
income countries or such subsets of the population within other developing countries.

It has a multidimensional purpose: for economic development, social inclusion, and environmental
sustainability. It encompasses all traditional microfinance and SME finance forms by specialized
institutions, including banks and non-bank financial institutions. It focuses on all instruments,
products, and services that address climate change: mitigation and adaptation, solutions for
waste, water and sanitation management, land management and ecosystem conservation,
organic farming, access to clean and reliable energy, and energy efficiency.

Overview of MCPI'S Green Inclusive Finance Program

In 2016, MCPI adopted GIF as one of the main components of its institutional strengthening
program. Under this component, comprehensive training on green microfinance is being offered
as a flagship capacity-building program for MCPI members interested in implementing clean
energy projects. This program builds on the expertise developed by the Developing Sustainable
Energy Access (DevSEA) project, implemented by MCPI in 2013-2016. Hence, a project under

1
This is the initiative of keeping the global mean temperature rise below 2 degrees Celsius against pre-industrial
temperature levels.
78 Appendix 4

the GIF is being implemented in partnership with Appui au Développement Autonome (ADA)2 of
Luxembourg with the support of the Ministère du Développement durable et des Infrastructures
(MDDI) of the Luxembourg Government.

The project has three key result areas:

▪ Result 1: The capacity of MFIs to provide green and renewable energy products is
strengthened through comprehensive training on GIF provided by MCPI.
▪ Result 2: Selected MFIs have a well-defined strategy in place for piloting their green
products and services due to MCPI’s coaching and mentoring support.
▪ Result 3: selected MFIs successfully test green microfinance products under MCPI's
supervision.

MCPI Resource Materials for Green Inclusive Finance

Green Microfinance Training Modules

Module 1: Clean Energy and Renewable Energy 101

This module introduces clean energy financing concepts such as climate change, clean energy,
renewable energy technology, and other emerging environmental preservation trends. It aspires
to better understand energy financing and its link to other development aspects.

Module 2: Energy Research: Introduction to Tools and Methodologies

This module focuses on the tools and methodologies used to identify the client's energy needs
and gaps (for both household and livelihood application) and match it with appropriate renewable
energy technologies available locally. Ultimately, it extensively discusses the process of
conducting an Energy Needs Assessment (ENA) based on the experience from the Developing
Sustainable Energy Access (DevSEA) project.

Module 3: Business Planning and Pilot Preparation

This module presents the entire process and preparation needed for the business planning and
pilot implementation of a clean energy financing solution. It details the nitty-gritty of the technology
and supplier selection. It also shows how to use the business model canvas as a tool for selecting
the appropriate green technologies to the target client-beneficiaries of the program.

Module 4: Monitoring and Evaluation System Design

This module establishes the significance of a monitoring and evaluation (M&E) plan for a clean
energy program, which will systematically measure its progress and impact on beneficiaries or
clients. It also looks at the most important points to consider in the formulation of an M&E
framework and the setting of key indicators.

2
ADA is a non-governmental organization approved and co-financed by the Luxembourg Directorate for Development
Cooperation and Humanitarian Affairs and is placed under the High Patronage of Her Royal Highness the Grand
Duchess Maria Teresa.
 Appendix 5 79

REGULATION AND SUPERVISION OF NONBANKING MICROFINANCE INSTITUTIONS

The law defines microfinance as: "the viable and sustainable provision of a broad range of
financial services to poor and low-income individuals engaged in livelihood and microenterprise
activities.1 It uses non-traditional and innovative methodologies and approaches, namely: the
extension of small loans, simplified loan application procedures, group character loans, collateral-
free arrangements, cash flow-based lending, alternative loan repayments, minimum requirements
for CBU/minimum balance retention, and small denominated savers' instruments aimed to
improve their asset base and expand their access to capital and savings."

Microfinance NGOs are expected to provide at least any of the following programs, products, or
services subject to existing laws and regulations:

 Microcredit and financial literacy programs;

 Microcredit and CBU or microsavings;
 Agricultural microfinance;
 Housing microfinance;
 Microinsurance, in partnership with authorized microinsurance companies, agents and/or
entities;
 Electronic payment systems such as mobile or any innovative digital platforms or
channels;
 Money transfer and other related remittance services, in partnership with authorized
agents and/or entities; and
 Other relevant and/or innovative programs, products, and services that address social
welfare purposes and which are not contrary to existing laws and regulations.

R.A. 10693 mandated the Securities and Exchange Commission (SEC), where the NGO MFIs
must register to establish an accreditation body, the Microfinance NGO Regulatory Council
(MNRC). The Council shall be composed of four (4) permanent members and three (3) members
from the Microfinance NGO sector. The Chairman of the SEC or his duly authorized
representative shall act as the chairperson of the Council. The Secretaries or their authorized
representative from the Department of Trade and Industry (DTI). Department of Finance and the

REPUBLIC ACT No. 10693 otherwise known as the “Microfinance NGOs Act” was passed on 03
November 2015 and set forth the state policies on microfinance operations in Sec. 2 of the law:
Declaration of Policies. It is hereby declared the policy of the State to pursue a program of poverty
eradication wherein poor Filipino families shall be encouraged to undertake entrepreneurial activities to
meet their minimum basic needs including income security. Towards this end, the State recognizes the
indispensable role of nongovernment organizations (NGOs) in fostering local enterprise development
and social entrepreneurship, including the provision of microfinance services to microenterprises. In
pursuance of this policy, the State shall support and work in partnership with qualified NGOs in promoting
financially inclusive and pro-poor financial and credit policies and mechanisms, such as microfinance
and its allied services.

Department of Social Welfare were designated as three other permanent members. There will be
three members nominated by the association of registered NGOs who will have a term of 3 years.

1 Republic Act 10693, Official Gazette of the Republic of the Philippines, November 3, 2015. www.officialgazette.gov.ph
 80 Appendix 5

The Council shall establish the set of parameters for assessment of the social performance of
Microfinance NGOs such as, but not limited to, their social objectives, governance and
accountability mechanisms, transparency, product design, services, and delivery channels, and
ethical treatment of clients. Another set of indicators for assessment of the NGOs' financial

Regulatory Framework for Microfinance Institutions

The National Credit Council (NCC), an inter-agency body chaired by the Department of Finance (DOF),
formulated, and approved the Regulatory Framework for all types of Microfinance Institutions (MFIs) in
July 2002). The framework specifically directed the NCC, in coordination with concerned stakeholders, to
formulate and develop a uniform set of performance standards that will cut across all types of institutions
involved in microfinance. These standards will serve as the microfinance industry benchmarks to allow
the comparison of performance among all institutions engaged in the delivery of microfinance services.
These benchmarks will also guide regulators in the assessment of financial institutions under their
supervision. It should be noted, however, that these standards are only applicable to financial institutions
that are engaged in retail microfinance operations.

performance will be adopted to measure their portfolio quality, efficiency, sustainability, and
outreach.

Under the Implementing Rules and Regulations (IRR) of the law, the Council was provided the
following criteria for accreditation consistent with standards set under the Regulatory Framework
for Microfinance Institutions established by the National Credit Council (headed by DOF) in 2002.

The Council is obliged to assess the financial performance of Microfinance NGOs through their:

1. Portfolio Quality Indicators

a. Portfolio at Risk Ratio
b. Loan Loss Reserve Ratio

2. Efficiency Indicators
a. Administrative Efficiency
b. Operational Self-Sufficiency
c. Loan Officer Productivity

3. Sustainability indicators
a. Financial Self-Sufficiency
b. Loan Portfolio Profitability

4. Outreach Indicators
a. Growth of the number of active microfinance clients
b. Growth of microfinance loan portfolio and
c. Depth of outreach

Social Performance Standards require that the NGO MFIs have a strategy to fulfill their mission
and achieve their social goals. As a pre-requisite, these missions and goals are communicated to
all stakeholders of the organization. It collects, reports, and ensures the accuracy of client-level
data that are specific to the institution's social goals.
 Appendix 5 81

The minimum criteria in the performance assessment of retail MFIs under the Regulatory
Framework for MFIs2 were adopted by the Council. The minimum criteria below will provide a view
of the nature and status of the MFI. These institutional criteria indicate whether the financial
institution practices sound financial practices and have satisfactory performance and stable
financial condition. Moreover, these criteria will indicate the financial institution's capability for and
seriousness in microfinance operations.

1. Institutional viability criteria3

a. CAMELS rating for banks of at least 3, with management score of not less than 3; and
b. COOP-PESOS rating for cooperatives with savings and credit services of at least 70
with net institutional capital to total assets ratio of not lower than 5%.

2. Governance
a. The institution is regularly audited by an independent external auditor. For banks, the
auditor should be recognized by the Bangko Sentral ng Pilipinas (BSP); for
cooperatives, the external auditor should be accredited by the Cooperative
Development Authority (CDA); and for non-governmental organizations (NGOs), the
external auditor should be certified by the Philippine Institute of Certified Public
Accountant (PICPA) as a member in good standing; and
b. Audited financial statements are readily available.

3. For microfinance operations:

a. Presence of program objective to reach the poor;
b. Number of active microfinance clients, classified by gender - at least 500 for group
lending or 200 for individual lending;
c. At least one year in microfinance operations;
d. Presence of a functioning and effective management information system (MIS) for
regular monitoring of microfinance operations as evidenced by the timely generation
of basic financial, loans tracking, and aging reports using Portfolio at Risk (PAR);
e. Manual of operations or product manual; and f. At least two full-time account officers
for microfinance operations

After meeting the minimum institutional criteria, the microfinance operations of the MFI shall be
subjected to the following performance standards:

1. Portfolio quality – Two indicators below provide specific information on the state of the
financial health of the microfinance portfolio of the institution. Maintaining good portfolio
quality is very important for the continued delivery of microfinance services to the MFI's
clients. Poor quality of loan portfolio will lead to losses to the institutions, making it difficult
to sustain microfinance operations.

a. Portfolio at risk (PAR) ratio – reflects the proportion of the microfinance loan portfolio
with one day missed payment to the total microfinance loans outstanding at a given
time and shows the degree of riskiness of the total microfinance portfolio.

Since microfinance loans are usually small and are payable within a short period of
time, the likelihood of default of the entire loan balance is high when one amortization
payment is missed. The formula for this indicator is:

2 Philippine Microfinance Standards, Microfinance Regulatory Framework, 2002.

3 Use of these criteria is optional for users depending on its purpose.
82 Appendix 5

Principal Balance of Loans with At Least One Day Missed Payment

Total Principal Loan Balance

Restructured or refinanced loans shall be considered non-performing, and no interest

income shall be accrued thereon. These loans shall be included in computing PAR.

Restructured loans are loans that have been renegotiated or modified to either
lengthen or postpone the original scheduled installment payments or substantially alter
the original terms of the loan.

Refinanced loans are loans that have been disbursed to enable repayment of prior
loans that would not have been paid in accordance with the original installment
schedule. Refinanced loans shall be classified and treated as restructured loans.

Standard: 5%

b. Loan loss reserve ratio – indicates the degree of protection of the institution against
expected losses due to delinquency.

An allowance should be provided once the microfinance loan is considered at risk

since the likelihood of default increases as amortization payments are missed. Hence,
the allowance for probable losses is based on PAR. Restructured and refinanced loans
are considered as risky and should be provided the appropriate allowance.

As a general provision, all current microfinance loans shall be subject to a 1% loan

loss provisioning. The following shall be the basis in computing for loan loss reserves:

Required
Reserves
Current 1%
PAR 1 to 30 2%
PAR 31 to 60 and/or loans restructured 20%
once
PAR 61 to 90 50%
PAR 91 & above and/or loans restructured 100%
twice

Loan Loss Reserve Ratio

Total Reserves Provided

Total Reserves Required

Standard: 100% of the required reserve

2. Efficiency – The indicators under this category show whether the MFI can deliver
microfinance services at the least cost to the institution. They also indicate the ability of
the institution to generate sufficient income to cover the expenses related to microfinance
operations.
 Appendix 5 83

a. Administrative efficiency – measures the cost of managing the organization's

assets.

Administrative Cost* (direct and indirect costs)

Average Gross Loan Portfolio**
* Administrative cost should include loan loss provisions expense.
**(Beginning Gross Loan Portfolio + Ending Gross Loan Portfolio ÷ 2

Indirect Costs are allocated in proportion to the number of personnel directly dedicated
to each cost center. Indirect cost allocated to the microfinance operations is computed
as:

Indirect Costs = (Number of Full-time M.F. Staff ÷ Total Number of Full-time Staff) x
Total Indirect Costs

Full-time M.F. Staff refers to employees working full-time in the microfinance operations
regardless of employment status, i.e., whether contractual or regular.

Total Indirect Costs refer to costs shared by both the microfinance and non-microfinance
operations. It includes, among others, salaries, and benefits, rent, office materials and
supplies, publications and publicity, transportation, travel, and training for overhead staff,
telephone and postage, insurance, utilities, repairs and maintenance, legal, audit, and
consultant fees, bank charges, taxes, and depreciation.

STANDARD: 10% and below

b. Operational self-sufficiency – indicates whether enough revenues are earned to fully

cover the costs of the microfinance operations.

Interest Income from Loans + Service Fees + Filing Fees + Fines, Penalties, Surcharges
Financing Cost + Administrative Costs (direct and indirect cost) 4

STANDARD: greater than 120%

c. Loan officer productivity – measures the ability of loan officers to service

microfinance borrowers.

Number of Active Borrowers

Number of Account Officers

Standard: Group: greater than or equal to 300, Individual: greater than or equal to 150

3. Sustainability – Two indicators below measure the ability of the institution to continuously
finance its microfinance operations from internally generated funds in the long run without
any subsidy.

a. Financial self-sufficiency – indicates whether the organization is earning enough

revenue to sufficiently cover in the long-run all operating costs and at the same time
maintain the value of its capital and assets, without the need for subsidy.

4 Same as Administrative Cost used for computing Administrative Efficiency

84 Appendix 5

Operating Revenue
Financial Expense + Loan Loss Provision Expense + Adjusted Expenses*
*Adjusted Expenses = Total Operating Expense + [(Average Equity – Average Fixed Assets) x Inflation Rate] +
[(Market Interest Rate x Average Total Liabilities) – Actual Interest Expense] + Other Implicit Costs. Other Implicit
Costs include those costs relevant to the conduct of its business such as grants, rent free building, donor paid
technical advisor or other subsidized expenses

Standard: greater than 100%

b. Loan portfolio profitability – measures the proportion of net revenues generated

from the M.F. lending operations to the M.F. loan portfolio. This ratio indicates whether
earnings can sufficiently cover the annual depreciation of the peso.

Net Operating Income

Average Net M.F. Loan Portfolio

Standard: greater than the inflation rate during the period

4. Outreach - These indicators show the extent of the reach of the MFI. They consider the growth
in the number of active clients, the expansion of the microfinance portfolio, and the depth of
outreach.

a. Growth in number of active M.F. clients5 - measures the ability of the MFI to expand its
operations through increases in its active clients (referring to those with outstanding M.F.
loans with the institution).

Ending No. of Active M.F. Clients – Beginning No. of Active M.F. Clients
Beginning No. of Active M.F. Clients

Standard: ≥ 5%

b. Growth in microfinance loan portfolio – determines the rate of expansion of the M.F.
loan portfolio, which may be a result of an increase in the number of active clients or the
loan amounts, or a combination of both.

Ending M.F. Loans Outstanding – Beginning M.F. Loans Outstanding

Beginning M.F. Loans Outstanding

Standard: ≥ 5%

c. Depth of outreach – indicates whether the MFI provides microfinancial services to

clients belonging to the lower-income segment of the economy.

Total Loans Outstanding ÷ Total Number of Active Borrowers

GNP per capita

Standard: Not exceeding 20%

5 All reference to growth rates should be computed on an annual basis. To get growth rate for a specific month, variable
should be compared with the performance of the same variable in the previous year. For instance, to get the growth
rate of clients as of November 2000, the no. of clients in November 2000 should be compared with the no. of clients
in November 1999.
 Appendix 5 85

Rating System

1. Portfolio Quality (40%)

A. Portfolio At Risk
Score Equivalent Points
5% or less 20
> 5% to 10% 15
> 10% to 15% 10
> 15% to 20% 5
Above 20% 0

B. Loan Loss Reserve Ratio

Score Equivalent Points
100% 20
70% to < 100% 15
50% to < 70% 10
30% to < 50% 5
Below 30% 0

2. Efficiency (30%)

A. Administrative Efficiency
Score Equivalent Points
0 or 10% 10
> 10% to 15% 6
> 15% to 20% 4
Above 20% 0

B. Operational Self-Sufficiency
Score Equivalent Points
120% & above 10
115% to < 120% 8
110% to < 115% 6
105% to < 110% 4
100% to < 105% 2
Below 100% 0

C. Loan Officer Productivity

Score Equivalent Points
For group loans:
300 and above 5
250 to 299 3
200 to 249 1
Below 200 0
For individual loans:
150 and above 5
100 to 149 3
86 Appendix 5

Score Equivalent Points

50 to 99 1
Below 50 0
Note: If MFI is using only one methodology,
MFI gets an additional 5 points

3. Sustainability (15%)

A. Financial Self-Sufficiency
Score Equivalent Points
100% & above 10
95% to < 100% 8
90% to < 95% 6
85% to < 90% 4
80% to < 85% 2
Below 80% 0

B. Loan Portfolio Profitability

Score Equivalent Points
Greater than inflation 5
rate
Equal to inflation rate 3
Less than inflation rate 0

4. Outreach (15%)

A. Growth in Number of Active Microfinance Clients

Score Equivalent Points
5% or higher 5
0 to 5% 3
Below 0 0

B. Growth in Microfinance Loan Portfolio

Score Equivalent Points
5% or higher 5
0 to 5% 3
Below 0 0

C. Depth of Outreach
Score Equivalent Points
≤ 20 5
> 20 - 100 4
>100 -150 3
>150-200 2
>200-300 1
>300 0
 Appendix 5 87

Overall Adjectival Rating

 Rating 1 (90 to 100) – Excellent. The MFI has strong performance that provides safe and
sound operation. The microfinance operations of institutions in this category are resistant
to external shocks and financial disturbances and are able to withstand adverse changes
in the business environment.

 Rating 2 (80 to 89) – Very Satisfactory. The MFI has satisfactory performance. They have
safe and sound operations and can withstand business fluctuations. However, there are
some areas in its operations that need special attention, which, if left unchecked, may
negatively affect its microfinance operations.

 Rating 3 (70 to 79) - Satisfactory. There are areas in microfinance operations that need
special attention. Key performance measures indicate that the operations may be
adversely affected and may deteriorate further when left unchecked.

 Rating 4 (Below 70) – Needs Improvement. The microfinance operation has serious
problems and needs close supervision.
88 Appendix 6

REGULATION AND SUPERVISION OF PHILIPPINE MICROFINANCE COOPERATIVES

Cooperatives are also considered as nonbanking microfinance institutions. MFI NGOs may opt to
transform into a cooperative or even as an MFI bank. Cooperatives are regulated and supervised
primarily by the Cooperative Development Authority (CDA) and other government institutions
such as the BSP, depending on the type and purpose of the cooperative. The primary functions
of the CDA are discussed in the ensuing paragraphs.

REPUBLIC ACT No. 6939 otherwise known as the “Cooperative Development Authority Act” was
passed on 10 March 1990 and set forth the state policies on operations of cooperatives.
Republic Act No. 6939 created the cooperative development authority to promote the viability and growth
of cooperatives as instruments of equity, social justice, and economic development, defining its powers,
functions, and responsibilities, rationalizing government policies and agencies with cooperative functions,
supporting cooperative development, transferring the registration and regulation functions of existing
government agencies on cooperatives as such and consolidating the purposes.

A. Registration

One of the primary functions of the Cooperative Development Authority is the registration of
cooperatives, including all their proposed registration amendments.1 In line with this function are
the following:

I. Issuance of Cooperative Name Reservation Notice (CNRN)

▪ Submission of Cooperative Name Reservation Report Form (CNRRF) shall be

submitted either to CDA Central Office or Regional Offices nationwide through
personal, postal mail, courier, electronic mail, or online.
▪ The applicant has the option to choose from the following period to reserve their
proposed names with the corresponding reservation fees:
a. Thirty (30) calendar days – Php 100.00
b. Sixty (60) calendar days – Php 200.00
c. Ninety (90) calendar days – Php 300.00
▪ The cooperative’s name shall be in accordance with the prescribed guidelines.
▪ All reserved names shall be valid in accordance with the period specified in the
Cooperative Name Reservation Notice.

II. Issuance of Certificate of Registration (COR)

The prospective cooperative acquires its juridical personality upon issuance of a
Certificate of Registration.

III. Issuance of Certificate of Amendments

This is being issued in case of any amendments in the Articles of Cooperation and by laws
of the Cooperative

IV. Issuance of Certificate of Authority (COA)

A Certificate of Authority shall be issued by CDA to cooperatives applying for the
establishment of a branch office upon compliance with the requirements. A Branch Office
1 https://cda.gov.ph/services/regulatory-services/registration/
 Appendix 6 89

refers to a business office outside the principal office where cooperative activities and
business operations are undertaken as per the approved cooperative development plan.

V. Issuance of Letter of Authority (LOA)

A Letter of Authority shall be issued by CDA to cooperatives applying for the establishment
of a satellite office upon compliance with the requirements. Satellite office refers to an
office established by a cooperative outside of its principal/main office but within its area of
operation to provide limited services to its members, but which does not, however,
maintain books of accounts as it is done only by the principal/main office.

VI. Issuance of Certificate of Recognition (COR)

Certificate of Recognition shall be issued for the organization of laboratory cooperative for
minors (ages below 18 years old) by a Guardian Cooperative.

VII. Issuance of Certificate of Merger or Consolidation

This refers to the process where two or more cooperatives becomes a single cooperative,
which, in the case of a merger, there is a surviving cooperative and consolidated
cooperative in the case of consolidation.

B. Monitoring

The regulation of cooperatives is a primary function of the CDA. Under its regulatory function,
CDA monitors the activities of cooperatives.2 This monitoring function is lodged with the regulation
division of the authority. The central office and 16 extension offices have their own regulation
section. The functions of the said units, among others, are the following:

▪ Develops, reviews, and enhances regulatory standards, tools, and other benchmarks to
guide objective assessment of cooperative performance; monitors the implementation of
regulatory policies, guidelines, rules, regulation, orders, and other issuances of the
authority;
▪ Monitors the performance of cooperatives through reports, feedbacks and information
gathered from inspections and examinations to ensure its safe and sound operations;
▪ Requires all cooperatives of all types and categories to submit annually the required
reports including the annual tax incentive report form, other documents and information
and ensures compliance hereof;
▪ Recommends the issuance of Certificate of Compliance (COC) upon evaluation of the
documentary requirements submitted and other information;
▪ Acts as custodian of the required inspection, investigation, examination reports, other
pertinent documents and copy of COC issued to cooperatives;
▪ Conducts examination/Investigation under the following circumstances:
o When the inspection yields findings that warrant subsequent examination;
o Upon a written complaint from any interested parties or upon a written complaint
from any member or officer of a cooperative or any party in interest involving any
irregularity or anomaly committed in the cooperative;
o Upon a directive or request from other government agencies;
▪ Analyzes the inspection reports submitted to guide the Institutional Development
Department (IDD) and Cooperative Surety Fund Department (CSF) in the formulation of
an intervention program for cooperatives.
▪ Recommends provision of appropriate intervention/assistance to cooperative when
necessary; and

2 https://cda.gov.ph/services/regulatory-services/monitoring/
90 Appendix 6

▪ Recommends imposition of sanctions and/or remedial intercession for violations

committed by cooperatives

C. Enforcement3

Under R.A. No. 6939

▪ Provides legal assistance to the Board and other units of the Authority for the proper
discharge of their respective functions;
▪ Assists the Board and other bodies that may be established in the conduct of
investigations and hearings of cases, including mediation and conciliation of disputes,
involving cooperatives that are brought to the Authority for resolution;
▪ Handles administrative cases involving personnel of the Authority;
▪ Assists in the promulgation of rules governing the operations of the Authority; and
▪ Performs such other functions as may be provided by law.

Proposed functions under R.A. No. 11364

▪ Provides legal assistance to the CDA board and other units of the authority for the proper
discharge of their respective functions;
▪ Reviews contracts and other agreements entered into by the authority and serve as a
repository of all signed contracts and agreements entered into by the Authority with other
government agencies;
▪ Assists the CDA board in the exercise of its disciplinary power over erring officers and
members of the cooperative for violation of cooperative laws, rules, regulations, issuances
of the authority and the articles of cooperation and bylaws (ACBL);
▪ Assists the concerned divisions/units in the filing of necessary charges for adjudication.
▪ Assists other bodies that may be established in the conduct of inspection or examination;
▪ Investigate to protect the interest and welfare of the members of a cooperative and the
public;
▪ Assists in the formulation of policies and programs for public awareness on illegal
operations;
▪ Conducts arbitration, mediation, and conciliation of disputes involving cooperatives that
are brought to the Authority for resolution;
▪ Handles administrative cases specifically in the filing of formal charges and hearing of
cases involving personnel of the Authority;
▪ Assists in the promulgation of rules, regulations, guidelines, and issuances governing the
operations of the Authority;
▪ Assists in the promulgation of rules, regulations, guidelines, and issuances governing
registration, regulation, operations, and development of cooperatives by the Authority;
▪ Assists the Authority in the preparation of legal opinion for guidance in the interpretation
of cooperative laws and the CDA Charter;
▪ Develops and implements an advocacy program to support the legislative agenda of the
Authority in coordination with other division/units of the Authority
▪ Provides research in coordination with other divisions/units of the Authority on existing or
proposed bills and resolutions in accordance with the mandate, plans, and programs of
the Authority
▪ Monitors and lobbies for the immediate consideration and enactment of legislative
measures affecting the Authority or the cooperative sector
▪ Coordinates legislative and policy-related activities between the Authority and Congress

3 https://cda.gov.ph/services/regulatory-services/enforcement/
 Appendix 6 91

▪ Makes certain the attendance of concerned officials of the Authority to Committee

hearings or TWG meetings in Congress.
▪ Provides staff support and background information on legislative measures and policies
to the key officials or other divisions/units of the Authority upon request, in their attendance
in congressional hearings/TWG meetings or other avenues for public discussion on policy
issues related to pending legislative measures affecting the Authority or the cooperative
sector.
▪ Makes certain the timely preparation of and submission of position papers/comments on
pending legislative measures in consultation with the appropriate officials and
divisions/units of the Authority
▪ Performs such other functions as may be assigned by the Authority.

Revised Rules and Regulations Implementing Certain and Special Provisions of the
Philippine Cooperative Code Of 2008

Pursuant to the provisions of Article 139 of Republic Act No. 9520, otherwise known as the
Philippine Cooperative Code of 2008, the Cooperative Development Authority hereby issues the
following rules and regulations implementing the provisions of the said code. “Article 139.
Implementing Rules and Regulations. The Authority shall issue rules and regulations to implement
those provisions of this Code which expressly call for the issuance thereof. This paragraph shall
not apply to those cases wherein a specific provision of this Code expressly designates particular
government agencies which shall issue the regulations called for by any provision of this Code.”

Title and Definitions

▪ COC – refers to the Certificate of Compliance issued by the Authority to all types of
cooperatives after compliance with the rules of the Authority.
▪ Code – refers to Republic Act No. 9520, otherwise known as the Philippine Cooperative Code
of 2008.
▪ Cooperative Bank – refers to a cooperative organized primarily to provide a wide range of
financial services to cooperatives and their members.
▪ Renewable Energy Resources – refer to energy resources such as, but not limited to,
biomass, solar, wind, hydro, geothermal, and ocean energy. These resources do not have an
upper limit on the total quantity of energy to be used and are renewable on a regular basis,
the renewable rate of which is rapid enough to consider availability over an indefinite time.
▪ Financial Service Cooperative (FSC) – refers to a cooperative organized for the primary
purpose of engaging in savings and credit services and enhanced financial services subject
to the regulations of the Bangko Sentral ng Pilipinas (BSP).
▪ Housing Cooperative – refers to a cooperative organized to assist or provide access to
housing for the benefit of its regular members who actively participate in the savings program
for housing. It is co-owned and controlled by its members.
For purposes of this definition, the following terms shall mean:

a. Blanket Loan/Wholesale Loan – refers to a housing loan contracted/obtained by a

housing cooperative intended to identify member-beneficiaries for land acquisition, land
improvement, house construction, home improvement, or renovation, and other similar
purposes.
b. Cooperative Housing Program – refers to an alternative housing approach, in
partnership with government/non-government agencies involved in a housing program,
undertaken by a financially and organizationally stable cooperative to address the housing
problems of its members, primarily the low-income earners, through its own cooperative
efforts in planning and direct production of affordable, decent and adequate housing units.
92 Appendix 6

c. DBP – refers to the Development Bank of the Philippines.

d. DENR – refers to the Department of Environment and Natural Resources.
e. HDMF – refers to the Home Development Mutual Fund or Pag-IBIG Fund.
f. HGC – refers to the Home Guarantee Corporation.
g. HLURB – refers to the Housing and Land Use Regulatory Board.
h. HUDCC – refers to the Housing and Urban Development Coordinating Council.
i. Housing Beneficiaries – refer to regular members in good standing of the Housing
Cooperative who actively participate in the savings programs for housing and quality to
own a unit as provided in the By-laws and duly approved internal policies of the
cooperative.
j. LBP – refers to the Land Bank of the Philippines.
k. NHA – refers to the National Housing Authority.
l. SSS – refers to the Social Security System.
m. Socialized Housing – refers to the housing program and project undertaken by the
government and private sector for the underprivileged and homeless, which may also be
undertaken by a Housing Cooperative. This includes sites and services development,
long-term financing, and liberalized terms on interest payments.
n. SHFC – refers to the Social Housing Finance Corporation.
o. Technical Plan – refers to all technical documents required in planning a housing project,
namely, the bar chart and construction schedule, systematic development plan, the
architectural and detailed engineering, and housing design, contract documents, technical
and material specification.
p. Water Service Cooperative – refers to a cooperative organized primarily to own, operate
and/or manage water supply distribution system to serve its members and their
households.

Financial Service Cooperative (FSC)

Section 15. Reserve Requirements against Deposit Liabilities. The FSC shall maintain a
Liquidity Reserve Fund that will be restricted in nature, equivalent to at least two per centum (2%)
of their savings and time deposit liabilities.

Section 16. Loans. The Board of Directors shall be responsible for setting loan policies and
lending procedures. It shall comply with the provisions of R.A. 3765, otherwise known as the
“Truth in Lending Act,” and shall make the true and effective cost of borrowing, an integral part of
every loan contract.

The FSC shall not invest in any single entity that is more than twenty percent (20%) of its net
worth.

Housing Cooperatives

Pursuant to the provisions of Art. 62 (13) (par.2) under Chapter V of Republic Act No. 9520,
otherwise known as the Philippine Cooperative Code of 2008, the Cooperative Development
Authority, in consultation with NHA, HDMF, HLURB, HUDCC, SSS, LBP, SHFC, DBP, HGC,
DILG, DENR, and the concerned cooperative sector, hereby promulgates these rules and
regulations for Housing Cooperatives.

CDA and GFIs shall exercise prudence in providing special loan windows to housing projects or
cooperatives and shall craft the Joint Implementing Rules and Regulations on Establishing
Special Loan Windows for Housing Projects of Cooperatives which includes the system of
identifying, measuring, monitoring, and controlling risks arising from said activity.
 Appendix 6 93

That the created special loan window complies and observes the provisions of the Manual of
Regulations for Banks (MORB), specifically Section X395, as follows:

a. It is within the provision of their respective charters;

b. Duly coordinated with the general policies and corresponding Schedule of Credit Priorities
as embodied in Appendix 23; and
c. Limit their credit to the economic activities falling Priority II of said schedule to fifty percent
(50%) of their outstanding loans at any time.

The financing shall be in the form of blanket loans or wholesale loans to qualified cooperatives
without need for individual processing in accordance with existing laws, rules, and regulations.

Section 13. Joint Monitoring and Evaluation Committee. A Joint Monitoring and Evaluation
Committee has been created, composed of CDA, as the lead agency, NHA, HLURB, HDMF,
HUDCC, SSS, LBP, DBP, SHFC, HGC, DILG, DENR, concerned cooperative sector and other
appropriate government agencies and financial institutions.

This rule shall apply to all electric cooperatives (E.C.s) registered with the Authority under R.A.
9520 that may undertake power generation utilizing renewable energy sources, including hybrid
systems, acquisition, and operation of sub-transmission or distribution as its primary purpose.

Performance Standards for Cooperatives

On February 25, 2013, the CDA issued Memorandum Circular 2013-15 otherwise known as the
Performance Report Standards for Cooperatives. The performance assessment covered financial
and social aspects of the cooperatives’ operations. Under the financial performance evaluation,
PISO report was required of every registered cooperative and this referred to the (i) profitability,
(ii) institutional strength, (iii) structure of assets, (iv) operational strength or staying power capacity
of the cooperative.4 The PISO was further enhanced to PESOS as indicators of financial
performance in May 2014. The PESOS reflect the cooperatives’ financial position based on the
following indicators with indicative maximum ceiling:

➢ P – portfolio quality (25%) representing portfolio at risk and probable losses;

➢ E – efficiency (20%) covering asset/portfolio yield, operational self-sufficiency, rate of
return on members’ share, administrative efficiency;
➢ S – stability (30%) reflecting liquidity, solvency and net returns to capital;
➢ O – operations (10%) showing the performance in membership growth and the trend in
external borrowings;
➢ S – structure of assets (15%) indicating asset structure and quality;

The prescribed formula for each indicator are detailed in Table 1.

4 CDA Memorandum Circular 2013-15, Section 3.e, Definition of Terms, 25 February 2013.
94 Appendix 6

Table 1: Financial Performance (PESOS Indicators)

RATIOS FORMULA PURPOSE STANDARD SCORE MAX. P.T. ACTUAL
P- Portfolio Quality (25%)
Portfolio at Balance of loan with one Measures the risk 5% or less • 5% or less 15
risk day missed payment of default risk in • 6-10% 12
Total loan outstanding the portfolio • 11-15% 9
• 16-20% 6
• 21-25% 3
• 26% and above 0
Allowance for Amount of allowance for Measures the 100% PLL: 100% 5
probable loans over 12 months adequacy of the 80-99% 4
losses on loan past due allowance for 60-79% 3
Total outstanding probable losses 36-59% 2
balance of loans over 12 on loans 10-35% 1
months past due 9% and below 0

35% PLL: 35% 5

25-34% 4
Amount of allowance for 17-24% 3
loans 1 to 12 months 9-16% 2
past due 1-8% 1
Outstanding balance of 0 0
loans 1 to 12 months
past due
E- Efficiency (20%)
Asset Yield Undivided Net Surplus Measures the At least • At least inflation rate 4
Average total Assets ability of the inflation rate • 1-2% below inflation 3
coop’s assets to rate 2
generate income • 3-4% below inflation 1
• More than 4% below
inflation rate 0
• 0 or negative asset
yield
 Appendix 6 95

RATIOS FORMULA PURPOSE STANDARD SCORE MAX. P.T. ACTUAL

Operational Interest income from Measures the >100% • 120% and above 4
self- loans + service fee + ability of the • 111-119% 3
sufficiency filing fee + fines, cooperatives to • 101-110% 2
penalties, surcharges sustain their • 100% 1
Financing Cost + admin operations • below 100% 0
cost
Rate of return Interest on Share Capital Measures the Higher than • Higher than inflation 4
on members’ Average member’s share earning power of inflation rate rate 3
share the member • Inflation rate 2
• 1-2% below inflation 1
rate 0
• More than 2% inflation
rate
• Zero or negative ROR
Loan Portfolio Interest income from Measures how More than • 20% and above 4
profitability loans + service fee + profitable the loan 20% • 13-19% 3
filing fees + fines, the loan portfolio • 7-12% 2
penalties, surcharges is • 1-6% 1
Average total loans • 0 or negative 0
outstanding
Cost per peso Financing cost + (admin Measures Php .10 per • .10 and below 2
loan cost - members’ benefit efficiency in Php 1.00 loan • .11 to 0.15 1.5
expense) managing the • .16-.20 1
Average total loan coops loan • 1-6% 0
outstanding portfolio
Administrative Administrative cost Measures the 3 to 10% • 10% and below 2
efficiency Average total assets cost of managing • 11-15% 1.5
the coop’s asset • 16-20% 1
• Above 20% 0
S – Stability (30%)
Solvency (Assets + allowances)- Measures the At least 110% • 110% and above 10
(total liabilities – degree of • 100-109% 8
Deposits + past due protection that • 90-99% 6
loans + loans re the coop has for • 80-89% 4
96 Appendix 6

RATIOS FORMULA PURPOSE STANDARD SCORE MAX. P.T. ACTUAL

structured + loans under member savings • 70-79% 2
litigation) and shares in the • Below 70% 0
Deposits + share capital event of
liquidation of the
coop’s assets
and liabilities
Liquidity Liquid assets – short Measures the No less than • 15% and above 10
terms payables coop ability to 15% • 12-14% 8
Total deposits service its • 9-11% 6
members' • 6-8% 4
withdrawal and • 1-5% 2
deposit on time •0 0
Net (Reserves + allowance Measures the At least 10% • 10% and above 10
institutional from probable losses) – level of • 7-9% 8
capital (past due loans + loans institutional • 5-6% 6
under litigation + capital after • 3-4% 4
problem asset) subtracting the • 1-2% 2
Total assets losses. •0 0
O – Operations (10%)
Performance Actual interest in the Determines the Target set in • 75-100% of Target 5
of number of members performance of the • 50-74% 4
membership Target increase in the change in development • 25-49% 3
growth number of members membership vis- • 1-24% 2
à-vis target • Status quo 1
• Decreasing or without 0
Trend in Determine the Decreasing • No external 5
external Ending external percentage of towards zero borrowings
borrowings borrowings - beginning change in • Decreasing compared 3
external borrowings external to the previous period
Beginning external borrowings • Status quo
borrowings • Increasing compared 2
to the previous period 0
S – Structure of Assets (15%)
 Appendix 6 97

RATIOS FORMULA PURPOSE STANDARD SCORE MAX. P.T. ACTUAL

Asset Quality Non-earning assets Measure the Not more than • 5% and below 5
Total Asset percentage of 5% • 6-7% 4
total assets that • 8-9% 3
are not producing • 10-11% 2
income • 12-13% 1
• 14% and above 0
Asset Total deposits Measures the 55-65% • 55-65% 5
Structure Total Assets percentage of • 45-54% /66-70% 3
total assets • 34-44% /71-75% 1
financed by • Below 35% or above 0
deposits 75%
Total loan receivables Measures the 70-80% 70-80% 2
Total Assets percentage of 60-99% or 81-85% 1.5
total assets 50-59% /86-90% 1
invested in the 40-49% / 91-95% 0.5
loan portfolio 39% and below /96% 0
and below
Total member share Measures the 35-45% 35-45% 3
capital percentage of 30-34% /46-55% 2
Total Assets total assets 25-29% /above 26% 1
financed by Below 25% 0
members’ share
capital
98 Appendix 7

PROFILES OF SELECTED PHILIPPINE MICROFINANCE INSTITUTIONS

Acronyms
AKP - Alalay sa Kabuhayan Program
AMP - Alalay sa Magsasaka Program
APP - Alalay sa Pabahay Program
ASKI - Alalay sa Kaunlaran sa Gitnang Luzon, Inc.
CARD - Center for Agriculture and Rural Development
CBU - capital build-up
CSR - corporate social responsibility
DPRM - Disaster Preparedness & Response Management
EDS - Enterprise Development Services
FDA - Foundation for Development Alternatives
FIDA - Farmers integrated development assistance
GEL - Green Energy Loan Program
K-Coop - Kasagana-Ka Coop
KDCI - Kasagana-Ka Development Center Inc
KEFI - Kauswagan Educational Foundation, Inc.
KKP - Kaagapay sa Kabuhayan Program
KMBI - Kabalikat Para sa Maunlad na Buhay, Inc.
LCBU - Locked-in Capital Build-Up
LEAP - Loan for Educational Advancement Program
MBAI - Mutual Benefits Association Inc.
MF - Microfinance
NWTFI - Negros Women for Tomorrow Foundation, Inc.
NGO - nongovernmental organization
SSR - sama-samang responsibilidad
SSS - Social Security System
TSKI - Taytay sa Kauswagan Inc.
TSPI - Tulay sa Pag-unlad Inc.
WASH - Water, Sanitation & Hygiene Program

A. Philippine Microfinance Institution Profile: ASA Philippines Foundation

ASA Philippines Foundation provides financial services such as loans, CBU (capital build-up or
savings), and microinsurance; and business management training for microentrepreneurs;
academic scholarships for deserving children of borrowers; disaster assistance; and health care
to its members nationwide as part of its corporate social responsibility (CSR) activities.

ASA Philippines is a non-profit, non-stock corporation specializing in microfinance devoted to

helping an increasing number of poor Filipino families rise out of poverty by providing microfinance
to help them establish or otherwise improve their microenterprises. This commitment results in
increased family incomes and savings while giving them greater access to life support goods and
services most cost-effectively and sustainably. Communities benefit as well from the goods and
services provided by our microentrepreneurs.

ASA Philippines Foundation is committed to three sectors. The first commitment is to the
marginalized poor sector for which the Foundation exists. The second commitment is to the staff
members who are dedicated to achieving the Foundation's goals. The third commitment is to the
founders and patrons to make ASA Philippines the best and most self-sustainable MFI in the
 Appendix 7 99

country. To these ends, we shall: (i) deliver the highest value for money, client-responsive
microfinance as well as supplementary products and services to the poor through the enterprising
women of each family; (ii) create the best place to work in, where all staff members have the
chance to live in dignity, develop a career path and experience the fulfillment of changing other
people's lives as well as their own; and (iii) e self-sustaining and be the best-managed
microfinance institution in the Philippines.

With a network of 1,150 branches as of the end of 2018, ASA Philippines Foundation covers
about 82 provinces serving over a million borrowers in 25,239 barangays. As of 2018, they have
disbursed more than P190 billion in microloans since it was founded way back in July 2004.

Kamrul Tarafder, President and CEO of ASA Philippines Foundation, a major microfinance
nongovernmental organization, ed his organization to disburse 7.6 billion Philippine pesos (about
US$145 million) in loans for the housing market as of June 2019. Its home financing portfolio also
jumped from 200 million pesos in 2015 to over 1.8 billion pesos in mid-2019.

It has employed more than 8,000 staff to administer its current activities, 6,000 of which act as
microfinance officers. These officers promote the Foundation's services among the poor and
ensure that the loans extended are put to proper use. They also ensure that repayment
agreements are efficiently fulfilled while savings generation continues. To date, the Foundation is
proud to report a 94.5% collection efficiency for every loan extended to the community.

Microfinance Programs and Objectives

Microfinance is, therefore, not simply about providing financial services; it is also about helping to
improve the quality of life of target communities. It has two bottom lines: one is financial, and the
other is social. Thus, the objectives of the microfinance program of ASA Philippines Foundation
are:

1. To ensure cheaper credit access to poor communities through an appropriate and

innovative alternative financing system;
2. To provide financial support to poor communities for them to produce goods and
services;
3. To establish the right of women at all levels to participate in income-earning activities
and to facilitate their involvement in participatory decision-making processes;
4. To increase household CBU (savings) and income and to create opportunities for self-
employment, thereby reducing poverty and establishing equality between men and
women in society;
5. To eliminate informal moneylenders who charge exorbitant interest rates;
6. To create pressure on the microfinance market to reduce interest rates to make loans
more affordable to poor clients;
7. To reduce dependence on charity and grants at all levels; and
8. To contribute to the socio-economic development of urban and rural poor communities
by providing financial support and services to the clients’-initiated income-generating
projects, resulting in improved quality of life and enabling them to achieve social equity.

Primary Services

ASA Philippines Foundation offers three major service products to the enterprising poor to help
uplift their economic condition:

1. Financing
100 Appendix 7

▪ Evenly divisible by a thousand (Ex. ₱1,000, ₱2,000, ₱5,000);

▪ No upfront deductions (Ex. If the loan is ₱5,000, then this exact amount is released);
▪ The initial loan ranges from ₱6,000 to ₱10,000 depending on the borrower's business or
capacity to repay;
▪ Service charge is 15% (for six months); and
▪ Payments are made weekly (₱50 for every thousand pesos borrowed by the client).
There are 23 repayments made for each cycle of six months.

2. Capital Build-Up (CBU)

▪ CBU is an alternative microsavings service for clients designed to promote the idea of
low-income families saving for the future to meet family emergencies and other needs;
▪ Withdrawable at any time;
▪ The client can deposit an amount of ₱50 or more during the weekly collection meeting at
her doorstep;
▪ The client earns interest at 7% per annum; and
▪ All excess savings are refundable on the same day a client leaves the program.

3. Locked-in Capital Build-Up (LCBU)

▪ LCBU is fixed and mandatory and serves as a monitoring tool of a client's performance
and a basis for determining a client's loan renewal and any increase in loan amount;
▪ Client deposits ₱10 a week;
▪ Non-withdrawable although it is 100% refundable;
▪ Once the accumulated deposit amount reaches ₱2,400, 50% or ₱1,200 shall be
transferred to the client's CBU account where she can withdraw it; and
▪ Refundable on the day a client wishes to leave the program.

B. Philippine Microfinance Institution Profile: Kasagana Ka Cooperative

Kasagana-Ka Coop1 was registered under the Cooperative Development Authority way back in
February 2016. Its foremost objective was to enhance its members' quality of life through
economic and social empowerment by adopting the microfinance strategy of access to financial
resources and generation of gains without the usual collaterals required.

K-COOP started as a nongovernmental organization (NGO) known as the Foundation for

Development Alternatives (FDA), involved in community organization, capability-building,
advocacy, and networking for urban poor concerns. With its initial membership of only 200 in
Sapang Palay, Bulacan, FDA grew into a microfinance NGO with a savings scheme for poor
women, as inspired by the Grameen Bank of Bangladesh.

By 2002, outreach expanded to around 2,000 clients spread over seven (7) service areas within
Caloocan City, Quezon City, Bulacan, and Rizal. The Kasagana-Ka program gave rise to the
Kasagana-Ka Development Center Inc (KDCI). Slowly, this microfinance NGO combined its
Grameen Bank model of sustaining small and organized groups of poor women borrowers under
a shared responsibility scheme with a new GRASYA approach. Grasya or blessing strongly
promoted individual liability by 2008. The individualized responsibility approach pushed the
operational spread to reach a membership size of 15,000 in three (3) major cities in Metro Manila
(Quezon City, Caloocan City, and Marikina City) and seven (7) municipalities and cities in the
provinces of Bulacan and Rizal. The total loan portfolio also hiked to the level of approximately
Php 60 million. As resources grew parallel to the increase in membership, microfinance services
were diversified in response to members' needs, not only for microenterprise but also for health,

1 www.kcoop.org.ph
 Appendix 7 101

education, shelter, insurance, and other needs. Services were also aimed at supporting the
members in their responsibilities toward the development of family members. By 2013, the
number of client-beneficiaries exceeded 22,000, and KDCI's net worth level was estimated at Php
78 million.

In 2016, the KDCI Board of Trustees commissioned a study and review of KDCI's 2013-2016
performance based on its microfinance strategy. The transformation of KDCI to a cooperative
model was spurred by the desire to provide a clear framework for redistribution of financial
benefits from the organization's microfinance operations back to the client-beneficiaries within a
well-defined regulatory and tax structure. K-Coop took over the livelihood development program
while KDCI maintained the social component of operations. The transition was smooth with the
K-Coop using KDCI's assets, equipment, program funds, and other resources under a
usufructuary arrangement.

Kasagana-Ka Coop progress is steered by its vision, mission, and objectives as quoted below:

Vision Statement

K-Coop envisions urban poor communities who believe in and are committed to cooperatives'
principles, in being fair and giving equal rights to all coop members, and in democratically
governing and managing the cooperative to provide financial sustainability and social protection
to everyone, towards their genuine economic and social empowerment.

Mission Statement

A cooperative that teaches the principles of cooperatives and financial education to poor women
provides income and capital, fosters productivity and purchasing power, and secures access to
the coop's financial and social services. K-Coop endeavors to be an effective service-oriented
institution that nurtures hope, practices, and opportunities to improve the lives and enhance the
sense of self-worth of poor Filipino families and their communities in urban areas.

Goals

K-Coop aims to contribute to improving the lives of its 30,000 plus members, who are all part of
the 1.1 million urban poor households within the National Capital Region. Many of these coop
members are resettled or resettled in Bulacan, Rizal, Cavite, and Laguna. K-Coop's Articles of
Cooperation (see Article II) outline the following goals for the organization:

1. To attain increased income, savings, investments, productivity, and purchasing power, and
promote among members equitable distribution of net surplus through the utilization of
economies of scale, cost-sharing, and risk management;
2. To provide optimum social – including health, housing, education, disaster management,
protection – and economic benefits to its members;
3. To teach members efficient ways of doing things cooperatively;
4. To propagate cooperative practices and new business and management ideas by teaching
members financial education and literacy and the means to address social concerns through
proper, effective, and efficient management;
5. To allow lower-income and less privileged groups to increase their ownership in the nation's
wealth, especially women and those in resettled communities;
6. To actively support the government, other cooperatives, and people-oriented community
development organizations, both local and foreign, in promoting cooperatives as a practical
 102 Appendix 7

means towards attaining sustainable socio-economic development under a truly just

and democratic society;
7. To institutionalize a dynamic savings mobilization and capital build-up scheme to sustain
development activities and long-term investments, thereby ensuring optimum economic
benefits to members, their families, and the general public;
8. To implement policy guidelines that will ensure transparency, equitable access to its resources
and services, and promote the interests of the members;
9. To partner and network with different nongovernmental organizations, private businesses, and
government entities to broaden programs that will improve the welfare of the members, their
families, and the community; and,
10. To adopt such other plans may help foster the welfare of the members, their families, and
their communities.

The K-Coop success is founded on its key guiding principles in operations from when it was FDA
under the leadership of then Executive Director Severino Marcelo Jr.:
▪ Managing with prudence as administrators of wealth, interest, and funds of the cooperative;
▪ Alleviation of poverty for all client-beneficiaries;
▪ Respect and courtesy for all
▪ Collaboration and cooperation to achieve the best results;
▪ Empowerment through nurturing of traits which value oneself, one's inherent capacities,
and the promotion of decisive thinking for the good of others;
▪ Learning together from and best practices, and change towards the improvement of
services for all members; and
▪ Opportunity for growth through recognition of different opportunities to enable the
development of all.

I. Kasagana Ka-Coop Programs and Services

A. Livelihood and Enterprise Development

1. K-Kabuhayan is the entry point of members to the main programs of K Coop, which
comprises of:
▪ K-PWD offers microfinance loans to persons with disabilities, applicable to
members and their family members;
▪ K-NHA Window 1 gives loan assistance for livelihood activities to urban low-
income families who have been staying in relocation sites of the National Housing
Authority (NHA) for less than six (6) months.
▪ K-Manggagawa provides the loans for K-Negosyo microenterprise loans.
▪ K-Kalamidad loans are aimed at assisting victims of calamities to ensure safe and
healthy living conditions.
2. K-Kabuhayan Window 2 extends loans to business members with a required
business permit with a fixed processing fee within the locality. The minimum loan
amount is Php30,000.00.
3. K-Trabaho lending window supports coop members in providing family members'
financial needs to obtain job application/s.

B. Education, Training, and Formation (K-Edukasyon)

1. Window 1 provides loans to coop members for educational expenses such as tuition
fees, school supplies, field trips, and other related expenses for their family members.
2. Window 2 will cover loans for further educational requirements of family or relatives.
 Appendix 7 103

C. Health and Wellness (K-Kalusugan)

1. Window 1 loans cover laboratory expenses for coop members and their families.
2. Window 2 extends loans for hospital confinement, medical procedures, medicines,
eyeglasses, and dentures.
3. Window 3 supports the needs for members' enrollment under the PHILHEALTH2 and
mandatory contribution for one (1) year.
4. Window 4 covers the K-Kadet training fee. A K-Kadet is a health champion who leads
activities to raise client-beneficiaries' awareness of health issues and their immediate
or emergency health needs.
5. Window 5 finances members' household needs for the Pure-it Water Purifier.
6. Window 6 lends to members to purchase the Pure-it Germ Kill kit to enhance the water
purifier.
7. Window 7 loans cover the purchase of OMRON health maintenance gadgets, such
as a digital sphygmomanometer, to check blood pressure.

D. Social Protection (K-Benepisyo)

1. Window 1 provides loans for members' enrollment fees with the Social Security
System3 (SSS) and six months' contribution to the pension and retirement fund.
2. Window 2 covers bundled protection products such as – K-Kalinga, Kwarta o Kahon,
and RMSI care.
3. Window 3 covers the payment of the hospital insurance income plan.
4. K-Kasal window extends loans for marriage-related expenses.

E. Security, Shelter, and Safety (K-Bahay housing microfinance program)

1. Window 1 extends loans for incremental house construction, repair, and improvement
to more durable and natural disaster-resilient structures or additional floors or rooms
that can be rented out for extra income. Estimated or fixed income will be evaluated
as a factor in the determination of loan amount.
2. Window 2 loans cover land tenure security with various purposes of updating or full
payment of land, real estate taxes, payment of registration, or title transfer.
3. Window 3 loans will finance connection or reconnection fees to utilities (electricity and
water) and purchase home appliances or furnishings.

C. Philippine Microfinance Institution Profile: Alay Sa Kaunlaran, Inc.

Alalay Sa Kaunlaran, Inc. has the vision of being a global development organization committed
to Wholistic transformation. ASKI's mission is to promote socio-economic development through
client-focused financial and non-financial services anchored on Christian principles.

2 The National Health Insurance Program otherwise known as PHILHEALTH was established to provide health
insurance coverage and ensure, acceptable, available, and accessible health care services for all citizens of the
Philippines. It shall serve as the means for the healthy to help pay for the care of the sick and for those who can
afford medical care to affordable subsidize those who cannot. It shall initially consist of Programs I and II or Medicare
and be expanded progressively to constitute one universal health insurance program for the entire population.
www.philhealth.gov.ph
3 The Social Security System is government-run social insurance fund covering the retirement and pension and other
benefits for the employees in the private sector, professionals, informal sector who are self-employed. Details of
membership requirements, prior, and post-retirement benefits, and other services to its members, are presented in
the SSS official website - www.sss.gov.ph.
104 Appendix 7

Established in 1986 and officially registered as "Alalay sa Kaunlaran sa Gitnang Luzon, Inc." in
1987, ASKI changed its business name in 2004 to its current form in line with its expansion
program. Today, it operates through 38 branches covering 11 provinces of Regions I, II, and III:
namely, Nueva Ecija, Pampanga, Bulacan, Aurora Province, Tarlac, Pangasinan, Isabela,
Cagayan Valley, Ifugao, Quirino Province, and Nueva Viscaya. In 2010, it expanded its area of
operations to Singapore through ASKI Global Ltd.

They envision a global development organization committed to Holistic transformation. Their

mission is to promote socio-economic development through client-focused financial and non-
financial services anchored on Christian principles.

LOAN PRODUCTS

Business Loan - credit-service offered to clients where the intended use is for increasing
business assets such as the acquisition of inventory, equipment, machinery, inputs, or any
required assets for income-generating activities such as trading, services, or agri-business. A
credit of this kind requires an existing business with the business cash-flow serving as the primary
creditworthiness and loan evaluation source.

1. Alalay sa Kabuhayan Program (AKP) or Group Lending: Borrowers are encouraged to

organize into groups to avail loans for their income-generating projects. The loan amount
ranges from P 3,000 to P 50,000.
2. Alalay sa Magsasaka Program (AMP): Loans extended to small farmers for crop
production, farm machinery acquisition, and other agro-enterprise needs. Borrowers can
avail of P 10,000 to P 150,000
3. Individual Lending Program (ILP)
a. SIKAP: Loans as a start-up for small businesses. The loan amount ranges from P
5,000 to P150,000.
b. UNLAD: Additional capital for progressing and big businesses. Borrowers can avail
from P 151,000 to P 300,000.

A consumer Loan is a credit service where the intended use is not directly related to income-
generating activities. Consumer loans include education loans, housing, technology, and other
expenditure or usage. Credit evaluation uses personal income such as salary, remittance, or
household income as the main basis for evaluation, although business cash flow may also be
used.

1. Alalay sa Pabahay Program (APP): Loans for house construction, lot acquisition, house
and lot purchase, house repairs, and maintenance. The loan amount is from P 5,000 to P
300,000.
2. Loan for Educational Advancement Program (LEAP): Loans product to support tuition fees
and other school-related expenses of their children. The loanable amount is P 5,000 to P
20,000
3. Salary Loans: Borrowers can avail of the program and use it as a multi-purpose loan. The
loan amount is a maximum of P 75,000.
4. Water, Sanitation & Hygiene Program (WASH): Loans for ASKI WASH projects for toilet
and water facility construction. The loan amount ranges from P 3,000 to P 100,000.
5. Green Energy Loan Program (GEL): Loans for renewable energy technologies such as
solar panels, biogas digesters, other products.
6. Kaagapay sa Kabuhayan Program (KKP): Loans to avail of insurance program, including
ASKI insurance products. Borrowers can avail from P 1,000 to P 300,000.
 Appendix 7 105

D. Philippine Microfinance Institution Profile: Taytay Sa Kauswagan Inc.

Taytay Sa Kauswagan Inc. (TSKI) is a microfinance organization that aims to help the
microentrepreneurial poor through loans and other services. Its mission is to make the love of
Jesus Christ felt by the poor by providing opportunities that promote spiritual transformation and
total human development. TSKI is a truly Christian development organization that endeavors to
see self-sufficient families respond to their community's needs and pursue a collective effort for
their development.

The objectives of TSKI are (i) develop small and micro-scale enterprises by providing financial
assistance for additional capital needed to increase productivity and income; (ii) create
employment opportunities for the unemployed through the expansion of business enterprises,
and (iii) assist in building up local church and communities through the help and contributions of
its members as a result of improved business operations.

TSKI Products and Services

1. Microfinance
▪ Okey Loan (Individual loan) – Caters to the individual entrepreneurs who need a big
amount of loans to acquire fixed assets or additional working capital for their business.
(Secured/Centralized loan); and
▪ PKK Loan (Group loan) – Livelihood loans offered to the micro-entrepreneurs who operate
a small enterprise or business without collateral. (Character loan);
✓ Micro Housing – assist its clients and staff for the construction, acquisition, and
renovation or improvements of their houses;
✓ Emergency loan – an incentive loan given to the 3rd cycle and above. An add-on with
the business capitalization just in case capital inputs had decreased due to calamity.
The loan can also be used in emergency cases like fires, calamities, sickness in the
family, and other related emergency cases subject to TSKI personnel's assessment.
The cost of this is very minimal, and the process of disbursement is simple and short;
✓ Educational loan – enables clients to avail loans intended for the payment of tuition
and miscellaneous fees of their children; and
✓ Water Sanitation and Hygiene (WASH) loan – provides loans for the construction,
rehabilitation, and improvement of water systems, sanitation, and hygiene facilities.

2. Business development services

▪ Business consultancy (Business diagnosis and business advisory) – provided to clients
who wanted to put up a new business, and to the existing ones who wanted to develop
further or strengthen their business; and
▪ Business incubation – provides nurturing environment needed to develop and grow client's
business offering everything from virtual support, ren-a-desk through to state of the art
laboratories and everything in between. It also provides direct access to hands-on
intensive business support, access to finance, and experts to help entrepreneurs grow.

3. Community enterprise development

▪ Social preparation – mobilize, prepare, and set the tone for the participation and
commitment of community and stakeholders to achieve established goals;
▪ Community organizing – builds/mobilizes people and other community resources towards
identifying and solving their problems, establishing people's awareness and capacities to
stage their future and act collectively (Dacanay, 1993);
106 Appendix 7

▪ Community development – the conscious effort of pursuing a definitive course or pattern

of development to promote positive changes or improvement in the community and the
society as a whole; and
▪ Enterprise development – the result of a process in which the community acts
entrepreneurially to create and operate a new enterprise embedded in its existing social
structure.

4. Training
▪ Staff training
▪ Leadership training

5. Farmers integrated development assistance – FIDA is the program innovated by TSKI to

address the poor and marginalized agrarian reform rural farmers' situation, with a farm lot of
0.5 to 2 hectares, who do not have access to formal financial services and post-harvest
facilities.
▪ Microfinance Agri
▪ Community-based social preparation
▪ Financial Assistance
▪ Post/Harvest/Skills development
▪ Product development
▪ Marketing

6. Allied services
▪ Educational assistance – Kauswagan Educational Foundation, Inc. (KEFI) Scholarship
provides educational assistance to deserving children of TSKI clients. The educational
assistance covers P15,000 in cash per semester
▪ Microfinance (MF) Scholarship Program
▪ Insurance
▪ Prime Health Care
▪ Micro-Insurance

E. Philippine Microfinance Institution Profile: CARD Bank, Inc.

The Center for Agriculture and Rural Development (CARD), Inc. is a microfinance-oriented rural
bank in the Philippines established in 1997 and is currently regulated by the Bangko Sentral ng
Pilipinas. Its main office is located in San Pablo City, Laguna. As of May 2019, Card Bank, Inc.
has 750 service offices nationwide.

CARD spent considerable time refining its operation using modified Grameen Bank methodology
in 1989 to achieve the twin goals of outreach and sustainability. It has successfully formalized its
micro-lending operations by transforming itself into a formal financial institution.

CARD is committed to: (i) empower socially-and-economically challenged women and families
through continuous access to financial, microinsurance, educational, livelihood, health, and other
capacity-building services that eventually transform them into responsible citizens for their
community and the environment; (ii) enable the women members to gain control and ownership
of financial and social development institutions; and (iii) partner with appropriate agencies, private
institutions, and people and community organizations to facilitate achievement of mutual goals.

Its vision is to become a world-class leader in microfinance and community-based social

development undertakings that improves the quality of life of socially and economically challenged
women and families towards nation-building.
 Appendix 7 107

CARD is committed to providing a wide range of loans and savings products, and other services.
It offers loan products to fit clients' businesses and family needs at a low interest rate and flexible
payment terms. Loans are granted based on the actual needs and repayment capacity of the
clients. Savings products are designed to suit every family member's needs, and clients can now
enjoy a high yield of their savings at a low initial deposit amount. Another service is the remittance
program that provides local and international money transfers to other banks and providers.

The services provided by CARD are loans, savings, and remittance. A brief description is
provided below.

1. Loans
▪ Microfinance loan
- Microenterprise loan
➢ MF- Sikap 1 – for business capital; and
➢ MF- Sikap additional – additional capital for business can be availed by
members even if they have an existing Sikap 1 Loan.
- Micro housing loan – for house improvement and renovation; and
- Micro agri-loan – for agriculture-related businesses.
▪ SME loan – for center members who needs a working capital of more than PHP300,000,
which may be used as working capital or investment.
▪ Other loans include:
- Solar loan
- Health loan
- Salary loan
- Educational loan
- Mobile/cellphone loan
- Calamity loan

2. Savings
▪ Pledge savings (for center members)
▪ Kayang-kaya savings (regular savings account)
▪ Matapat savings (ATM Savings account)
▪ Maagap savings (Kiddie savings account)
▪ Tiwala savings (Special savings deposit)
▪ Tagumpay savings (recurring deposit)
▪ Checking account
▪ Dollar account

3. Remittance
▪ Domestic remittance
▪ International remittance

F. Philippine Microfinance Institution Profile: Kabalikat Para Sa Maunlad Na Buhay,

Inc.

Kabalikat Para sa Maunlad na Buhay, Inc. (KMBI) hopes to see people in communities live in
abundance with a strengthened faith in God and the right relationship with their fellowmen and
the rest of creation. KMBI is a Christ-centered development organization existing to help transform
its clients' lives and develop its human resources to provide sustainable microfinance, training,
and demand-driven non-financial services.
108 Appendix 7

Starting as a church-based credit program in 1985, KMBI was incorporated as a non-stock, non-
profit organization in 1986. By 2010, KMBI had expanded to 61 branches in 16 areas of operations
across the country. Their vision is to see people in communities live in abundance with a
strengthened faith in God and the right relationship with their fellowmen and the rest of creation.
KMBI is a Christ-centered development organization existing to advocate and work for the integral
transformation of the lives of low-income people and their communities by providing responsive,
sustainable microfinance and non-financial services.

FINANCIAL SERVICES

KMBI provides a more reasonable alternative with loans given at an interest rate of 20%, payable
in six months.

Credit Products

1. Group Loan - The Group Loan Program helps existing microbusinesses expand and develop
by providing loans and empowering women microentrepreneurs with below Php50,000
additional capital requirements.
2. Individual Loan - The Individual Loan aims to assist further graduated program members
from its Group Loan Program and new members from the microenterprise segment by
providing additional working capital to expand and further develop their existing businesses.
3. Agricultural Microfinance - The Agricultural Loan of KMBI exists to aid and develop the
country's agricultural sector by providing loans that will serve as working capital for farming or
within the allied agricultural sector.
4. Non-Credit Products
▪ Micro-Insurance - Micro-insurance is an add-on service given to the program members of
the organization. Along with the Group Loan and Capital Build-Up, all clients aged 18 to 63
years are required to enroll in this program to be protected in cases of death in the family.
Offered under this service are death insurance and burial benefits.
▪ Capital Build-Up (CBU) - Capital Build-Up is an opportunity for program members to begin
accumulating their financial resources and lessen their vulnerability to crisis and
dependence on outside credit sources. It is also a reserve fund that a member may use as
additional capital for the existing business or capital for a new business when she retires
from the program.

NON-FINANCIAL SERVICES

KMBI takes a holistic approach in addressing the problem, offering microfinance and non-financial
services to clients to help ease economic poverty and give hope.

1. Entrepreneurship Development Services (EDS) - The EDS or the Enterprise Development

Division helps strengthen the core knowledge and skills of entrepreneurial members of KMBI
through knowledge sharing programs and capability building programs through client training
and follow-through activities. It also strives to perform its consolidator functions through
networking and linking with business development service offices to assist our clients' needs
as entrepreneurs.
2. Community Development - The Community Development program provides livelihood
opportunities by establishing a local livelihood enterprise, which aims to empower its
recipients in being responsible community member through being an instrument in alleviating
their community out of poverty.
 Appendix 7 109

3. Mass Wedding - KMBI values the sanctity of marriage and the family's role as an important
unit of society. An annual wedding is offered as one of our services for unmarried cohabitating
members to legalize their union.
4. Wellness Program - We at KMBI take into heart the health and wellness of our program
members. KMBI Wellness Program includes Wellness Caravans for branches, Wellness
Bulletins, Emergency Care Program, and Basic health orientations during center meetings.
5. Disaster Preparedness & Response Management (DPRM) - We understand that our clients
are extremely vulnerable to economic downturns, disasters, and health hazards. The DPRM
was set up to address these vulnerabilities to help our clients when they need it the most.

G. Philippine Microfinance Institution Profile: Negros Women For Tomorrow

Foundation, Inc.

The Negros Women for Tomorrow Foundation, Inc. (NWTF) has the vision of becoming a
sustainable institution of change: building vibrant, "Dungganon" communities. Its mission is to
provide sustainable financial and client-responsive developmental services to the poor.

Founded in 1984, the Negros Women for Tomorrow Foundation, Inc. began as a
nongovernmental organization that aims to help women achieve self-sufficiency and self-reliance,
particularly in Negros Occidental's low-income and depressed urban and rural communities. It
sought to increase women's awareness of their economic potential, increase their skills and
productivity, and improve their quality of life.

In 1989, NWTF accepted the challenge of replicating the Grameen Bank credit methodology and
established Project Dungganon (Honorable). In 2000, after 11 years with group lending, NWTF
started the Individual Lending Program. Also, in 2000, NWTF started the Micro-Insurance
Package and the Scholarship Program. In 2004, the Micro-Crop Project was launched to cater to
the needs of the Agrarian Reform beneficiaries. In 2005, NWTF opened the Microfinance Thrift
Bank.

Today, NWTF continues to be guided by its vision of becoming a leading and fully sustainable
microfinance institution renowned for its commitment and professionalism to provide the poorest
with real and meaningful opportunities to build a future where every Filipino is Dungganon. The
management keeps on redesigning its credit products to meet the needs of its clients while
pursuing ongoing training of staff, updating its policies and procedures to suit the current needs
of the organization, and implementing an MIS system to put the organization at par with other
institutions providing fast and accurate service to its clients.

For the past 35 years, Negros Women for Tomorrow Foundation, Inc. operates as a non-
government organization. For 30 years as a microfinance institution using the Grameen method
of microcredit. Through Project Dungganon and Project Kasanag, Negros Women for Tomorrow
Foundation, Inc. is helping micro-entrepreneurs build and sustain their businesses.

Project Dungganon: Dungganon, a Hiligaynon word meaning honorable, is the flagship project of
NWTF that offers group-based loans utilizing the Grameen lending methodology. It aims to help
poor women from rural communities achieve self-reliance and rise above poverty.

Project Kasanag: Kasanag, a Hiligaynon word meaning light or brightness, offers individual micro-
business loans designed for micro-entrepreneurs in need of additional capital for their growing
business.
110 Appendix 7

H. Philippine Microfinance Institution Profile: Tulay sa Pag-Unlad Inc.

TSPI is a Christian microenterprise development NGO. Its mission is to provide individuals,

families, and communities the opportunities to experience the fullness of life in Christ through
Christian microenterprise development. The organization's vision is to see people live Christ-
centered lives with dignity, sufficiency, integrity, and hope, demonstrating this through love and
service in their families and communities.

TSPI works with the rest of society to help alleviate poverty by contributing our expertise in
microenterprise development. We reach out to microentrepreneurs and farmers and offer various
services that help them establish, sustain, or grow their enterprises and farms. It believes that
this source of livelihood for them could be their bridge out of poverty ("tulay sa pag-unlad").

TSPI provides microfinance and micro-agri loans to microentrepreneurs and farmers. It offers
various training from financial literacy, microenterprise management, yield-enhancing agricultural
techniques, and courses on setting up specific livelihood enterprises. It finds ways to link its
microenterprises and farms to better markets, lower sources of production inputs, and better
methods of production. TSPI helps shield these microenterprises from shocks such as calamities,
illnesses, or unexpected cash drains, by offering support services to address basic needs for
healthcare, housing, education, micro-insurance, and other non-financial services.

PROGRAMS AND SERVICES

TSPI focuses on serving microentrepreneurs and small farmers through its microfinance
programs and other business, agriculture, social, and spiritual development initiatives. The
organization works with other institutions and the rest of society to help alleviate poverty by
contributing its microfinance expertise and offering clients complementary services that help them
sustain and grow their microenterprises and farms.

TSPI has a Home Improvement and Sanitation Loan Program. It is a loan facility for housing,
toilet, water source construction/renovation, and electrical connection fees. The loan amount
ranges from P10,000 to a maximum of P100,000 (with collateral above P70,000).

TSPI SAMBAYANIHAN

Sambayanihan is the name of the partnership program of TSPI (A Microfinance Organization)

and the TSPI Mutual Benefits Association Inc. (MBAI). The program was launched during the
series of Sector and Support Service Rally attended by the TSPI field and support staff in
November-December 2019. The rallies commenced a month after TSPI marked its 38th
anniversary, with the theme "Sambayanihan." The partnership program is jointly implemented by
the TSPI branches and the council of client leaders on the ground.

Sambayanihan at Work for the Clients -- A culture of sama-samang responsibilidad (SSR), or

collective responsibility, thrives when clients help one another build discipline as a borrower, grow
their livelihood, and deepen their relationship with God. This culture is the essence of
Sambayanihan. This same spirit of working together for everyone's benefit is what drives
community activities. In 2019, three Sambayanihan activities were organized, the “Serbisyong
Segurado”, “Kalusugan Karaban” and “Musmos Bangong Alaga” (Paskong Bulilit).
 Appendix 8 111

CLIMATE CHANGE ADAPTTION FOR URBAN POOR HOUSING

A. Enabling Sustainable and Climate-Adaptive Systems for Housing Sector

During the observance of the annual World Habitat Day on 05 October 2020, with the theme of
“Housing for All: A Better Urban Future,” the Climate Change Commission (CCC)1 urged leaders
from the public and private sectors to enable sustainable and climate-adaptive systems within the
housing sector to address concerns on shelter and other human settlement within cities and
communities.

Every first Monday of October, World Habitat Day is observed, focusing on the state of human
settlements and the basic right of all to adequate shelter. It is centered on improving all levels of
partnership between government and relevant stakeholders and implementing policies and
methods effectively to ensure adequate and affordable homes for all. The critical role of cities and
local governments worldwide is recognized in eliminating inequalities and poverty levels by
providing access to basic amenities like shelter, food, and water for all. This is especially true in
this time of pandemic and climate crisis.

While cities prioritize COVID-19 response, the threat of typhoons, flooding, extreme heat, and the
spread of vector-borne diseases due to climate change remains. This risk is particularly worrying
for the Philippines, where populations and incidence of poverty are high. According to the Global
Commission on Adaptation, it is thus imperative for cities to adapt to climate change, being home
to 50% of the world’s population and where 80% of GDP is produced.

The CCC highlighted ongoing work for the

development of science-based climate
risk management interventions for five
cities under the Building Climate Resilient Box 1. Designing Resilience
Urban Plans and Designs (BCRUPD) Building Climate Resiliency through Urban Plans and
project with the Department of Human Design (BCRUPD) is a capacity building project
Settlements and Urban Development, funded by the German government’s International
Climate Initiative (IKI) and is being implemented by the
League of Cities of the Philippines, UN- UN-Habitat in partnership with the government of the
Habitat, and other key partner agencies Philippines.
and organizations (Box 1). The project supports the Philippine government to
improve policies, regulations, and capacities for
The CCC is committed to foster capacity climate change adaptation by promoting climate-
building and knowledge exchange for responsive sustainable urban development plans and
designs.
green urban development, such as in its
existing partnership with the National
Housing Authority and the Philippine
Green Building Council best practices on sustainable building designs and standards, including
renewable energy and energy efficiency, and build a sustainable technical support network for
government agencies and relevant stakeholders for low-emission local development strategies.

A.1 Climate Change Resilient Pilot Housing (CCRPH) Technology

The CCRPH promotes the design and construction of a low-cost, climate-adapted, and energy-
efficient house-building system, which will benefit low-income families living in cities. It is one of
the outcomes of the Integrated Resource Management in Asian Cities: The Urban NEXUS project

1 Climate Change Commission is the lead policy-making body of the government tasked to coordinate, monitor, and
evaluate government programs and ensure mainstreaming of climate change in national, local, and sectoral
development plans towards a climate-resilient and climate-smart Philippines.
112 Appendix 8

implemented by the GIZ in partnership with the United Nations Economic and Social Commission
for Asia and the Pacific (UNESCAP) and ICLEI—Local Governments for Sustainability—
Southeast Asia (SEA). The project is funded by the German Federal Ministry for Economic
Cooperation and Development (BMZ).

On 24 June 2016, the climate change resilient pilot house was inaugurated at Bicol College for
Applied Science and Technology (BISCAST) in Naga City, representing an alternative to
conventional construction for affordable, social housing. It consists of the application of low-cost
housing technology, including climate-adapted and energy-efficient devices.

Following its inauguration in 2016, the CCRPH secured certification from the Accreditation of
Innovative Technologies for Housing (AITECH) of the Philippine National Housing Authority
(NHA) in December 2017. It also obtained a Kamagong (highest) rating from the Philippine Green
Building Initiative (PGBI), which recognized the CCRPH as the second greenest building in the
country.

The Climate Change Resilient Pilot Office serves as a model home to help low-income residents
most affected by natural disasters and housing shortages and functions as an office for BISCAST.

The home has a safe shelter to protect from typhoons or other natural disasters and is slightly
elevated from the ground to prevent flooding. It also has advanced systems and solutions that
dramatically curb energy usage and nearly eliminate water usage compared to a typical building.
BISCAST hopes that the pilot home can be implemented in cities throughout the Philippines.

A.2 Looking at the Cost and Technology of CCRPH

Without the cost for finishing work (tiling, flooring, plastering, painting, etc.), the m 2 price can be
lowered to PHP 5,500/m2 (116.75 U$), leaving the finishing works to be done by the owners to
make it affordable for even lower-income groups. Moreover, it employs environmentally friendly
construction technologies (prefabricated beams and hollow blocks) without wooden formwork. It
can be built in a short span of time, thus further reducing the costs.

The specific advantages of the technology are as follows:

 Modular architectural system reduces the number of different building parts, leading to a
reduction in different types of formworks;
 Reduction of waste material and wastewater on-site by up to 30 percent;
 Approximately 50 percent reduction of the mortar due to the hollow concrete blocks (HCB)
concept of closed bottom;
 Reduction of 40 percent of concrete and 30 percent of steelworks for slab construction
due to HCB-slab system;
 30 percent increase in the use of cement for HCB to achieve the required strength for
load-bearing walls;
 Natural ventilation (cross ventilation throughout the building);
 Natural illumination, window/wall ratio 40 percent and roof lights;
 Energy-efficient devices (LED lights and occupancy sensor);
 Reduction of electricity consumption by more than 25 percent through the photovoltaic
system;
 Water conservation via rainwater harvesting; and
 Re-use of clarified wastewater as fertilizer for urban gardening.
 Appendix 8 113

A.3 Local Climate Adaptation and Mitigation

There are laws and programs in place that promote climate change adaptation and mitigation.
For instance, Local Government Units must prepare a Climate Change Adaptation Mitigation Plan
and set aside 5% of their budget for this purpose. This plan must be approved by the Local
Development Council represented by civil society and community organizations.

The problem, however, is that these laws and programs are often not properly implemented.
Therefore, urban poor communities are demanding housing rights and climate justice. For
instance, they develop Disaster Risk Reduction Plans and prepare contingency plans for when
disasters occur. These communities call on the relevant government agencies to support their
plans through early warning systems and infrastructure such as retaining walls.

B. Climate Change and Disaster Resilient Housing for the Urban Poor

B.1 The Need for Disaster Resilient Housing

All structures in the country must be able to withstand natural calamities such as strong typhoons
and earthquakes. During the 2019 Climate Smart and Disaster Resilient ASEAN conference held
in Manila, organizer Glenn Banaguas stated the following: “Based on one of the priority areas of
the National Climate Change Action Plan (NCCAP), an infrastructure has to be climate-smart and
disaster-resilient to save lives. For instance, a hotel or school can stand more than 300 kph
tropical cyclone."

B.2 Remembering Typhoons Ondoy and Yolanda

Two of the most devastating typhoons that hit the country in recent history are Typhoons Ondoy
and Yolanda. Both severely affected millions of people and resulted in the loss of thousands of
lives, livelihoods, possessions, and dwellings.

B.2.1 Ondoy: A rare 450 mm of rainfall within 12 hours

Tropical Storm Ketsana, locally known as Ondoy, swept across Metro Manila and parts of Central
Luzon on Saturday, 26 September 2009, causing widespread flooding. The equivalent of a
Category I storm, Ondoy brought an unusually high volume of rain which inundated the central
part of Luzon. During the 12-hour period starting at 8:00 am on 26 September, the rainfall was
recorded as approximately 450 mm at the Manila Observatory. This was considered an extremely
rare occurrence.

The typhoon dumped one month’s worth of rain in the Manila metro area in fewer than 24 hours.
Consequently, these intense rains generated high flooding in the Marikina River that exceeded
the river’s carrying capacity. Ondoy caused extensive flooding in the Metro Manila area and the
neighboring Rizal province, including the cities of Antipolo, Makati, Malabon, Marikina,
Muntinlupa, Pasig, Quezon, San Juan, Taguig, and Valenzuela.

According to a National Disaster Coordinating Council (NDCC) report in 2009,

the typhoon affected 4.9 million people, destroyed 185,000 houses, and dealt damages estimated
at PhP 1 billion.

When Typhoon Ondoy hit the Philippines, some 40,000 people lived in informal settlements, or
slums, along the Manggahan Floodway, an artificially constructed waterway built to mitigate flood
114 Appendix 8

risk. The vast majority of damage to the housing stock was concentrated in the informal sector,
which serves mainly low-income families.

B.2.2 Typhoon Yolanda: Most Powerful Storm of all Time

Super Typhoon Yolanda (internationally known as Typhoon Haiyan) made landfall in the
Philippines on 08 November 2013 as a Category 5 storm. It laid waste to the Visayas group of
islands, the country’s central region and home to 17 million people. Yolanda was the most
powerful storm in 2013 and one of the most powerful typhoons of all time.

Based on the final report of the NDRRMC on the effects of Typhoon Yolanda, a total of 1,140,332
houses were damaged during the disaster. Of this number, 550,928 houses were completely
destroyed, while 589,404 houses suffered partial destruction. This covered 9 regions and broken
down as follows:

Table 1: Housing Units Destroyed by Typhoon Yolanda per Region

Completely Partially
Region Total
Damaged Damaged
IV-A: CALABARZON 34 806 840
IV-B: MIMAROPA 11,611 22,202 33,813
V: Bicol Region 2,088 10,324 12,412
VI: Western Visayas 229,326 253,023 482,349
VII: Central Visayas 62,840 48,479 111,319
VIII: Eastern Visayas 244,550 248,306 492,856
X: Zamboanga 2 18 20
Peninsula
XI: Davao Region 11 8 19
XIII: Caraga Region 466 6,238 6,704
Total 550,928 589,404 1,140,332

Over the past decade, the Philippines has been affected by disaster events that have caused
billions in damages. From 2010-2015, the number of housing units damaged by major calamities
was estimated to reach 1.8 million units. Of which 1,086,365 housing units or 60% and 724,973
housing units or 40% are partially and totally damaged, respectively.

Table 2: Number of Housing Units Damaged by Major Calamities 2010-2015 (HUDCC)

Calamities Totally Damaged Partially Total
Damaged
Bohol Earthquake 14,480 57,405 71,885
Typhoon Ondoy 27,602 189,920 217,522
Typhoon Pablo 89,666 127,151 216,817
Typhoon Sendong 13,585 37,559 51,144
Typhoon Agaton 838 1,328 2,166
Typhoon Yolanda 550,928 589,504 1,140,332
Typhoon Glenda 27,874 83,498 111,372
Total 724,973 1,086,365 1,811,338
 Appendix 8 115

B.3 Core Shelter Project (Promoting Low-Cost Typhoon-Resistant Housing in the

Philippines)

Following the destruction of Typhoon Sisang, the government, through the Department of Social
Welfare and Development (DSWD), decided in 1988 to initiate a program of providing typhoon-
resistant housing for those living in the most typhoon prone areas. Rather than use the
international aid available to provide yet another temporary solution to the problem, the
government decided to design a low-cost house resistant to typhoons that the people could build
themselves using local materials. Only in this way could the cycle of devastation, which was such
a limiting factor in the development of these lives and communities, be broken.

Called the Core Shelter Housing Project, it involved the provision of environmentally friendly,
structurally strong shelter units that can withstand a range of hazards such as typhoons, flooding
and mild earthquakes using locally available construction materials. Not only did the project
involve shelter provision, but it also included capacity building and organization of residents into
Neighborhood Associations for Shelter Assistance.

The local government units (LGUs) provided counterparts such as, but not limited to, land and
project site development, and technical manpower (such as foremen, construction
equipment/tools, food for work, among others). The project is an excellent example of how an
innovative design, efficient organization and quality control can successfully, and at a low cost,
mitigate the effect of typhoons.

Designed in collaboration with Professor Dr. Satyendra P. Gupta, presently with the School of
Civil Engineering, Asia Institute of Technology, Bangkok, Thailand, the Core Shelter houses are
simple and inexpensive and built using local materials. Families build the houses themselves with
the help of friends and neighbors and technical guidance from local foremen.

B.3.1 The Core Shelter House Design

The key innovative aspect of the design is strengthening the structure to enable it to withstand
typhoons.

The Core Shelter technical design, therefore, has the following typhoon resistant features:
 Anchorage tying the roof to the ground through cement footings to achieve continuity.
 A four-sided roof design strengthened by roof trusses.
 Use of extra bracing and anchoring on the wall and ceiling to ensure stability.

The shelter itself is quite small, measuring 3 m x 3.5 m. There are four wooden corner posts
attached to concrete pedestals partially sunk in the ground and four wooden side posts situated
midway on each wall, similarly attached to concrete pedestals partially sunk in the ground.
Together with secure anchorage of the superstructure, these firm footings help to ensure that the
dwelling remains firm during typhoons. Costs are kept down by using cheap, locally available
materials for roofing, walling and flooring, since these units are not essential to the wind resistance
of the dwelling.

Special wind resistance features are included in the dwelling to improve its wind resistance—
these include wall and ceiling braces, anchor cleats, and roof cross braces. Rafters are attached
to the roof trusses and roof girt and additional steel strengthening is used at the corners where
the hip rafters join the corner posts.
116 Appendix 8

An essential aspect of the design is that it should be easy to understand and build. It is thus
acceptable to local people who can be trained in the simple methods necessary, and the
technology can be easily transferred without the need for lengthy and complicated training
courses. Apart from the essential design aspects relating to wind resistance, all aspects of house
design and appearance are left to the individual beneficiaries to develop as they wish. This results
in a range of highly individual homes of which the families are justifiably proud.

Wherever possible, shelters are built in a plot of 80 m2, enabling land around the shelter to be
used for vegetable growing and other income-generating activities.

Each shelter requires 47 man-days for its construction, but the work can be scheduled into ten
working days with a small team of people. Frequently the whole family will assist as general
helpers. The completed frame of a dwelling can be seen below, with the roofing work underway.
Roofing and wall cladding take only one to two days, the bulk of the work being in the frame's
construction.

In addition to the basic Core Shelter dwelling, designs are available for three modules, or options,
for upgrading the dwelling. This enables each family to have a basic Core Shelter that is typhoon-
resistant, which they can then upgrade at a later date according to their resources and needs.

The success of the project is measured not only in terms of the numbers of typhoon resistant
shelters built but also in terms of the increase in the skills and self-reliance of the families involved,
in the successful mobilization of communities to meet their own needs and in the income-
generating opportunities created for desperately poor families.

The project benefitted the low-income families whose dwelling units and livelihoods were
adversely affected by typhoons. Since it started in 1988, 41,059 core shelter units had been
constructed, entailing funding support of PHP 441,476,569 (US$7,950,000). The achievements
of this project were recognized internationally in 1990 when it received the World Habitat Award
for its innovative and effective housing solution.

B.4 Retrofitting: Improving Existing Housing Stock (Learnings from the World Bank
and Build Change)

The World Bank, “Build Better Before” the next disaster simply defined, retrofit is to add
improvements to something that already exists.

Efforts of the World Bank to “build back better” aim to reduce annual disaster-related losses by
up to 60%. They boast of a global disaster risk management effort that continues to deliver life-
changing impact, protection, and peace of mind to the people who need it the most in countries
as diverse as Dominica, Indonesia, and India.

World Bank believes that the dimension of the global resilient housing challenge is so large that
it calls for more innovation. This can be done—not only through resilient building codes, planning
regulations, and safe production of new housing but, importantly, through improving the existing
housing stock before the next earthquake or hurricane.

In other words, they seek to “build better before” the next disaster.

Fortunately, retrofitting is fast, cost-effective, and it saves lives. All over the developing world,
poor families faced with dysfunctional land and housing markets find themselves priced out of
range of formal housing production.
 Appendix 8 117

Thus, the poor are faced with no option but to trade livability for opportunity—by living in flood-
prone, landslide-prone or other at-risk areas for access to jobs and services. They end up building
their own homes, which could be substandard and often not aligned with building and planning
codes, but in many cases could withstand an earthquake or hurricane with a few small
improvements.

Looking at the retrofitting option. Typically, housing budgets in developing countries focus on
expanding new housing and mortgage markets for the middle class rather than improving the
poor majority’s existing housing. This is not due to a lack of awareness or political will.
Governments at times do not have the knowledge they need to take advantage of the retrofitting
option; nor are there policies and incentives in place to start making homes safer at scale. In other
situations, governments may not want to be perceived as “investing in slums” or “promoters of
informality.”

B.4.1 Build Change: A Market Study of Residential Retrofit Financing

Is there a market for this in the Philippines?

Build Change, an international nonprofit social enterprise that saves lives in earthquakes and
typhoons, has been present in the Philippines since 2013. Their focus has expanded from post-
disaster housing and school construction programs to preventative measures, including a
retrofitting program to structurally strengthen residential houses in regions vulnerable to typhoons
and earthquakes.

Build Change aims to scale up a housing retrofit program piloted in the Philippines in 2017-18
through government or private sector-led socialized housing financing programs. Their initial
market assessment in 2017 indicates a demand for home retrofitting exists.

The market study was formalized through research aimed at achieving the following results:
 Developing a thorough understanding of the market size of the housing and finance needs
of low-income households;
 Developing a thorough understanding of housing financing products available in the
Philippines from microfinance organizations (including rural banks) and government
lending programs, including the regulatory requirements for each lender’s profile;
 Comparing the preferences and capacities of low-income households with the housing
financing products available in the market; and
 Identifying the opportunities and barriers to scale a housing retrofit product among each
type of financial institution and then providing recommendations on the partnerships
representing the most promising way forward.

Key findings from this research are summarized below:

 The estimated market for housing retrofitting is nearly 15.6 million units, which house over
69 million vulnerable people. The majority of these families earn Php 9,000 - 36,250 ($170-
682) per month. Of the 15.6 million vulnerable units, it is estimated that microfinance
institutions can cater to about 8.6 million units, banks, and other financial service providers
to about 3.6 million units, while 3.4 million units will need some form of subsidy or grant.

 There is demand for residential retrofitting and residential retrofit financing. Even low-
income households understand the risks they are facing in the event of a disaster and
appreciate the value of living in safe houses. Government shelter agencies, local
118 Appendix 8

government units (LGUs), and financial service providers also understand this reality.
However, for many poor and low-income households, the immediate need is a livable
housing unit; disaster resistance is a secondary concern. Nevertheless, it is important that
housing programs for this market segment strictly adhere to disaster-resilient principles
and standards.

 Financing and land ownership are key constraints to retrofitting the homes of poor and
low-income households. Land ownership problems are more prevalent in highly urbanized
areas such as Metro Manila. Whether the land is government or privately owned, there is
little incentive for poor and low-income households to retrofit their houses. Even if they
decide to have their houses retrofitted, the range of financing options is very limited. These
homeowners may rely on government relocation programs. On the other hand, low-
income households with land titles face fewer financing barriers because they have both
the motivation and access to various financing options. For these households, a key
consideration is the suitability of financial products for retrofitting.

 Low-income homeowners who already qualify for financial products and services of
microfinance institutions (MFIs) have a good chance to access financing for house
retrofitting. The housing or home improvement loans currently being offered by MFIs can
potentially cover home retrofitting. Those currently excluded by these MFIs (i.e., the
extremely poor) face greater obstacles and may need a different form of financing. This
might take the form of a cash grant from the national government or in-kind subsidies from
the local government.

 Financing type depends on the market segment. Even within the low-income stratum,
there is no one-size-fits-all product that can cater to the needs of different segments of the
market for residential retrofitting. Different market segments have different preferences
and capacities to repay debt. Low-income homeowners already borrowing from MFIs
prefer smaller loans (under Php 50,000 or approximately $950) to affordable weekly
payments. This necessitates retrofit projects that are phased or incremental to ensure
repayment terms are sustainable and loan terms suit the homeowner's cash flow needs
and repayment capacity.

 MFIs can meet low-income households’ need for home retrofit financing. An MFI with
strong buy-in and high commitment to social goals and client well-being is ideally
positioned to serve its clients with a financial product that will help strengthen housing
structures. Likewise, disaster-resilient homes (and businesses) can fit into the MFI’s risk
management framework, recognizing that clients’ micro-enterprises can be severely
affected by disasters, a fact that would adversely affect repayment performance.

 Generally, Philippine government shelter agencies lack adequate scope in their programs
for home retrofitting. Shelter agencies’ mandates and resources are mainly directed
toward addressing the general housing needs of the poor and low-income households and
expanding financial access to this market segment. Social Housing Finance Corporation
(SHFC)’s Community Mortgage Program (CMP) and Pag-IBIG loans, meanwhile, offer
opportunities to include home retrofitting in their programs, but retrofitting needs to be
incorporated in the “language” of these agencies with explicit policy statements or
guidelines for adoption. There is also space to include disaster-resilient principles in the
government’s housing programs to ensure that the construction of new housing structures
adheres to construction and building standards.
 Appendix 8 119

 Local Government Units (LGUs) are well-positioned to assist the poor and low-income
households for home retrofitting. Disaster resilient homes can be integrated into their
disaster risk reduction and management (DRRM) framework and local development plans.
Barriers to this, however, include a lack of technical expertise to assess housing conditions
(and the corresponding scope for home retrofitting) and a lack of data to monitor and
assess the need for home retrofitting. There are also anticipated challenges in using public
funds for private housing due to stringent government procurement policies and
procedures

 Whether government-initiated or led by MFIs, any home retrofit financing program needs
to be aided by marketing and consumer awareness activities. Even as low-income
households express the need to have their houses retrofitted, they will not always prioritize
home retrofitting over other spending priorities given scarce funds and resources.
Therefore, it will be important to communicate to households the existence of such
programs and the value proposition of home retrofitting, particularly its ability to save lives,
property, and businesses in the event of a disaster.

 There are already housing financing products on the market. For the low-income segment,
housing loans average Php 22,500 ($425) at 32% interest rate with a one-year term. For
higher-income segments, loans can average Php 1,000,000 (USD $18,900) with 8%
interest rates and 5-to-15-year terms. These programs provide a considerable supply of
housing finance. However, low capitalization and lack of risk-sharing mechanisms limit the
ability of financial service providers to offer a comprehensive loan product with flexible
terms for this market.

 Fintech is a growing trend with financial service providers. There are opportunities to
integrate digitized tools to support resilient housing into their platforms.

Working with MFIs. Build Change works with microfinance institutions (MFIs) that provide
financing to low-income families. Loan amounts are tailored to the client’s capacity to pay. To help
more families afford to strengthen their homes, we have developed simple tools, materials, and
training packages to allow these families to have access to good designs and trained builders.
There isn’t the capacity for each and every house to be individually engineered, which is why we
develop tools so local builders can evaluate deficiencies and then prioritize how to address them
through an incremental build, leading to a more resilient house.

B.5 Resilient Housing and Secure Tenure Connection: Another Aspect to Look into in
Climate Change

From its publication, Asia-Pacific Urbanization and Climate Change Issue Brief Series No.3,
January 2014, the UN-Habitat shared the following key messages:

 Effective land planning and management are fundamental to reducing climate risks.
Vulnerability assessments and clear long-term strategies help to ensure that negative
social and environmental impacts on communities are minimized.

 Tenure security is an essential element in building community resilience and addressing

urban inequalities. If women- and men-headed households enjoy secure land and
housing, they are more likely to plan and invest in resilience measures.

 Adapting existing housing to current and future climate threats is usually simpler and more
effective than relocating communities. Participatory upgrading and capacity development
120 Appendix 8

strengthens resilience while allowing residents to remain in place without disruption.

The publication states that communities should always be actively involved in housing and
resilience development programs. Given the many challenges and constraints they face, the
urban poor often lacks the time or resources to plan and invest in long-term strategies. However,
simple measures to improve the resilience of their houses at little or no additional cost, such as
building above the flood level in low-lying areas, are usually welcomed.

The consequences of non-existent land rights. The informal settlements, considered as the
visible face of urban poverty, are where most slum dwellers do not have security of tenure and
are susceptible to forced evictions or resettlement. The absence of land rights undermines the
poor’s access to safe and secure housing, placing them at constant risk of eviction or
displacement as a result of redevelopment. This also undermines their ability to make long-term
investments in their homes and businesses, including resilience measures such as upgrading.

This makes land regularization an essential element in strengthening community preparedness.

Zoning plans and controls and gender-responsive and innovative forms of land tenure can be
used to formalize slum settlements as a first step to improving their resilience. Land rights should
therefore be a priority focus area for any land or housing development program.

Equitable housing and tenure security for climate resilience. Climate change resilience for
local communities entails technical, economic, social, and environmental considerations. A
complex range of prescriptions is required for land and housing development if the urban poor
are to enjoy safe and secure shelter, now and in the future.

There is a need to develop flexible and adaptive approaches to meet the needs of different
communities, with an emphasis not only on environmental improvements but also livelihoods,
social capital, affordability, access and most importantly of all, the rights and wishes of those
affected.

While reliable information and data collection is a vital element in this, it should be supported by
community participation and multi-stakeholder partnerships to ensure that upgrading programs
are designed and implemented effectively. Ultimately, resilience can be supported, enhanced,
and subsidized by governments and other groups but it cannot be imposed on residents without
their consent. To be sustainable, the communities themselves must own programs. From
affordable credit and tenure security to better building codes and smarter urban design, land and
housing policies can only succeed if poor households willingly adopt them.

C. Climate Change and Urban Poor Housing in the Philippines

C.1 The Cause and Effect

Climate change is caused by the increased presence of dangerous greenhouse gases like carbon
dioxide (CO2), methane, and nitrous oxide, among others, in the atmosphere, which results in
long-term and drastic changes to weather patterns and temperatures.

This has led to rising sea levels and extreme weather events such as super typhoons, heavier
rains, and duration of floods, more intense heat, prolonged and severe droughts. These have
brought enormous losses in lives, livelihoods, properties, and the environment. Vulnerable
countries like the Philippines are bearing the brunt of the impact of climate change.
 Appendix 8 121

The country has witnessed the devastating impact of natural hazards and the prevalence of
disaster risks exacerbated by climate change. These disasters have killed countless individuals,
wiped out communities and cities, and undid many years of development gains.

C.2 The Current Scenario is Grim

The 2021 Global Climate Risk Index ranked the Philippines fourth among the countries most
affected by weather-related loss events from 2000 to 2019. Over 317 extreme weather events
were recorded locally over the past 20 years, the highest among the top 10. Other international
studies have also placed the Philippines constantly at the top of the list of countries that suffered
most from global warming.

Climate change has developed into everything from disasters such as Ondoy in 2009, Yolanda in
2013 or Ulysses in 2020, sea-level rise and land loss, ocean acidification, and the effects on
forests and biodiversity over the years.

The heat is on. Despite the cooling effect of the La Niña phenomenon, 2020 was considered to
be one of the warmest years, with the average global temperature at about 1.2 degrees Celsius
above pre-industrial levels. Based on the National Aeronautics and Space Administration (NASA)
analysis, the earth’s global average surface temperature in 2020 tied with 2016 as the warmest
year on record. The years 2015 to 2020 have been recorded as the six warmest years and with
increasing heat-trapping greenhouse gases in the atmosphere, the trend is targeted to continue.

According to PAGASA, the average annual mean temperature in the Philippines has increased
by 0.65 degrees Celsius since 1951, rising at an average rate of 0.1 degrees Celsius per decade.
It is projected to increase 1.7 to 3.0 degrees Celsius by 2050. Higher temperatures are expected
for all regions by 2050, the rates doubling compared to 2020 levels.

Threatening food security. Warming is projected to be the worst in Mindanao, the country's
food basket. Thus, it threatens food security. For every one-degree Celsius rise in minimum
temperature, rice plants have shown to drop yields by as much as 10 percent. In the past, farmers
in the Philippines had to stop growing rice during El Niño droughts. An Asian Development
Bank (ADB) report warns that rice production in the Philippines could drop by 50 to 70 percent.
Climate change will cut agricultural crop yields and hike food prices.

Philippines to lose 6% GDP annually by 2100. The latest Intergovernmental Panel on Climate
Change (IPCC) Assessment Report concluded that climate change will create new poor between
now and 2100. Poverty breeds disaster vulnerability and those who have the least in life risk like
most.

Based on a study by the Asian Development Bank on the economics of climate change, the
country stands to lose 6% of its GDP annually by 2100 if it disregards climate change risks. This
same study found that if the Philippines invests 0.5% of its GDP by 2020 in climate change
adaptation, it can avert losses of up to 4% of its GDP by 2100—clearly a short-term investment
with a long-term eight-fold gain.

With such a grim scenario, there is a need to push for a climate agenda that will protect the interest
of the most vulnerable communities, even during a similarly daunting challenge like the Covid-
19 pandemic. As the country continues to work together toward putting an end to this, it cannot
afford to lose sight of an even more destructive and lingering crisis - the global climate emergency.

C.3 Implications for housing in the Philippines

122 Appendix 8

Assessing the backlog. The Department of Human Settlements and Urban Development
(DHSUD) estimated in June 2020 that if the government fails to address the housing gap, the
country’s housing backlog could balloon to 22 million in two decades. According to DHSUD
Secretary Eduardo del Rosario, “As time goes by, the housing need increases. As per statistics,
the housing need from 2017-2022 is about 6.5 million and if nothing is done, by 2040, it will hit
about 22 million. The housing gap would increase significantly if we do not formulate strategies
to strengthen housing production.”

To close the housing gap of 6.5 million between 2017 and 2020, the government needs to build
250,000 houses a year. However, the housing sector can only build 203,000 to 205,000 units
annually between 2016 and 2019.

Worsening the crisis. However, this shortage of affordable housing is coupled with an increasing
frequency of natural disasters that can damage homes, further compounding the housing crisis.

Being exposed directly to prolonged and frequent rainfall, strong winds, and higher waves and
temperature variations can lead to accelerated structural fatigue and materials failure. The
impacts could be severe in areas where housing and settlements are not designed to cope with
the effects of climate change.

Unaffordable and insecure housing leaves families less able to cope with unexpected expenses
such as extensive repairs or rebuilding from flooding. Both the frequency and reoccurrence of
climate-related disasters have exacerbated affordable housing crises in areas prone to disasters.

The poor are the most affected. Urban poor communities, particularly informal settler families,
are bearing the brunt of these disasters, since they are forced by their circumstances to live in
unsafe houses, in unsafe locations and under unsafe conditions. These communities are at
extreme risk due to the impacts of more frequent and severe natural hazards such as typhoons
or storm surges. Their homes are washed away in floods and they experience water shortages
and fires during the frequent droughts.

Those living in peri-urban areas are also highly at risk. These peri-urban areas are often of lower
socioeconomic standing, which consequently increases inhabitants’ risks regarding food security,
but also increased land title insecurity and price pressures.

Aside from substantial socioeconomic losses, families, and communities are displaced and their
livelihood sources and strategies shift. It is expected that environmental degradation and climate
change impact those below the poverty line with more vigor than those above it.

Economic status defines the levels of vulnerability of people. Poverty constrains the capacity of
the affected population to immediately bounce back in the face of disasters or to quickly shift to
new adaptation modes that necessitate financial resources to happen. According to the World
Bank, climate change could put more than 100 million people into poverty by 2030 without
effective mitigation measures.

Low lying and coastal houses are extremely vulnerable. Settlements located in low elevation
coastal areas are particularly vulnerable to climate change hazards such as sea level rises, storm
surges, and typhoons. According to the National Integrated Climate Change Database
Information and Exchange System (NICCDIES),2 observed sea-level rise is remarkably highest
2
National Integrated Climate Change Database Information and Exchange System serves as the primary enabling
platform of the CCC in consolidating and monitoring, among other things, data and information on climate change
 Appendix 8 123

at 60 centimeters in the Philippines, about three times that of the global average of 19 centimeters.
This puts at risk 60% of LGUs covering 64 coastal provinces, 822 coastal municipalities, 25 major
coastal cities, and an estimated 13.6 million Filipinos that would need relocation.

C.4 The Climate Change Act (RA 9729)

The Act passed in 2009 acknowledges the Philippines' vulnerability to climate change and the
need for appropriate adaptation. It creates a comprehensive framework for systematically
integrating the concept of climate change, in synergy with disaster risk reduction, in various
phases of policy formulation, development plans, poverty reduction strategies and other
development tools and techniques.

The Act established the Climate Change Commission as the sole policy-making body within
government, which overseas co-ordinates and evaluates climate change policies and plans. The
commission is established under the office of the President (abolishing the Presidential Task
Force on Climate Change, established in 2007) and has a diverse advisory board composed of
government ministries and agencies.

and climate action from sources and actors coming from both public and private sector and other stakeholders,
allowing for decision-makers to access, distribute and exchange these data for use in policymaking, development
planning, investment decision making.
124 Appendix 9

MICROFINANCE AND DISASTER RISK REDUCTION AND MANAGEMENT

Microfinance DRRM Resource Center

The Microfinance DRRM Resource Center provides links to microfinance and disaster risk
reduction and management (DRRM) related materials and references and links to websites of
government agencies and non-government organizations involved in DRRM. It is a component of
the Disaster Risk Reduction and Mitigation for Microfinance Institutions Program, a project of a
consortium composed of the Microfinance Council of the Philippines, Inc. (MCPI), National
Confederation of Credit Cooperatives (NATCCO), PinoyMe Foundation, and Peace and Equity
Foundation (PEF) that aims to help build disaster-resilient microfinance institutions.

DRRM Guide for MFIs

To access the full copy of the guide, the MCPI should be contacted. An illustrative sample of the
materials available as part of the guide is presented below.

Disaster and Microfinance

▪ Surviving Disasters and Support Recovery: A Guidebook for Microfinance Institutions
▪ The First 30 Days: A Practical Guide to Managing Natural Disasters for Microfinance
Institutions
▪ Loan Rescheduling after a Natural Disaster
▪ Microfinance and Disaster Management
▪ Recovery from the Tsunami Disaster. Poverty Reduction and Sustainable Development
through Microfinance
▪ MFI Liquidity Problems after a Natural Disaster
▪ Microfinance in the Wake of Natural Disasters: Challenges and Opportunities
▪ Housing Finance for the Poor: Emerging Lessons in Post-Emergency Environments
▪ Reconstruction Initiative through Social Enterprise: A Poverty Sector-Focused Post-
Yolanda Response in the Philippines
▪ Making Money Transfers Work for Microfinance Institutions

Disaster Response
▪ Disaster Assessment (OCHA-UNDAC)
▪ Guidelines for Assessment in Emergencies (IFRC and ICRC)
▪ Emergency Rapid Needs Assessment Guidelines
▪ The Sphere Project Handbook

Disaster Risk Reduction and Resilience Building

▪ Building Resilient Communities

▪ Building Resilient Communities: A Training Manual on Community-Managed Disaster
Risk Reduction
▪ Project Dina (OCD)
▪ Valley Fault System Atlas
▪ Philippine NDRRM Plan 2011-2028
▪ Making Risk Sharing Models Work with Farmers, Agribusinesses, and Financial
Institutions
▪ Assessing Green Microfinance
 Appendix 10 125

PROFILE: ORGANIZATION OF SOCIALIZED AND

ECONOMIC HOUSING DEVELOPERS OF THE PHILIPPINES

The Organization of Socialized and Economic Housing Developers, Inc. (OSHDP)1 is the
country's leading association of real estate developers primarily engaged in socialized and
economic housing production. It claims to be the product of dedicated and committed developers
and individuals who relentlessly sought means to enable the provision of a vibrant, efficient,
productive, and responsive housing sector by delivering decent and affordable housing and
always committed to addressing the country's housing needs.

OSDHP Core Principle

"Growth Through Dignified, Decent and Affordable Housing"

Mission-Vision Statement

OSHDP shall remain the leading organization of socialized and economic housing developers in
the country, advancing as it does the essential issues of the day for discourse and solutions for
the benefit of the mass housing and relative industries.

Profile, History, and Achievements

OSHDP is the outcome of the dedication of several real estate developers and individuals who
relentlessly sought means to advance the cause of better housing delivery to many who dream
of having a decent home.

Faced with the challenges of the Unified Housing Lending Program (UHLP), then managed by
the National Home Mortgage Finance Corporation's (NHMFC), ever-changing policy in housing
finance, the socialized housing developers deemed it necessary to organize in 1995, register with
the Securities and Exchange Commission to be recognized as a voice in the housing sector. The
founding president was Mr. Orlando Bongat of Durawood Lumber and Construction and remained
one of the organization's Board of advisers. The core group initially led activities to determine the
direction of the government-led policy reforms in housing development and finance. OSHDP held
its first formal planning exercise in 1997 and defined its mission and vision statement, objectives,
and strategic plan to overcome the financial difficulties and pursue its aspiration to build homes.
In 1997, OSHDP member-developers were confronted by the adverse effects of the UHLP and
Asian economic crunch collapse. UHLP was the primary window for retail homebuyers' lending
window, particularly low-end homebuyers and developmental finance. Socialized housing
developers struggled as the transfer of the home buyers' financing program to Pag-IBIG was
hampered by policies adopted to minimize risks, specifically the shift from formula-based lending
to a risk-based lending facility.

Most OSHDP members downsized operations while others diversified into other businesses, wind
down operations and sought ways to liquefy their staling housing inventory. The industry suffered
from a lack of liquidity for private sector developers, delinquent payments for developmental
loans, deteriorating housing inventory resulting from difficult access to retail buyers' financing.

Joint efforts of developers' associations gave rise to strategic actions to settle member-developers
developmental loan obligations through a "dacion en pago" arrangement with the NHMFC. Such
a scheme was a settlement of financial obligation in kind, such as assignment of developed lots,

1 www.oshdp.com
126 Appendix 10

house and lot packages, and other properties that collateralized the loans. Such an arrangement
provided relief from the lengthy and costly transactions in foreclosure of properties.

The strong leadership and participation of OSHDP in drafting guidelines for government projects
such as the Pasig Rehabilitation's Housing and Resettlement program and Philippine Medium-
Term Development Plan for Housing earned recognition for the body in the industry.

In the succeeding years, the association's continuing efforts garnered achievements as listed
below:

 Approved proposals for regular/periodic price ceiling adjustments for socialized and
economic housing packages;
 Amendments to laws based on a requested review of housing and subdivision design
standards the IRR of BP 220, PD 957 and RA 7279 and the Fire Code of 2009 to seek
exemption from specific requirements for socialized housing;
 and National Informal Settlements Upgrading Strategy (NISUS);
 Representation as Private Sector Representation in the HUDCC Council;
 Advocated for amendments or passage of major legislation about the housing industry.
e.g., amendments to RA 7279 or the Urban Development and Housing Act, RA 9646, or
the Real Estate Service Act (RESA), and a more inclusive and comprehensive National
Land Use Act (NLUA);
 Active membership in the Pag-IBIG Fund's Technical Working Group on housing finance;
 Strong representation with the Board of Investments for the inclusion of mass housing
under the 2013 and 2017 Investment Priorities Plans (IPP);
 Obtained approval from SEC on the OSHDP-led joint petition with major associations that
included OSHDP, SHDA, and NREA for relief from for relief from the SEC adoption of
International Financial Reporting Interpretation Committee's (IFRIC) interpretation of
construction and real estate sector's manner of recognizing sale and income;
 Revisions to the implementing rules and regulations of BP 220 was adopted and issued
after leading a year of nationwide series of consultations together with officials from the
HUDCC, HLURB, DILG attached offices and agencies;
 Strongly participated in the review of P.D. 957, IRR of the 2009 Fire Code of the
Philippines seeking exemption of socialized housing projects from the mandatory
requirement of installing fire extinguishers in all housing projects provided under the New
Fire Code, and preparation of proposed amendments to RA 9646 or the Real Estate
Service Act (RESA);
 Recognized strong representation with the Board of Investments (BOI) for retention of
mass housing under the 2011 Investment Priorities Plan (IPP) and the ceiling of P3.0
million housing package for the incentive, which included BIR's recognition housing
projects already covered incentives/exemptions by BOI and expedition of issuances of
Certificates Authorizing Registration, without need for a BIR Ruling for every project;
 Gained time savings benefits upon joining the consultative group, The Organization of
Property Stakeholders (TOPS), for streamlining procedures and guidelines for strong
coordination with the Land Registration Authority (LRA) towards simplifying procedures
and guidelines for the release of titles;
 Pushed for creating the Department of Human Settlements and Urban Development
(DSHUD); a more inclusive and comprehensive national land use act; a new definition of
socialized housing condominiums; and revision of the IRR of BP 220, among others;
 Strengthened the linkages among the key shelter agencies and other government
institutions; and
 Organized more than twenty (20) years ago, OSHDP is composed of over 130 regular
members, with seven (7) local Chapters with a combined membership from Bicol, Central
 Appendix 10 127

Luzon, Cebu, Cagayan de Oro, Davao, Pagadian City, and North Luzon, and over 40
affiliate members. A regular member is defined as a private developer engaged in
socialized and economic housing. In contrast, an affiliate member is defined as an entity
or an individual indirectly engaged/involved in housing development.

Continuing the Legacy 20 Years and Beyond

OSHDP has experienced the continuing drive to achieve even more, with the second generation
of developers steering forward to its advocacies and programs. OSHDP was also active in
participating with the Board of Investments (BOI) and the Asian Development Bank (ADB)
Consulting Team to promote Inclusive Business as a strategic investment.

OSHDP also embarked on green housing and green technology discussions and had initiated
joint efforts with the IFC/World Bank Group to discuss green building and EDGE Certification2.
Considering that OSHDP members have already begun with their green initiatives, the
organization held business meetings to learn and understand green building technology. Actual
projects of member-developers who adopted solar panels in their projects, such as Imperial
Homes, have been adopted as successful case studies. OSHDP is also working with the Climate
Change Commission to align its programs along with the country's green programs.

Community Transformability Project Integration was also a collaboration of the organization,

working with the Ateneo de Manila University, in adopting the Transformative Urban Resettlement
in Metro Manila Project (TURMM) supported by the Rockefeller Foundation of the Institute of
International Education. TURMM launched its electronic copy of the Transformative Community
Resettlement Toolbox and helped actualize its Toolbox and give the ISFs "the ability to attain a
better state without looking back."

Land constraints were also among the issues in providing affordable housing in Metro Manila and
the causes of land constraints. The alternative solutions to these issues were among the major
concerns of OSHDP. One of the policy debates' highlights is the OSHDP's proposal to amend BP
220 and include in the definition of "socialized housing" the word "vertical socialized housing."
OSHDP has supported the HDMF policy on loan value ceilings for vertical socialized housing and
economic housing.

Amid all the pressing issues that the organization is facing, OSHDP did not forget about its
members' local needs. Aside from business meetings, the OSHDP continues to engage its
members through friendly activities such as the annual golf tournament and the Shelter Post's
regular release. The organization also provided a regular update to members on the current
events affecting housing.

At the 2015 convention, OSHDP once again made history as the organization founded the Center
for Housing and Independent Research Synergies or CHAIRS. This initiative was conceived
given the importance of "Housing" in the country's political, social, and economic life. In the
Philippines, this field probably is the least understood as data is limited and technical studies are
insufficient while the issues are so varied and complex. Against this backdrop, OSHDP and 8990

2 An innovation of IFC, a member of the World Bank Group, EDGE is a green building certification system focused on
making buildings more resource-efficient in over 170 countries. It enables developers and builders to quickly identify
the most cost-effective ways to reduce energy use, water use and embodied energy in materials. EDGE empowers
emerging markets to scale up resource-efficient buildings in as fast, easy, and affordable way. As a global certification
partner, Green Business Certification Inc. (GBCI) administers EDGE certification in over 160 countries around the
world. Learn more about EDGE at edge.gbci.org.
128 Appendix 10

Holdings, Inc. co-founded and institutionalized CHAIRS as a non-stock, non-profit research

organization.

OSHDP's 6-Point Private Sector Shelter Agenda

 Expanding housing finance through viable demand-side and supply-side incentives

programs;
 Strengthening access to land;
 Uniform and efficient regulations, standards, permitting processes (Building Code, Fire
Code, and the Green Building Code);
 Creation of DSHUD for shelter sector to gain a higher budget of at least 6% of the GDP;
 Housing for low-income earners through the development of vertical buildings and within
loan amount ceilings of HDMF; and
 Green building and resilient settlements.
 Appendix 11 129

PROFILE: THE SUBDIVISION AND HOUSING DEVELOPERS’ ASSOCIATION

The Subdivision and Housing Developers Association, Inc. (SHDA)1 is the country's leading
organization of housing and real estate developers for socialized to high-end shelter development
in the Philippines. The National SHDA Board Officers actively participate in the Home
Development Mutual Fund (HDMF) or Pag-IBIG Technical Working Group (TWG), which serves
as the venue to discuss its new programs and policies and regulations that affect housing
developers and member end-buyers.

Vision

To be the leading voice in articulating the housing industry's advocacy in the Philippines,
becoming a responsive, esteemed, trustworthy, and relevant developers’ organization.

Mission

 To unite all registered subdivision and condominium developers nationwide under one
organization and champion member developers' welfare.
 To ensure a faster, effective, and efficient flow of information and services delivery to the
general membership.
 To partner with the government and other sectors of society towards undertaking
programs and policies that foster a sustained housing industry vis-à-vis the country's
economic growth.
 To promote the highest standards of ethical conduct and professionalism among the
members of the association.

History of SHDA

The Subdivision and Housing Developers Association, Inc. (SHDA) has been an active player in
the real estate industry for 45 years. The organization, which was originally named Subdivision
Owners Association of the Philippines, Inc. (SOAP) was registered with the Securities and
Exchange Commission (SEC) on 06 May 1970.

The organizers and incorporators of SOAP were subdivision developers who aimed to unite all
subdivision owners and developers under one organization and influence government policies,
laws, and regulations to consistently enhance the viability of the real estate sector with the public
welfare. While the organization supported a homeless housing program, this was undertaken
indirectly since most of the SOAP members focused on developing subdivisions without housing
components. The typical practice then was to sell developed lots on an installment basis and the
lot buyers were, generally, left on their own to build their own homes by borrowing from banks,
SSS, or the GSIS to finance construction. This was the prevalent business practice for real estate
developers up to the early 1980s when housing loans from the Pag-Ibig Fund became available
to a large number of prospective buyers following the mandatory membership in Pag-Ibig of all
private and government employees.

In 1981, real estate developers gradually shifted to the delivery of house and lot packages. The
house and lot packages were pre-appraised and certified completed by the Home Financing
Corporation (HFC). The Pag-Ibig Home Lending Program was administered by the National Home
Mortgage Finance Corporation (NHMFC) and originated by private banks. Unfortunately, in 1984,
the Pag-Ibig Home Lending Program started to falter due to a lack of funds brought about by a

1 www.shda.ph
130 Appendix 11

combination of financial, political, and economic difficulties. NHFMC suffered from liquidity
mismatch due to its practice of borrowing at short term and higher interest rates and lending long
term loans at lower interest rates. By the end of 1984, the National Shelter Program of the
government was completely put to a halt.

After the EDSA Revolution of 1986, the new administration of President Cory Aquino moved
swiftly towards reorganizing the National Shelter Program as one of her priorities. On 17
December 1986, Executive Order 90 (EO 90) was signed into law. EO 90 identified the
government agencies essential for the National Shelter Program and defining their mandates, as
well as lending mechanisms for home mortgages.

The National Shelter Program of President Aquino became a major inspiration for private
developers to undertake large-scale mass housing developments for low and middle-income
members of HDMF, SSS, and GSIS such that the SOAP needed to reorganize and redirect its
mission, focusing much more on mass housing. The pressure on the SOAP to stay relevant to
developments in the real estate industry at that time became so strong that the organization
resolved to rename the SOAP to the Subdivision and Housing Developers Association, Inc.
(SHDA); amending its articles and by-laws and keeping the same basic purposes but with a
greater focus on housing.

The Securities and EC approved the adoption of a new name, SHDA, on 26 March 1987. From
1987 to 1992, the very first housing boom was experienced in the country, with 400,000 housing
units delivered and mortgage loans taken out. In April of 1992, coinciding with the very first SHDA
sponsored National Developers Convention held at Intercontinental Hotel, Manila, SHDA
awarded President Cory with a plaque of recognition for the historically outstanding performance
of her National Shelter Program. Through the years, SHDA has been true to its mission and has
performed very well as a real estate and housing industry organization, with chapters in Davao
for Southern Mindanao, Cagayan de Oro for Northern Mindanao, Zamboanga for Western
Mindanao, Bacolod, Cebu, Iloilo, Leyte, Lucena and Pampanga for Central Luzon.

Collaboration with the Government

With the passage of the Republic Act No. 11201, otherwise known as the "Department of Human
Settlements and Urban Development Act," SHDA recently signed an agreement with the
department to support the production of housing units at the regional level through the use of
approved local shelter plans (LSPs) at the city and municipal levels. Based on the Memorandum
of Understanding (MOU) signed, the joint efforts to boost housing production through private
sector partnerships with the national and local governments are summarized below.

▪ Identification of which LGUs have existing shelter plans which have identified and
prepared specific sites for housing activities and beneficiaries and need partners to
implement their shelter plans;
▪ Development of alternative modes of compliance for the Balanced Housing
Requirements under the UDHA, including the extension of BOI-IPP incentives for
participating developers;
▪ Formulation of a housing program template involving the national government, the
LGUs, and the private sector for the provision of affordable and decent housing at the
local government level, through the support and utilization of existing programs and
funds of government financial institutions, including other methods which may be
formulated in the future;
▪ Increase of the actual housing units available at the regional level to help address the
total housing needs.
 Appendix 11 131

▪ Undertaking of other acts/activities as may be necessary for effective housing

plan formulation, delivery, and production.

Designing Homes for the New Normal

SHDA continues its advocacy for member developers amid the ongoing COVID-19 pandemic
through kapihan (coffee shop) sessions and webinars' conduct. The following is a synopsis of an
August webinar on “Designing Homes for the New Normal,”2 which was posted last 8 September
2020.

SHDA governor RJ Ledesma masterfully moderated a spirited and provocative discussion

between AECOM Architect Sylvester Wong, NEO Chair Raymond Rufino, and members of the
country’s premier housing industry group. With his international urban master planning
background, Architect Wong touched on 5 key trends in urban development: the 15-minute city,
the work from home trend, the “space is wellness” concept, modular construction methods, and
digital infrastructure.

SHDA members, most of whom are small and medium developers, should take advantage of the
SHDA network and band together to get economies of scale by acting as a de facto collection of
neighborhoods in any given area. This helps create a “15-minute city”, where residents have all
their basic needs within a short walk. One developer provides a health care area, another provides
space for a school, an area for groceries from another – bringing collective benefits to buyers and
collective attractiveness and marketability to the developers. Banding together also allows
developers to take advantage of the group purchase agreements and supplier discounts available
to SHDA members, a point brought up by SHDA Advisor Bansan Choa.

2 Collaboration, banding together, innovative green materials and efficient construction technologies were among the
ideas discussed in our “Designing Homes for the New Normal” webinar held on August 28 via Zoom
call. https://www.facebook.com/shdaph/videos/309640863660388
132 Appendix 11

Banding together also allows SHDA members to harness the power of the private sector to create
infrastructure and transportation solutions, the two biggest problems preventing the decongestion
of large city centers. “There’s a lot of global impact capital looking for good projects,” said
Architect Wong. “We are not alone; we do not develop in a vacuum” agreed developer RJ
Ledesma. “In fact, across all industries, it’s no longer about competition, but co-operation and
collaboration,” to address the numerous needs of the marketplace.

Active membership in SHDA also allows developers access to innovative sustainable materials
and efficient construction technologies. “Designing for the new normal means creating healthy
spaces using materials that, for example, have low VOC (open circuit voltage for solar panels)
content,” said Raymond Rufino, co-founder of the Philippine Green Business Council. The Phil
GBC’s partnership with SHDA allows developer-members access to their directory of green
suppliers at preferential rates. One such product is World Home Depot’s Conwood, a timber
substitute with high recycled content that looks and feels like wood but has zero maintenance
costs. SHDA Governor Kerwin Padua called it a “solution finder” for his low-cost Lynville Homes.
The meeting ended on a note of hope. “Cynicism is a luxury these days,” said Architect Wong.
“We work with what we have and find a way to provide solutions.”

SHDA President Rosie Tsai-Wang ended the meeting in the SHDA spirit. “Meetings should agitate
people and bring about change. There should be other ways of doing things, and we try to find
those ways. Here at SHDA, let us know how we can help. We should work together, brick by brick,
to rebuild our industry.”
 Appendix 12 133

SUMMARY OF HOUSING MICROFINANCE RAPID ASSESSMENT: MICROFINANCE INSTITUTIONS

Group 1 MFI with HMF

Group 2 MFI w/o HMF Housing NGOs
Survey Questionnaire Program
# of MFI survey participants 14 3 1
A. General background & information
1 - 10 years = 1 MFI
11 - 20 years = 4 MFIs 21 - 30 years = 1 MFI
A.1 Years of operation; date
21 - 30 years = 4 MFIs more than 50 years = 1 MFI 32 years
established
31 - 40 years = 4 MFIs No answer = 1 MFI
No answer - 1 MFIs
A.2 Type of Organization
1 = Thrift Bank 1 = 1 thrift bank
2 = 1 MFI
2 = Rural / Cooperative Bank 3 = 1 Cooperative 4
4 = 2 MFIs
3 = Cooperative 4 = 12 MFI NGOs
4 = MFI NGO
B. Relevant experience in housing microfinance
B.1 Organization operates housing
microfinance or housing Yes = 14 No = 3 No
microfinance-related program
No
Housing
improvement/strengthening = Habitat does not directly
13 implement any housing
Sanitation improvement = 3 microfinance-related program.
Increased awareness on Instead, it works with various
B.2 Name(s) and purpose(s) of the sanitation issues = 1 financial intermediaries (MFIs
Not applicable
program(s) Provision for green such as MFI NGOs,
feature/renewable energy = 1 cooperatives, rural banks) and
Post disaster housing repair = other market actors to
2 implement and expand
Provision of basic utilities = 1 affordable housing finance
Land acquisition = 1 products and services for low-
income households through
134 Appendix 12

Group 1 MFI with HMF

Group 2 MFI w/o HMF Housing NGOs
Survey Questionnaire Program
its Terwilliger Center for
Innovation in Shelter.
1 - 10 years = 6 MFIs
11 - 20 years = 6 MFIs
21 - 30 years = 1 MFI
No answer = 1 MFIs
Reasons:
Microenterprise loans used for
home
improvement/unavailability of
home improvement and water
supply loan packages = 7
Availability of external funds
for water and sanitation
B.3 Date program started and why related loans = 1 Not applicable Not applicable
Availability of funds from
donor funded projects
(DPUCSP) = 1
To provide access to
electricity and water supply
and sanitation = 3
Response to the need for a
more sturdy and natural
disaster-resilient structures =
1
To provide housing to
typhoon victims = 1
Luzon = 7
B.4 Areas where housing microfinance Visayas = 3
Not applicable Not applicable
is offered. Mindanao = 1
Nationwide = 3
C. Features of the housing microfinance and/or housing microfinance-related program
 Appendix 12 135

Group 1 MFI with HMF

Group 2 MFI w/o HMF Housing NGOs
Survey Questionnaire Program
1 Existing client = 14
2 Age = 3
3 Reliable source of income =
13
4 Repayment record = 13
C.1 Client eligibility
5 Attendance rate = 1
6 No adverse CI/BI findings =
1
7 Depositor = 1
8 Typhoon Victims = 1
1 Home improvements =
C.2 Eligible loan purposes and
53.34%
expenditures; Percentage of
5 Construction or
availment
improvement of sanitation
1 = home improvements
facilities = 22.71%
2 = house construction
8 Energy-efficient housing
3 = house and lot purchase
=15.50%
4 = housing expansion
9 Others = 8.83% Not applicable Not applicable
5 = construction or improvement of
7 Utility connections = 6.50%
sanitation facilities
4 Housing expansion = 5.47%
6 = post disaster housing repairs
6 Post disaster housing
7 = utility connections
repairs = 3.03%
8 = energy-efficient housing (e.g.,
2 House construction =0.24%
solar panels)
3 House and lot purchase =
9 = others [please specify] ____
0.06%
1. 300k, 1 year, 16% annually.
Average loan = Php42,727.94
2. 3 million, 5 years, 13%
C.3 Average loan size, loan term, and Loan term = 6 months
3. 5 million, 10 years, 11% Not applicable
interest rate Interest rate = 3.1128% per
4. Same as house
month
construction
C.4 Collateral requirements, if any 2 Individual/Group Guarantors 1 Freehold or transfer
1 = freehold or transfer certificate =8 certificate of title = 1 Not applicable
of title 1 Unsecured lending = 6 5 Group guarantee or
136 Appendix 12

Group 1 MFI with HMF

Group 2 MFI w/o HMF Housing NGOs
Survey Questionnaire Program
2 = usufructuary agreements 3 Accumulated capital build individual guarantors = 1
3 = leasehold agreements up = 1 6 Unsecured lending = 1
4 = right to use or certificates from 4 Freehold or transfer
government certificate of title = 1
5 = group guarantee or individual
guarantors
6 = unsecured lending
7 = others [please specify]
*Average of total HMF
C.5 Total size of HMF program;
Program; **Average of NCR, Cavite, Laguna, Rizal
Highest loan availment by region; Not applicable
highest loan availment; and Bulacan
Clients who borrowed the most
***Tabulate by type of client
D. Program implementation related experiences
4 Interest rates = 8
5 Loanable values, loan size
D.1 Key success factors (ranked in
=9
order of importance)
3 Repayment period = 7
1 = use of collateral substitutes
2 Income requirements = 3
2 = income requirements
6 Collection mechanisms = 3
3 = repayment period
1 Use of collateral substitutes
4 = interest rates Not applicable Not applicable
=2
5 = loanable values, loan size
7 CSR activities implemented
6 = collection mechanisms,
in community = 2
(describe features)
9 Supplemental products to
7 = others [please specify]
existing clients = 2
_______
8 Government collaboration =
1
D.2 Key challenges encountered 1 Low affordable limits of the
(ranked in order of importance) clients = 9
1 = low affordable limits of the 6 Limited housing knowledge
Not applicable Not applicable
clients of the staff = 7
2 = mismatch between the MFI’s 2 Mismatch between the
shorter-term sources of loanable MFI’s shorter-term sources of
 Appendix 12 137

Group 1 MFI with HMF

Group 2 MFI w/o HMF Housing NGOs
Survey Questionnaire Program
funds vs. the need for a longer loanable funds vs. the need
repayment period of clients for for a longer repayment period
housing-related loans of clients for housing-related
3 = high nonperforming loans loans = 7
4 = use and valuation of collateral 3 High nonperforming loans =
substitutes 3
5 = unsecured loans 5 Unsecured loans = 3
6 = limited housing knowledge of 7 Lack of supply from
the staff accredited suppliers = 1
7 = others [please specify]
D.3 Loan repayment rates 3 Satisfactory, with less than
1 = highly satisfactory, almost 15% uncollectibles = 4
100% 1 Highly satisfactory, almost
2 = moderately satisfactory, with 100% = 3
less than 10% uncollectibles 4 Unsatisfactory, with less Not applicable Not applicable
3 = satisfactory, with less than 15% than 20% uncollectibles = 3
uncollectibles 2 Moderately satisfactory, with
4 = unsatisfactory, with less than less than 10% uncollectibles =
20% uncollectibles 3
D.4 Primary reasons for payment
delays or default
1 = unemployment
2 = sickness in the family
3 COVID-19 = 10
3 = COVID-19
4 Reduced income or
4 = reduced income or livelihood
livelihood = 10
5 = disaster-related (flooding,
5 Disaster-related = 7 Not applicable Not applicable
earthquake, fire, volcano eruption,
2 Sickness in the family = 6
typhoon, etc.)
1 Unemployment = 4
6 = payment mechanism
7 Death of borrower = 1
difficulties (bank closure, internet
problems, government-prescribed
loan moratoriums)
7 = others [please specify]
138 Appendix 12

Group 1 MFI with HMF

Group 2 MFI w/o HMF Housing NGOs
Survey Questionnaire Program
D.5 Guarantee program availment
Guarantee program availed, if any,
No = 10
for housing finance or Not applicable Not applicable
Yes = 4
microfinance.
Reason for availing or not availing
E. Starting or expanding housing microfinance program
E.1 If without any housing
Yes = 5
microfinance program, would you
No = 1 Not applicable Not applicable
be interested and willing to develop
NA = 7
and launch one?
E.2 If interested to start, type of
housing microfinance product you
1 Home improvements = 4
will likely develop and offer
6 Post-disaster housing
1 = home improvements
repairs = 3
2 = house construction
2 House construction = 2
3 = house and lot purchase
3 House and lot purchase = 2
4 = housing expansion
5 Construction or Not applicable Not applicable
5 = construction or improvement of
improvement of sanitation
sanitation facilities
facilities = 2
6 = post-disaster housing repairs
8 Energy-efficient housing = 2
7 = utility connections
4 Housing expansion = 1
8 = energy-efficient housing (e.g.,
7 Utility connections = 1
solar panels)
9 = others [please specify]
E.3 If with an existing housing
Yes = 12
microfinance program, would you Not applicable Not applicable
No = 1
be interested in expanding?
E.4 If interested to expand, type of 8 Energy-efficient housing = 9
product you will likely develop and 6 Post-disaster housing
offer repairs = 8
Not applicable Not applicable
1 = home improvements 1 Home improvements = 5
2 = house construction 5 Construction or
3 = house and lot purchase improvement of sanitation
 Appendix 12 139

Group 1 MFI with HMF

Group 2 MFI w/o HMF Housing NGOs
Survey Questionnaire Program
4 = housing expansion facilities = 5
5 = construction or improvement of 2 House construction = 4
sanitation facilities 4 Housing expansion = 3
6 = post-disaster housing repairs 7 Utility connections = 3
7 = utility connections 3 House and lot purchase = 2
8 = energy-efficient housing (e.g.,
solar panels)
9 = others [please specify] ____
4 Mismatch between the
E.5 Deterrents to either starting or
MFI’s shorter-term sources of
expanding housing microfinance
loanable funds vs. the need
1 = lack or insufficient capital
for a longer repayment period
2 = inadequate knowledge of the
of clients for housing-related
housing sector
loans = 6
3 = perceived risks of lending for
3 Perceived risks of lending
housing
for housing = 5
4 = mismatch between the MFI’s
1 Lack or insufficient capital =
shorter-term sources of loanable
4 Not applicable Not applicable
funds vs. the need for a longer
2 Inadequate knowledge of
repayment period of clients for
the housing sector = 4
housing-related loans
7 COVID 19 = 5
5 = lack of knowledge of collateral
6 Inadequate supply of
substitutes and their valuation
affordable, climate-resilient
6 = inadequate supply of
housing units (or materials) in
affordable, climate-resilient housing
the market = 3
units (or materials) in the market
8 Timing and prioritization of
7 = others [please specify]
programs = 2
E.6 Need for financing, if any, to start
or expand HM program Yes = 10
Organization needs financing to No = 3 Not applicable Not applicable
start or expand your housing No answer = 1
microfinance program.
140 Appendix 12

Group 1 MFI with HMF

Group 2 MFI w/o HMF Housing NGOs
Survey Questionnaire Program
If NO, state sources of financing
currently available
E.7 Type of financing and assistance
required, if any, to start or expand
HM program

1 = concessional terms (low- 1 Concessional terms = 9

interest rates, grace period, and 3 Technical assistance for
long-term repayment period) housing design and
2 = liberal and innovative construction and climate-
collateral requirements. (e.g., sales resilient products and services
factoring or receivables financing) =8
3 = technical assistance for 2 Liberal and innovative
housing design and construction collateral requirements = 3
Not applicable Not applicable
and climate-resilient products and
services 4 Capacity development
4 = capacity development grants grants for the design of
for the design of affordable, affordable, climate-resilient
climate-resilient products and pilot products and pilot testing = 7
testing 5 Financially viable housing
5 = financially viable housing microfinance rediscounting
microfinance rediscounting facility facility = 7
(e.g., mortgage takeout facility to
improve MFI’s liquidity, secondary
markets for housing microfinance)
6 = others [please specify] ____
F. Interest in Green Inclusive Housing Microfinance
F.1 Green, sustainable, and eco-
Yes = 3 involved in disaster
friendly practices and activities
resilient housing and green
engaged in
energy loan program Not applicable Not applicable
The organization is either piloting
No = 5
or engaged in: (i) any form of low
No answer = 5
carbon (GHG) reducing activities,
 Appendix 12 141

Group 1 MFI with HMF

Group 2 MFI w/o HMF Housing NGOs
Survey Questionnaire Program
(ii) climate-resilient, climate
adaptation housing, (iii)
microfinance program similar
activities
[Please specify the activities or
program and provide a description.]
1 Partnership and
collaboration with
organizations advocating in
climate change and disaster
resilient housing
2 Technical assistance to
develop/design climate-
resilient housing program
F.2 Key success factors in green HM
3 Capacity development grant
program Not applicable Not applicable
for the design of climate
Please identify at least three
resilient
factors.
4 Loan program and pilot
testing income requirements
5 Flexible repayment
(depending on the product
offering)
6 Affordable loan products
and low interest rate
4 Capacity development
grants for the design of
F.3 Need for financing, if any, to start
affordable, climate-resilient
or expand green inclusive housing
products and pilot testing = 5
1 Concessional terms = 4 Not applicable Not applicable
If yes, please provide the features
3 Technical assistance for
of the financing you will require.
housing design and
(Refer to list under E.7)
construction and climate-
resilient products and services
142 Appendix 12

Group 1 MFI with HMF

Group 2 MFI w/o HMF Housing NGOs
Survey Questionnaire Program
=4
5 Financially viable housing
microfinance rediscounting
facility = 3
2 Liberal and innovative
collateral requirements = 2
 Appendix 13 143

SUMMARY OF HOUSING MICROFINANCE RAPID ASSESSMENT: DHSUD REGIONAL OFFICES

Survey Questionnaire Response from DHSUD Regional Offices

A. General background & information
A.1 Region # Regions I, VI, VII, IX, CAR
B. Relevant experience in housing microfinance
B.1 Is your office involved in any ongoing housing microfinance Yes = 1
project or program? No = 4
Name of Project: Luna Terraces Permaculture Community
# of beneficiaries = 270 - Baguio City
Name of partners = KHA, LGU/HOA: DSHUD-CAR (ESCROW
B.2 If yes, please provide the following information for each FUND for land development)
project or program: (i) name of project or program; (ii) NHA (Housing Construction, MRBs)
location(s) and the number of beneficiaries; (iii) name of HDMF (Affordable Housing)
partner MFI; (iv) name of partner LGU, if any; (v) name of Baguio City (Titled land)
other key shelter agencies involved, if any; (vi) project or
program objectives and targets; and (vii) project and Name of Project: Community Mortgage Program (CMP)
program duration. Location: Brgy Long-long, Mun. of La Trinidad, Benguet
No. of beneficiaries: 235 (Villa Montanosa HOA members)
Name of partner KHA, LGU/HOA: Social Housing Finance Corp
(SHFC) and the Villa Montanosa HOA
B.3 What housing microfinance products and services are
offered through each project or program you have indicated
in your response to Question #6 above?
1 = home improvements
2 = house construction
3 = house and lot purchase
No answer
4 = housing expansion
5 = construction or improvement of sanitation facilities
6 = post-disaster housing repairs
7 = utility connections
8 = energy-efficient housing (e.g., solar panels)
9 = others [please specify] ____
B.4 For each project or program, what is the average loan size? Luna Terraces Permaculture Community:
Loan term? Interest rate? Average Loan Size: Low cost (P580-P1.7M); Socialized (P580
144 Appendix 13

Survey Questionnaire Response from DHSUD Regional Offices

and below)
Loan Term: 30 years with 3 years re-pricing @5.375%
Interest rate: 3% interest rate for affordable housing

Community Mortgage Program (CMP):

Average Loan Size: P580K
Loan Term: 25 years
Interest rate: 6%
B.5 For each project or program, what are the collateral
requirements?
Luna Terraces Permaculture Community:
Titled lot under the LGU's name
1 = freehold or transfer certificate of title
-for sale to beneficiaries under salary deduction (HDMF)
2 = usufructory agreements
3 = leasehold agreements
Community Mortgage Program (CMP):
4 = right to use or certificates from government
Titled lot under HOA's name
5 = group guarantee or individual guarantors
-parcellation of units upon full payment of loan
6 = unsecured lending
7 = others [please specify] ____
B.6 What do you think are the factors that have contributed to
the success of your project(s) or program(s)? [If you choose Luna Terraces Permaculture Community:
more than one answer in the list provided, please rank them a. LGU with titled land
according to level of importance]. b. availability of grant (Escrow Fund/RAP)
1 = use of collateral substitutes c. rational repayment period
2 = income requirements d. liberal interest rates
3 = repayment period e. With LSP & Local Housing Board
4 = interest rates
5 = loanable values, loan size Community Mortgage Program (CMP):
6 = collection mechanisms, describe features a. availability of the titled land
7 = others [please specify] _______ b. income requirement
1= low affordable limits of the borrowers c. repayment period
2= short repayment period d. Interest rates
3 = high interest rate e. With LSP & Local Housing Board
4 = lack acceptable collaterals
 Appendix 13 145

Survey Questionnaire Response from DHSUD Regional Offices

5 = limited housing knowledge of the MFI staff
6 = others [please specify]
B.7 If your answer is “no” to Question #B1, please cite the
reasons you have not been involved in housing
microfinance. 1 Limited knowledge of housing microfinance = 3
1 = Limited knowledge of housing microfinance 2 No partnerships with MFIs engaged in housing
2= No partnerships with MFIs engaged in housing microfinance = 3
microfinance 3 Socialized housing programs of the government do not link
3= Socialized housing programs of the government do not sufficiently to MFIs and housing microfinance = 3
link sufficiently to MFIs and housing microfinance
4 = others [please specify]
C. Interest to initiate or expand housing microfinance project or program
C.1 Are you interested and willing to initiate or expand housing Yes = 5
microfinance in your region? N0 = 0
Limited A&D land
Geographic characteristic is restrictive
C.2 If no, please cite the reasons.
Land development is too costly
Ancestral land issues (contentious issues under the IPRA law)
1 Limited knowledge of housing microfinance = 3
2 No partnerships with MFIs engaged in housing
microfinance =
C.3 If yes, what do you think will be the key factors for your 3 Socialized housing programs of the government do not link
regional office to successfully initiate or expand a housing sufficiently to MFIs and housing microfinance = 3
microfinance project or program? 4 Link to MFIs = 1
5 Approval of proposed land for delineation under the
DENR'S Forest Delineation Program and approval of land
covered by tax declaration as loan collateral = 1
1 Need to look into policies on collateral substitutes, income
C.4 What do you think are the institutional and policy reforms requirements, and repayment/collection schemes and
necessary to accelerate housing microfinance in your mechanisms
region? 2 Strong community development activities can also be
considered in the formulation of the new policy
146 Appendix 13

Survey Questionnaire Response from DHSUD Regional Offices

3 Microfinance institutions to be recognized by DHSUD or
other appropriate agency(ies) as alternative financial
institution for housing
4 Regulate loan terms, such as interest rates, so that it is
lower, if not at par, with regular financing institutions like
Pag-IBIG & SHFC
5 This can be inculcated in “Balance Housing Compliance”
with the developers – “Capacitating communities – how to
be climate resilient communities” or in the training of
communities in the engagement of GHG reducing activities.
This is one of the components of the thrust of the DHSUD –
“urban development.”
6 Exemptions of Cordillera from the 0-18% slope restriction
for settlement (PD 705)
1 PHSD staff that will handle the program should be
capacitated on its mechanics, benefits, risks, and other
pertinent information. In depth understanding of this
scheme/program is vital in order for the staff concerned to
be able to promote it to clients and implement it correctly
2 Trainings on /exposures to house designs, value
engineering, housing microfinance to enhance knowledge
and appreciation of the scheme/program
3 Capacitate MFIs in the housing designs and housing
C.5 What capacity development activities or initiatives do you construction and standards that will fit to the affordability of
think should be provided? the socialized housing beneficiaries
4 Link /coordination between the MFIs and the LGUs as to
the data access of list of beneficiaries who would take
advantage of the said program.
5 Capacitate communities in designing houses that are
resilient to climate and train them in how to engage into
GHG reducing activities
6 Conduct of Housing/land to deliberate on
contentious/restrictive issue
7 Encourage the harmonization of DENR/NCIP titling process
 Appendix 13 147

Survey Questionnaire Response from DHSUD Regional Offices

8 Review the IPRA law
D. Interest in green inclusive housing microfinance
D.1 Are you engaged or interested in any form of low carbon Yes = 2
(GHG reducing activities), climate-resilient (climate No = 1
adaptation) housing microfinance program, or activities. No answer = 2
1 Formulation and issuance of policies mandating developers
to incorporate low-carbon and climate-resilient features in
the design and construction of their future housing projects.
Said policies must also include the capability of department
personnel to monitor and facilitate acquiescence of
proponent to said policy; Moreover, the department could
also look into amending current BP 220 standards to
conform with the “new normal” and inclusion of green
concepts in the designs;
D.2 What do you think are the factors that will contribute to the
2 Less expense on electricity
success of incorporating low carbon and climate-resilient
3 Added income from solar energy generated that can be
features in housing microfinance?
used to pay off loan from MFI
4 Value engineering can bring down the cost of construction
while at the same time lessen the impacts of rising
temperature without using electricity (this is more on
housing design
5 Active participation of communities in the planning process
6 Strong participation of private developers, LGUs, people’s
organization for the success of the Green Inclusive Housing
Microfinance.
D.3 Do you think there is a need for long-term financing from
international donor agencies to start or expand green, Yes = 3
inclusive housing microfinance in your region and the No answer = 2
Philippines as a whole?
148 Appendix 14

PRESENTATION ON MICROFINANCE AND DHSUD SURVEY RESULTS

Appendix 14 149
150 Appendix 14
Appendix 14 151
152 Appendix 14
 Appendix 15 153

MINUTES OF VIRTUAL CONSULTATIVE MEETINGS

WITH SECTOR STAKEHOLDERS

No. Date and Time Participants Page

1 07 May 2021 Habitat for Humanity (HFH) 2
(1000H)
2 12 May 2021 Consultative Meeting with MFIs: 4
(1000H) Simba sa Pag-Asenso, Inc. (SEDP)
Tulay sa Pag-Unlad, Inc. (TSPI)
Kabalikat Para sa Maunlad na Buhay, Inc. (KMBI)
Alalay sa Kaunlaran, Inc. (ASKI)
Taytay Sa Kauswagan, Inc. (TSKI)
Country Builders Bank (CBB)
Pag-asa ng Masang Pinoy Foundation, Inc. (PMPFI)
Ahon Sa Hirap, Inc. (ASHI)
3 14 May 2021 Consultative Meeting with MFIs: 8
(1000H) ECLOF Philippines Foundation
Katuwang Resource Center, Inc. (KRCI)
Ramon Aboitiz Foundation, Inc. (RAFI)
KFI Center for Community Development Foundation, Inc.(KCCDFI)
JMH Microfinance, Inc. (JMH)
Bangko Kabayan, Inc. (BK)
People’s Alternative Livelihood Microfinance Foundation of Sorsogon,
Inc. (PALMSFI)
4 25 May 2021 DHSUD PHSS HMF Team 11
(1000H) All PHSS Regional Offices Nationwide
5 26 May 2021 Key Shelter Agencies (KSAs): 18
(1000H) National Housing Authority (NHA)
Social Housing Finance Corporation (SHFC)
Social Housing Finance Corporation (NHMFC)
Home Development Mutual Fund (HDMF)
6 26 May 2021 Kasagana-Ka Coop 25
(1500H)
7 27 May 2021 Organization of Socialized and Economic Housing 27
(1000H) Developers of the Philippines, Inc. (OSHDP)
Subdivision and Housing Developers Association, Inc. (SHDA)
8 28 May 2021 Meeting with Bangko Sentral ng Pilipinas (BSP) 30
(1300H) Center for Learning and Inclusion Advocacy (CLIA) of BSP
Mr. Ed Jimenez
9 08 June 2021 DHSUD Bureaus: Environmental and Land Use Planning and 34
(1000H) Development Bureau (ELUPDB) and Housing and Real Estate
Development Regulation Bureau (HREDRB
10 10 June 2021 National Economic and Development Authority 38
(1000H)
11 11 June 2021 DHSUD - Homeowners Association and Community Development 43
(1000H) Bureau (HOACDB)
154 Appendix 15

01 Habitat for Humanity Consultative Meeting

Prepared By: Reviewed and Approved By:

Joy de Leon Dr. Joji Reyes
Date of Meeting: Venue and Time:
07 May 2021 Zoom, 10 AM
Participants

Habitat for Humanity Representatives:

1 Jitendra Balani – Habitat for Humanity (HfH)
2 Jessan Catre - HFH

Other Participants:
1 Rowena Dineros, DHSUD PHSS
2 Edward Maghirang, DHSUD PHSS
3 Loyce Bonto, DSHUD PHSS
4 Dr. Joji Reyes, ADB Consultant/GlobalWorks Study Team
5 Ma. Felicidad de Leon, GlobalWorks Study Team (GWIC)
6 Paul Daniel Isip, GlobalWorks Study Team (GWIC)
7 Gloria Guevarra, GlobalWorks Study Team (GWIC)
8 Clarisse Patricia Reyes, GlobalWorks Study Team (GWIC)

Introduction
1 Director Dineros welcomed all participants and introduced Mr. Balani and Mr. Catre, representing
Habitat for Humanity, one of DHSUD’s partners in housing provision. She also shared DHSUD’s
forthcoming 3-day workshop to be conducted by HFH for their project Negros Occidental Province
Impact 2025. After that, Ms. Dineros introduced the DHSUD PHSS team members, Mr. Maghirang
and Ms. Bonto.
2 Ms. De Leon introduced the GWIC team members, Paul, Clarisse, and Glo Guevarra, before giving
a few statements on the main agenda of the day, which is to share the results of the recently
conducted rapid appraisal on HMF in the country. ADB’s consultant for the study, Dr. Reyes, was
then requested to take the floor for her presentation.
3 Dr. Joji Reyes presented the highlights of the MFI survey conducted as part of the study to scale up
green and inclusive housing microfinance in the Philippines.
Matters Discussed

1 Mr. Balani expressed their agreement to the major findings of the PHI HMF survey being in common
with the results of studies the HfH has conducted in the country, the latest of which was with the
Negros Women for Tomorrow Foundation (NWTF) and other NGO members of the Microfinance
Council of the Philippines (MCPI). (https://www.habitat.org/sites/default/files/documents/NWTF-Case-
Study.pdf)

2 Dr. Reyes emphasized that the average loan size of P50,000 for a housing loan is far from the
DHSUD defined ceiling for socialized housing of P480,000. This ceiling is currently under evaluation
that may further be increased based on current prices of labor, materials, and cost of funds. The
huge gap in loan size is partly affected by the short tenor of MFIs’ funds for HMF.

3 Dr. Reyes raised the info on the Housing Microfinance Product Manual for MFI banks beyond
DPUCSP, which evolved under the joint efforts of HUDCC, DBP, and the BSP. The need to involve
the banking sector in PHI HMF will be part of the roadmap
4 Mr. Jitendra shared information on the developing partnership of MFIs with the ADB Private Sector
Department and commercial banks, which is spearheaded by Habitat for Humanity International.
The collaboration will ‘expand ADB’s Microfinance Risk Participation and Guarantee Program to include
microloans for housing, home improvement, and water and sanitation for vulnerable and climate
 Appendix 15 155

change-exposed communities. ADB will help MFIs obtain financing for these purposes from
commercial banks of up to $30 million in the first phase. Habitat for Humanity will build the MFIs’
capacity to design, pilot-test, and roll out the loans, with technical assistance from ADB.

5 The Credit Insurance Fund will provide credit guaranty coverage to loans to be extended by the
commercial banks to the MFIs. For the partnership with the ADB, the chat box link is
https://www.adb.org/news/adb-habitat-humanity-support-housing-microloans-vulnerable-communities.

6 DHSUD socialized housing ceiling is currently at P480,000. However, HMF loans remain at a low
average level of P50,000.

7 Habitat for Humanity expressed the need for strengthening the technical knowledge in housing and
real estate market operations. Mr. Balani and Mr. Catre appreciated the discussion on the link to be
established with the private sector housing developers for technical assistance and tapping the 20%
balanced housing credits raised by developers in compliance with the Urban Development Housing
Act and held by the DHSUD. The link with DHSUD on tapping the 20% balanced housing for the
MFIs is a most welcome program.

8 Their work with MFIs focused on microfinance product development, pilot testing, and launching.
The continuing efforts of Habitat for Humanity monitoring and evaluation of the challenges faced by
the housing microfinance sector and sharing lessons learned will continue in partnership with
DHSUD and the publication of their studies.

9 The meeting was adjourned at 11:10 AM.

156 Appendix 15

02 Virtual Consultative Meeting with MFIs (Group A)

Prepared by: Reviewed and approved by:

Gloria Guevarra Joji Reyes
Date of Meeting: Venue and Time:
12 May 2021 Zoom, 10 AM
Participants

MFI Representatives:
1 Ferdinand Jakiri, ASA Philippines Foundation
2 Mercedes R. Abad, Ahon sa Hirap, Inc. (ASHI)
3 Jane M. Manucdoc, Alalay sa Kaunlaran, Inc. (ASKI)
4 Mary Grace Peña, Alalay sa Kaunlaran, Inc. (ASKI)
5 Reggie L. Ocampo, Country Builders Bank (CBB)
6 Eduardo C. Jimenez, Kabalikat para sa Maunlad na Buhay, Inc. (KMBI)
7 Hazel R. Bayaca, Kabalikat para sa Maunlad na Buhay, Inc. (KMBI)
8 Sid Banzuelo, SEDP – Simbag sa Pagasenso, Inc.
9 Rebecca Gabayoyo, Taytay sa Kauswagan, Inc. (TSKI)

Other Participants:
1 Loyce Bonto, DHSUD PHSS
2 Ana Liza Mia Mirador, DHSUD PHSS
3 Dr. Joji Reyes, ADB Consultant/GlobalWorks Study Team
4 Ma. Felicidad de Leon, GlobalWorks Study Team
5 Paul Daniel Isip, GlobalWorks Study Team
6 Clarisse Patricia Reyes, GlobalWorks Study Team
7 Gloria Guevarra, GlobalWorks Study Team

Introductions

1 Ms. Gloria Guevarra introduced the representatives of the various MFIs in attendance.
2 Ms. Joy de Leon introduced the DHSUD participants, Dr. Joji Reyes and her GlobalWorks study
team members.
3 Dr. Joji Reyes presented the highlights of the MFI survey of MFI conducted as part of the study to
scale up green and inclusive housing microfinance in the Philippines.

Matters Discussed

1 The MFIs representatives in the meeting signified their agreement with the findings of the survey
results as presented by Dr. Reyes. In the discussion that followed the presentation, the participants
gave their insights, reactions, and comments and provided their inputs to the roadmap preparation.
The key points of the discussion are summarized below.

2 Need for proper and affordable technology for green and resilient housing. Both Ms. Abad
(ASHI) and Ms. Manucdoc (ASKI) raised the importance of affordable technology, especially for
disaster resilient housing. The suggestions resulting from this discussion include:
a. Pursue discussions with DHSUD on putting together all the technology and approaches
relevant to building more affordable and disaster-resilient structures.
b. Talk to developers and encourage them not to focus on the profit per housing unit but the
total earnings from the volume of houses.
c. Look into and consider technologies such as DOST (Boy de la Peña and his team of women
engineers); the nano technology of Japan; the AITECH of the National Housing Authority (a
system for accrediting innovative technologies); and CUBO’s modular housing for low-income
families.
 Appendix 15 157

d. Aside from being disaster-resilient, the design of the entrepreneurs' homes should
accommodate the hybrid nature of their dwelling (i.e., houses are used by some for both
residential and business purposes.

2. Prioritizing the recovery of microenterprises: issues of timing and phasing. Ms. Bayaca of
KMBI raised that while the initiative is deemed highly relevant, especially to clients, the challenge is
the recovery in light of the present circumstances brought about by the coronavirus (COVID-19)
pandemic. First, there is a liquidity issue both on the side of the MFI and the clients due to the
stringent measures taken last year especially, in response to COVID-19. Secondly, health and
prevention protocols need to be observed like social distancing, limiting close monitoring, or contact
when implementing a housing project. The priority at this time is the recovery of the businesses of
the clients. KMBI has been assisting the clients with multipurpose loans to help them with the
process.

3. It was agreed that the timing for the green and inclusive housing microfinance program
implementation is indeed critical and will be reflected in the road map. This means that the initial
phase of the roadmap could include support for the recovery of microenterprises. To prepare a more
vigorous housing microfinance program and approach in the next couple of years or post-COVID-
19, the formulation of the road map should address the pressing issues of capacity building,
recovery, and clients' liquidity.

4. ASA’s financing sources and challenges. ASA was requested to share its experience with raising
funds to finance its expanding operations. To address the difficulties of borrowing long-term loans
from banks, ASA opted to issue $40.0 million bonds under the fund advisory and management
services of BPI Capital bonds in 2017. This fundraising facility gave ASA a 5-year term source of
funds. The bonds will mature next year.

5. ASA also issued a P2 billion bond in 2017 to 3 banks, namely, PNB, Land Bank, and BPI. The bond
is guaranteed by Credit Guarantee Investment Facility, a trust fund of ADB. In addition, ASA was
also able to access a direct short-term lending facility of $30 million from the ADB Private Sector
Department them a $30.0 million line. They made their first drawdown of $10.0 million (P500 billion)
last June 2020, more than a year after ADB approved the lending facility. However, the proceeds
from this lending facility may only be used for fragile and conflict-affected areas like those in the
Visayas and Mindanao. However, ASA is not planning to avail of the next drawdowns since they
have found it difficult to meet ADB’s requirements. This is largely due to the impact of COVID-19,
which has adversely affected members’ income and livelihood activities. As a result, collection
efficiency has decreased.

6. Observations regarding ASA’s ADB loan include: (a) the slow and long process involved; (b) the
voluminous documentation required; (c) unlike ASA, the smaller MFIs will not be in a position to
access this facility directly.

7. Discussions with ADB’s Private Sector Development. Possibly with Anshukant Taneja, Lead of
ADB’s Microfinance Program and other groups like MCPI, Bankers Association of the Philippines
(BAP), the BSP, and even Philippine Guaranty Corporation may be forthcoming or arranged.

8. ADB provides a guaranty mechanism for MFIs similar to the Credit Guarantee Fund of Mongolia. It
has recently launched a guarantee facility to cover borrowings of MFIs in Asia. The facility provides
risk cover for their borrowings (see https://www.adb.org/news/adb-habitat-humanity-support-housing-
microloans-vulnerable-communities).

9. Other related topics discussed included: (i) the possibility of ADB financing a wholesale apex
facility to extend loans to smaller MFIs which can include funding for housing microfinance; (ii) the
partnership between ADB’s Private Sector Group and Habitat for Humanity to help MFIs deliver
housing loans to low-income families in rural and peri-urban areas in India, Indonesia, and the
Philippines; and (iii) exploring the possibility of sovereign loans from ADB or other donors which
are cheaper and can be availed by DHSUD.
158 Appendix 15

11 Balanced housing as a source of financing for green and inclusive housing microfinance. The
escrow fund, which was established for the compliance of the private developers with the balanced
housing policy of the government, could be explored as a source of funds for accelerating green and
inclusive housing microfinance. When blended with donor funds, this can provide a big boost to the
sector. A pilot project on how this can be designed and implemented should be undertaken as soon
as possible.

12 The BSP had set up a similar fund years ago from the penalties for banks' compliance under the
Agri-Agra law. The money was pooled into an agricultural guarantee fund that guaranteed up to
85% of agriculture-related loans from the banks. The fund was initially managed by the Land Bank
of the Philippines but was later transferred to the Philippine Guarantee Corporation.

13 Regularization and legalization of ownership: reviewing collateral substitutes. In light of the

issue regarding land titles and tax declaration, which the banks require as security for housing loans,
there is a need to review the different rights-based instruments (RBIs) approved in the housing
microfinance product manual and the valuation methodology. The discussion pointed out the need
to do more work to transform these RBIs into marketable, negotiable instruments if they are to
become more acceptable to banks as collateral substitutes. Ed Jimenez informed the participants
that BSP has issued a circular allowing the use of RBIs by banks without being penalized. However,
the banks still prefer to see something tangible as collateral; hence, there is a need to raise this
matter to BSP and increase the banks' comfort level.

14 Other matters: The following additional matters were discussed.

▪ Environmental, Social and Governance Framework: BSP issued Circular 1085 on

Sustainable Finance Framework in October 2020 to integrate the environmental, social,
and governance (ESG) criteria into the business or financing decisions. Dr. Reyes shared
that ADB projects with financial intermediation loan (FIL) components require participating
banks to have an environmental and social management framework (ESMF) for their
onlending activities. How this can be applied in housing microfinance should be examined
as part of the road map.
▪ Collaboration and partnerships. ASKI has a partnership with Build Change which enabled
them to secure funding to strengthen housing units of clients in disaster-prone areas. The
study can promote partnerships between MFIs and private sector groups as well as
international and national civil society organizations (CSOs) who usually help out during
disasters. Collaboration with colleges and universities can also be explored.
▪ A post-disaster financing program for MFIs and their clients should be set up (pooling and
blending financing from various sources) to rebuild houses both as part of an emergency
response and support to clients living in disaster-prone areas to build more resilient housing
structures.
▪ Housing structures: Ideas put forward included: (a) considering an affordable housing
design for home-based microentrepreneurs; (b) 2-story buildings to differentiate the space
for business activities from the residential space for those whose businesses are located at
home; and (c) look at new housing projects for ISFs like the one Mayor Isko Moreno is doing
in Manila, in the old property of Procter & Gamble.
▪ Monitoring and evaluation system: Lack of a system that tracks, consolidates, and
evaluates housing microfinance for banking and nonbanking MFIs. The Center for Learning
and Inclusion Advocacy of the BSP tracks the progress and housing microfinance for baking
MFIs. Still, there is no similar effort done for nonbanking MFIs, which makes integration
impossible. This situation needs to be addressed immediately as part of the envisioned
scaling-up.
▪ TSKI is looking at integrating the WASH program into its housing microfinance program.
However, they will need additional funding.
▪ The consultative meeting was adjourned at 12:25 PM.
 Appendix 15 159

03 Virtual Consultative Meeting with MFIs (Group B)

Prepared By: Reviewed and Approved By:

Gloria Guevarra Dr. Joji Reyes
Date of Meeting: Venue and Time:
14 May 2021 Zoom, 10 AM
Participants

MFI Representatives:
1 Fides Ganzon-Ofredo, Bangko Kabayan (BK)
2 Nimrod dela Peña, Bangko Kabayan (BK)
3 Lawrence Ledesma, Katuwang Resource Center, Inc. (KRCI)
4 Rhett Quinday, KFI Center for Community Development Foundation, Inc. (KCCDFI)
5 Alice Z. Cordero, Tulay sa Pag-Unlad, Inc. (TSPI)
6 Lyn G. Onesa, Tulay sa Pag-Unlad, Inc. (TSPI)

Other Participants:
1 Rowena Dineros, DHSUD PHSS
2 Edward Maghirang, DHSUD PHSS
3 Loyce Bonto, DHSUD PHSS
4 Dr. Joji Reyes, ADB Consultant/GlobalWorks Study Team
5 Ma. Felicidad de Leon, GlobalWorks Study Team (GWIC)
6 Paul Daniel Isip, GlobalWorks Study Team (GWIC)
7 Gloria Guevarra, GlobalWorks Study Team (GWIC)
8 Jennifer Belizar, GlobalWorks Study Team (GWIC)

Introduction

▪ Ms. Gloria Guevarra introduced the representatives of the participating MFIs.

▪ Ms. Rowena Dineros followed with the introduction of the DHSUD participants.
▪ Dr. Reyes introduced the members of the study team and staff of GWIC.
▪ Ms. de Leon then briefed the participants on the flow of the workshop – presentation of the findings
of Survey Results Highlights and comments/inputs from MFI participants.
▪ The presentation of revised Survey Results Highlights by Dr. Joji I Reyes followed.

Matters Discussed

MFI representatives gave their comments, reactions and experiences relevant to the presentation which
are summarized below. These will serve as inputs to the road map preparation.

1 Need for a Guarantee Mechanism and an Appropriate Financing Facility for the MFIs
a. Ms. Cordero shared that TSPI has a loan program for farmers that is guaranteed under the
Agriculture Guarantee Fund Pool (AGFP), which covers up to 85 % of the unpaid balance
of the non-collateralized loans. This is especially helpful during times of calamities and crisis
that prevent the farmers from paying their loans on time.
b. Given the nature of the housing microfinance loans, a similar guarantee program is needed
for more MFIs to start offering this product or expand their existing housing program.
c. Moreover, a financing facility that can provide preferential rates to the MFIs will help reduce
their pass on interest rates.

2 Multi-partner approach in pursuing housing program: the case of KRCI

a. Mr. Ledesma shared that they wanted to find ways to assist the poor, like the sugarcane
farmers, in line with their mission.
b. KRCI gained accreditation from Social Housing Finance Corporation (SHFC) and NHMC so
they can organize the target beneficiaries.
160 Appendix 15

c. Partnered also with Habitat for Humanity and Gawad Kalinga

d. Partnering with agencies and organizations enabled them to mobilize at minimal cost since
they don’t have the funds
e. Worked with a landowner who asked them to do collections from the farmers who will
eventually be transferred to the NHMFC.
f. Working with LGUs like Sagay City who asked their assistance in managing the LGU’s
housing program, and with Victorias City, the only LGU in the province which has a local
housing department.
g. Interested in green housing initiatives like solar, wind, and garden

3 How can Pag-IBIG be Tapped for Housing Microfinance?

a. Nimrod de la Peña raised that from the survey that Bangko Kabayan conducted, a large
percentage of employees (those earning less than P40K a month) and clients are more
interested in-home improvement than new house construction or the socialized housing of
Pag-IBIG.
b. How feasible is it for them to include this provision in their charter?

From the discussion and sharing, both DHSUD and the Study Team inferred the following:

4 On the guarantee mechanism: There is a need to revisit and reassess the guarantee program
provided by the approved Housing Microfinance Product Manual to make it more applicable and
implementable. Per Ms. de Leon, the Home Guarantee Corporation (now merged into the Philippine
Guarantee Corporation) no longer covers the principal loan amount up to 11% of interest. The
agency considers the risks too high for them and provides instead fiscal incentives like tax shelter,
but not cover the principal and interest. The guarantees are necessary to address affordable limits
constraints of the clients.

5 Capacity building will be needed by MFIs, like KRCI, who are just starting out their housing
microfinance program.

6 Relative to the farmers housing program of TSPI, Director Dineros shared that under the General
Appropriations Act 2021, there is a provision for DHSUD to set up guidelines on settlements for
fisherfolks. DHSUD shall pursue this intervention under the study as part of the market for housing
microfinance.

7 As to the role of Pag-IBIG, it would be worthwhile to revisit the proposed institutional partnership
between Pag-IBIG and MFIs under the DPUCSP. The concept was for clients to have a seasoning
period with the MFIs to eventually become members of Pag-IBIG. This is a faster route than revisiting
or revising their charter.

8 Partnerships with private developers can be explored for technical assistance on house designs.

9 On establishing a financing facility: Get the agreement of the private developers to tap their escrow
funds for use in housing microfinance as a means to utilize and address their compliance to the
housing balance requirement. An accreditation system of MFIs who can access these funds can
be set up. The DHSUD can work with the developers to prepare guidelines.

10 The financing facility should be able to accept innovative collateral requirements (like RBIs) and
provide longer tenor. The RBIs can me made negotiable and have secondary market. There should
also be a way to liquify collaterals for a long-term lease.

11 Encourage innovative schemes and technology for low carbon, climate resilient housing
including solar, windmill, garden (as mentioned by KRCI).

In this connection, Director Dineros shared the initiative of Habitat for Humanity under the Negros
Occidental Impact 2025 (NOI25) which DHSUD is a part of. The project aims to build 10,000
housing units in sustainable communities that are clean, green, safe, disaster-resilient, and
 Appendix 15 161

progressive where families enjoy security in their homes. Here, the utilization of disaster-resilient
Cement Frame Bamboo Technology to scale and help address the housing gap in Negros
Occidental.

Furthermore, Dir. Dineros mentioned the Balai Berde program of NHMFC under DHSUD as
something to also look into. This provides support to communities, marginalized sectors, LGUs,
and the private sector in building safe and secure communities.

Dr. Reyes pointed out that while the market is not yet big for this, we can discuss with private
developers to innovate with us. To incentivize them, there can be a performance-based grants
mechanism for those who will innovate.
162 Appendix 15

04 Virtual Consultative Meeting with DHSUD Regional Offices

Prepared By: Reviewed and Approved By:

Joy de Leon Dr. Joji Reyes
Date of Meeting: Venue and Time:
25 May 2021 Zoom, 2 PM
Participants

DHSUD Representatives:
1 Rowena Dineros, DHSUD PHSS
2 Mary Ann Policarpio, DHSUD NCR
3 Norman JP Doral, DHSUD NCR
4 Michelle Ynay, DHSUD CAR
5 Karen Poligarpe, DHSUD CAR
6 Atty. Foronda, DHSUD Region I
7 Harry Christian Nool, DHSUD Region I
8 Arnold, DHSUD Region I
9 Grace de Vera, DHSUD Region II
10 Cheryll Moreno, DHSUD Region II
11 Engr. Doy Baldos, DHSUD Region III
12 Ferdinand, DHSUD Region III
13 Amy Melendres, DHSUD Region IVA
14 Joshua Layos, DHSUD Region IVA
15 Levi Aderes, DHSUD Region IVA
16 Arch. Jurs, DHSUD Region IVB
17 Louis Alconcel, DHSUD Region IVB
18 Engr. Christina Abano, DHSUD Region V
19 Regina Andes, DHSUD Region V
20 Eva Marfil, DHSUD Region VI
21 Russel, DHSUD Region VI
22 Ellen Canete, DHSUD Region VII
23 Alain Aquelo, DHSUD Region VII
24 Jeremy Claire Loreto, DHSUD Region VII
25 Engr. Evelyn Bobier, DHSUD Region VIII
26 Brenda Blones, DHSUD Region VIII
27 Rafael Osorio, DHSUD Region IX
28 Annie Raluto, DHSUD Region X
29 Grace Saniel, DHSUD Region X
30 Engr. Suhita Pedroso, DHSUD Region XI
31 Engr. Luisita May Monie, DHSUD Region XI
32 Engr. Tahurge, DHSUD Region XI
33 Vivien Mabunga, DHSUD Region XI
34 Koeln Gayaya, DHSUD Region XII
35 Darlyn Misiliones, DHSUD Region XII
36 Engr. Jessie Figeres, DHSUD Central Office
37 Warlito Quirimit, DHSUD Central Office
38 Macky, DHSUD Central Office
39 Art Martinez, DHSUD Central Office
40 Elmar Dalisay, DHSUD Central Office
41 Loyce Bonto, DHSUD Central Office
42 Anna Mirador, DHSUD Central Office
43 Eduard Maghirang, DHSUD Central Office
44 Noel Telles, DHSUD Central Office
45 Camla, DHSUD Central Office
46 Jossani Sison, DHSUD Central Office
47 Jecka, DHSUD Central Office
 Appendix 15 163

Other Participants:
1 Dr. Joji Reyes, ADB Consultant/GlobalWorks Study Team
2 Ma. Felicidad de Leon, GlobalWorks Study Team (GWIC)
3 Paul Daniel Isip, GlobalWorks Study Team (GWIC)
4 Jennifer Belizar, GlobalWorks Study Team (GWIC)

Introduction
▪ Director Dineros welcomed and introduced the DHSUD regional office and central office participants.
▪ Ms. de Leon introduced the study team and expressed her gratitude to all the participants.
▪ Dr. Joji Reyes greeted Director Dineros and all the participants from the main office of PHSS DHSUD
and regional offices and presented the highlights of the MFI survey MFI.
Matters Discussed

1 Ms. Joy de Leon opened the table for any reactions/comments to all that have been presented –
highlights of the survey results conducted among MFIs and on the take of the DHSUD PHSS,
regional offices that were indicators of interest and indicators of what
have been felt or recognized as weaknesses of the system.

2 Dir. Dineros pointed out the findings mentioned by Dr. Reyes specifically on capacity development
needs for green and inclusive housing microfinance, such as concepts, best practices, and policy
innovations towards accelerating the acceptability of collateral substitutes, green and inclusive
microfinance; and the fourth one which is the policy geared towards acceptance of the rights-based
secure tenure instruments. In mid-2000, HUDCC drafted a joint memorandum circular with other
agencies in close coordination with DENR, Land Management Bureau. There is a need to update
the housing microfinance product manual as it sets forth relative to the use of collateral substitute
with relevant appraisal guidelines as approved by Bangko Sentral. These were even made applicable
to all banking institutions outside of the DPUCSP in 2010. Lastly, she mentioned the talk they had
with Secretary del Rosario earlier, if we can tap a similar system as the Pag-IBIG Fund to establish
housing microfinance as another program to address pro-poor housing finance. Also, she suggested
housing microfinance as another option to comply with the balanced housing requirement. There is
also the possibility to tap the escrow fund as a support mechanism for socialized housing production.
Then it would be possible to carve out from escrow fund to cover a pilot housing microfinance project
that can be part of a roadmap.

3 Dr. Joji Reyes asked Director Dineros the current status of the balanced housing. Dr. Joji expressed
her excitement of the potential use of balanced housing funds that have accumulated over the years.
She said that the purpose of balanced housing was to expand the socialized housing production with
the participation of developers. The developers’ contribution to socialized housing took the form of
funds for socialized housing development and not actual production. In the DPUCSP, another option
for compliance was the investment in securities issued by housing agencies for use in upgrading
resettlement areas, but it has not been effective. To pursue this, it is necessary to know the size of
the approximate fund amount expected to be remitted to the escrow fund on an annual basis. Such
an assessment may be incorporated effectively in the roadmap.

4 Director Dineros Escrow fund was transferred from HLURP to DHSUD. The Housing and Regulatory
Bureau is currently managing the escrow fund and drafting the MOAs with the beneficiary local
government units.

5 Director Dineros mentioned that the body was informed PHSS has the policies and guidelines with
reference to MC (Memorandum Circular) last year on the transfer and allowable purposes for the
use of the fund. The developers may resort to compliance requirements in partnership with LGUs,
and for those interested in tapping use of the escrow fund, they can also coordinate with the Housing
and Regulatory Bureau to obtain information/data.
164 Appendix 15

6 Dr. Joji Reyes requested to check the estimated fund size and trend of funds flowing into the escrow
account for the past three years. Ms. Joy de Leon recalled that one regional office has an ongoing
project with the LGU and Community Associations. They are already considering tapping the escrow
fund.
7 Dr. Joji Reyes encouraged others who would like to share experience, comment, disagree, or agree
with what has been presented to validate these findings.

8 Eva Marfil mentioned that when they were doing the DPUCSP, the requirements of the wholesale
bank was so stringent, which she thought served as a hindrance to them in the implementation of
the DPUCSP. She remembered that Region 6 had two projects, one was in Passi City, and Taytay
sa Kauswagan was the NGO MFI. They had a hard time processing project approval as the
requirements of the wholesaler bank were so stringent. She hoped that the requirements would be
trimmed down.

9 Dr. Joji Reyes thanked Eva for pointing out such difficulties. She mentioned that when her team met
with the microfinance institutions, especially those at the management level, they alluded to the same
difficulties because what we had was a commercial bank as a wholesaler, and being under the BSP
regulations, the bank’s capability to be more innovative were restricted and could not be more liberal
towards microfinance and housing microfinance in particular. At this point, the idea of the wholesale
facility is a key recommendation in that it should not be a bank. It could be a facility lodged within
one of the housing microfinance agencies. They can be better positioned to accept the fund,
implement housing microfinance, and serve the financing needs with more liberal instruments,
policies, and guidelines to allow retail lending to the housing microfinance institutions.

10 Ms. Eva Marfil thanked Dr. Reyes for sharing her thoughts and believed that DBP was not lending
to the informal sector.

11 Dr. Joji Reyes emphasized the need for a housing microfinance facility that can be introduced just
as a housing microfinance product manual was a pioneering and very innovative development; a
housing facility that will have the same type of standing, thinking, and innovativeness is needed
because if not, we will have a facility that is highly regulated by the banking sector there will be no
road to innovations, and it will be much harder; and there is a need to make sure that the wholesaling
activity is not the choke point of the program this time.

12 Director Dineros indicated that there is also a mismatch of funds; for example, microfinance
institutions, non-bank or banking, get short-term funds when in fact, the housing for the sector is
seen to be of 25 to 30 years the repayment period.

13 Dr. Joji Reyes remarked that it is a fundamental finance principle that there should be matching of
sources and uses of funds. In the case of MFIs, their ability to do that is constrained by the fact that
their sources of funds are mainly the members’ capital build-up. The terminology of capital build-up
means the funds should be available on demand by the members. She recalled that in discussion
with Habitat for Humanity, Mr. Jiten said that unnecessarily popular the progressive home
improvement or incremental home construction prolongs completion period to as much as 2 years
against a possible construction period of 6 months, considering the affordable loan limit of the
member. The prolonged process as any prudent microfinance institution will not lend long term if
their fund sources are short-term. The capital market can also give financing up to 5 years but is
subject to a long list of requirements that the smaller MFIs would find difficult to complete. Only
large-sized MFIs such as ASHA can comply with those requirements. The need may be of a fund
source for governments apart from the balanced housing that will be able to borrow a short-term rate
like ADB that has short term loan and has a long repayment period, 20 or 25 years. She pointed out
another problem, the guarantee mechanism because the lending in housing is risky. If members
default in payments of loan amortizations to MFIs, recovery mechanisms are not designed for
incremental loans. MFIs take pride in the repayment recollection rate for MFIs which has been from
97% to almost 100%.
 Appendix 15 165

14 Director Dineros responded to Dr. Reyes: microfinance institutions say that the poor can pay.
Director Dineros said that she became a believer that the MFIs have technology in inculcating credit
discipline and responsibility. If you have a debt, you have the responsibility to pay the obligation.
There’s the drive to improve the quality of their lives through livelihood at first, then later on housing.
Right now, because of climate change, there’s a need to refine the microfinance that would address
the housing need of the lower-income or informal settlers or poor-income households.

15 Dr. Joji Reyes said to Director Dineros that there was a suggestion from the microfinance institution
that maybe a separate window can be made available for liquidity, specifically during disasters within
the wholesale facility. It’s a quick response mechanism for people who are suffering from disasters
and be able to tap the resiliency fund. This one Microfinance institution says that they had a
developer partner who provides them a fund, and at the same, they pool members’ loans against
this. There is a proper and efficient governance system that would easily click in; maybe this is a
very intact way of helping IFS; it’s a short window but a quick response mechanism. Finding more
affordable means for more climate-resilient, low-carbon technologies for low-income housing would
be great for a medium-term response.

16 Director Dineros read the question from Region V from Christy, “how about the escrow fund that can
only be used for site development?”
o Escrow fund has many uses stated in the latest policy shared by RD Manila. There’s a
recent issuance that it not only covers site development like provision of assistance for
rehabilitation. Can we suggest to the management to use it for housing construction?
o The purpose of housing microfinance is to know what the available funding sources are.
After this pilot stage, we have the policy on housing microfinance and then the roadmap.
o I am trying to suggest to our consultant to identify pathways of the roadmap with our
assistance, implement this policy, and find ways to be creative. What I am seeing for now
is the use of escrow funds, and later, one option is the loan from the ADB with little interest
to start this one.

17 Dr. Joji Reyes mentioned that one thing that can be initiated after this study is another study on how
to set up the fund initially financed by balanced housing and then pilot test that fund. It is a small-
scale facility that would be financed primarily by that. It can be a seed fund that can be set up. That
might be a really good use of the balanced housing. Also, it is a very tangible way of making that
balanced housing provision count.

18 Ms. Cheryll from Region II commented that all wanted to have a world where everyone has a decent
place to live in. Housing microfinance is not new but a wonderful and interesting venue to address
the below standard housing or substandard living conditions of our informal settler families, and
different templates have been presented. Ms. Cheryll to talk to Officer In-charge Grace to perhaps
adapt this financing for our small projects. She asked if it can be possible that the land development
projects of NHA Region 2, wherein the beneficiaries are without housing component, can be
introduced to housing MFIs for house construction?

19 Dr. Joji Reyes believed that it is possible, there must be some steps that need to be taken. For
example, the HOA in the project could be organized into a cooperative and tap the bigger
microfinance institutions for their financing needs to look into more institutional arrangements on how
this can be done, but in principle, it can be done.

20 Ms. Cheryll expressed that if that would happen and possible to be done, there are many of them in
Region 2.

21 Director Dineros agreed to Ms. Cheryl and emphasized the reason why they are pushing the
roadmap that needs to be prepared and as much as possible to have the fund set up at least for pilot
areas, to test the policy on this one, the most appropriate sites would be those in the build back
better task force coverage areas like region 5, region 2.
166 Appendix 15

22 Dr. Joji Reyes mentioned about the other thing they were talking about that might interest the group
about the certification program for housing microfinance because one of the problems is the lack of
knowledge and information system for housing microfinance. She suggested if a learning program
can be developed that allows the certification of the regional officers for housing microfinance to
multiply more the knowledgeable people to deal with this more innovative kind of issues.

23 Dir. Dineros agreed with Dr. Reyes to develop a capacity building for the regional offices because
they are on the ground. The knowledge should come in handy to them because they are the ones
who deal with the community, HOA. Even microfinance is lacking in the capability of standards and
procedures.

24 Dr. Joji Reyes suggested increasing the knowledge because by doing that, we scale up the HMF
program. Even the MFIs, when it comes to housing microfinance, still have scant knowledge, limited
knowledge that must be scaled up if we are to be successful in boosting the housing microfinance in
the Philippines.

25 Ms. Nen/ DHSUD CAR added to what Ms. Eva said, the provinces of Pangasinan, La Union, and
Baguio City who were the recipient of the e-house before but were unable to implement the housing
microfinance because they were raising the same issues on the stringent requirements of the bank.
She mentioned about the project in Baguio which avails escrow fund for employee housing project,
and that was Luna Terraces as well as to accommodate displaced households. They availed of the
escrow fund for land development amounting to P155M. The house construction availed of the
program of NHA to put up two buildings low-rise socialized buildings. I may suggest that since the
policy revolves around the escrow fund, a certain percentage of an accumulated escrow fund should
be opened for HMF but not for land development but housing purposes. Is DHSUD income-
generating?

26 Director Dineros agreed to Ms. Nen and asked Dr. Reyes if they should charge interest?

27 Dr. Joji Reyes answered to look at the recent policy issuances regarding balanced housing. If we are
going to carve out something, it must be towards a setup that will be governed by the specific rate
that needs to be approved, and it is like designing a fund and making sure that it is within the
government home lending system. We need to check the law if we can use the fund and charge
interest. I think it can, but within the facility that it can be allowed, for example, within DHSUD, it
might not be, but if we set it up in a social housing corporation, it can be. Let’s look at it in more
detail.

28 Director Dineros: escrow fund is a grant, and there should be sustainability features to address the
concern of others.

29 Dr. Joji Reyes recalled that there’s nothing in the law that says that it cannot be recovered, that it
cannot be used as a seed fund for something else. The whole idea is to set up something that is
financially sustainable. If going to use it as a grant, then it will go for some certain period. We need
to ensure that it is affordable and to carve out a capital subsidy.

30 Ms. Joy de Leon said that with the guarantee program, the big concern is recovery. Acquired assets
disposal and disposition program is not in place, so that liquidity may not always be there for the
MFIs and the banks. It is important to encourage higher participation from MFIs, but recovery must
be in place such that if we had access to the escrowed fund, then we don’t want it to dissipate just
like that due to non-recovery; every fund is not a grant. Presumed that there is nothing on the law
that prevents DHSUD from investing part of a policy will be adopted, enabling part of it to be invested
to a facility that will be managed by a government housing agency, together with other external funds
so that it can serve more and probably be devoted to various housing purposes.

31 Dr. Joji Reyes added that the idea is to set up something like Pag-IBIG, but for the ISFs, as they
cannot access Pag-IBIG or banks. She agreed with Ms. Joy that there’s nothing in the law that says
you cannot reinvest. There’s nothing in the law that says you cannot use it to fund the facility.
 Appendix 15 167

Balanced housing is supposed to be a mandate, mandatory for the private developer to either
develop a 20% in their project cost for this market or to invest in securities or pay it somewhere else
in the different forms like escrow fund. When it comes to changing policy, etc.: to always get back
to the law, if the law does not prevent that, there are ways to write implementing rules that would
make it possible to design, set up, and operate an efficient financing facility for the ISFs that is
managed as a housing microfinance wholesale facility.

32 Ms. Joy de Leon said that Home Credit Guarantee Corporation had been transferred to the Philippine
Guarantee Corporation as the government put together all guarantee funds under the Phil
Guarantee; banks continue to tap their services as they are part of the housing microfinance product
manual. Phil Guarantee mentioned the fact that they also need capacity building in terms of recovery.
How does the Phil Guarantee recover from rights-based instruments that have been used as
collateral? This also forms part of the study that Dr. Reyes is doing for us.

33 Director Dineros said that the rights-based secure tenure instruments are related to NHA
resettlement, and with the proclamation. A certificate of entitlement and lot award is a rights-based
secure tenure instrument to tie it up with housing microfinance.

34 Ms. Joy de Leon mentioned what Dr. Reyes said about the financial and social intermediation
component of the housing microfinance sector. Microfinance is not only financial intermediation but
also a certain technology for social intermediation that they educate their clients and help them in
going into micro-enterprise loans, be responsible, etc.

35 Dr. Joji Reyes agreed with Ms. Joy and said that it is part of the microfinance principle and concepts
that have to be part of training. The difference between traditional and microfinance lending is there
is a strong teaching of credit discipline and financial obligation concept of social intermediation in the
microfinance system. There are attempts to organize the community, make them more
knowledgeable of the financial responsibilities and management, and understand the product of
housing microfinance more. In one of our meetings last week, we found out that one of the MFIs is
a collection arm, intermediation arm of NHMFC.

36 Ms. Ann of Region XI remembered in Davao City before, these microfinance enterprises and reasons
why they did not become successful, and how ISFs are able to access the loan. In terms of
sustainability, the fact that housing loans need to be repaid to enable additional loans, but the source
of payments need to be established

37 Dr. Joji Reyes said that the reason why we are not discussing those aspects is the very evident
constraint of affordability limits of the borrowers is the fact that the discussion was from the
microfinance perspective. Microfinance institutions are already providing loans, enterprise loans, and
giving training to them. In their technology, you cannot be given a housing loan until you are not
qualified for the housing loan, meaning you have to be economically viable already. ISFs might not
be a member of MFI. In DPUCSP, there was a facility for micro-enterprise loans because the idea
was, they cannot avail of the housing loan if they don’t have a stable source of income. Dr. Joji
agreed to Ms. Ann’s point of view that there is a need for MFIs who are not yet linked to any home
associations, and there has to be a link for that to happen

38 Ms. Ann of Region XI asked if this would be part of capacity-building because it was mentioned that
it's all intact.

39 Dr. Joji Reyes responded to Ann, to look at what institutional arrangements, partnership
arrangements by which those who are not yet a member of MFIs, and not yet subject to social
intermediation. She suggested that initial steps might be taken at the regional offices of DHSUD
provided that the capacity of the regional offices are augmented to make them understand better the
principle, etc., or can encourage a partnership with microfinance NGOs and HOAs to start this.

40 Director Dineros asked Dr. Reyes, if this can be part of the outputs of this housing microfinance, and
wanted to see the relationship from the ISF to the MFIs through the local government unit or directly
168 Appendix 15

to MFI, to ISF? Because, in DPUCSP, the local government had a role and made sure that the
resettlement area forms a HOA.

41 Dr. Joji Reyes discussed that institutional arrangements are needed to be able to tap the civil society
organizations, and there should be a menu of things that can be done to identify potential
arrangements in the roadmap, a strategic plan needs to be implemented. This kind of concept needs
to be there as one of the action points that must be considered. The way it is coming out, an
intervention is necessary on the policy side, financing side, and the capacity development side. It is
always a three-point approach which is what we also did to NISUS.

42 Director Dineros read chat message from DHSUD CAR, “should be a cap to funds given to the LGU
so that more can avail and be able to give certain percentage for HMF to sustain?” She read another
chat message from region 7,” the LGU can recover it because they owned a lot developed by the
developers as their compliance.”

43 Ms. Ellen of Region VII said that they could recover it if the LGU owns the land. The provincial
government proposes this because they are the landowner, the site development is through escrow
fund, and the house construction is through Pag-IBIG or SHFC or NHA. LGU can still recover the
land cost, and the Pag-IBIG can recover the house construction.

44 Director Dineros added that it varies from the capability of the home beneficiaries and, as Nen
suggested, capacity development.

45 Ms. Joy de Leon called out for any more comments or questions and confirmed to Director Dineros
if they wanted a copy of the PowerPoint presentation.

46 Dr. Joji Reyes added that she would incorporate some ideas.

47 Director Dineros mentioned the culminating activity in June, and that all will be invited. She presumed
that the first draft will be presented to NEDA as one of the consultative meetings.

48 Dr. Joji Reyes explained that the DFR would be presented again for comments. The whole idea is to
solicit all the comments and reactions from the various groups and then another workshop to present
the consolidated, essentially the basic inputs to the DFR; outline of the roadmap will be there already
that will also be presented to ADB. The DFR is the product of a consultative meeting; and thanked
everyone and concluded the meeting.
 Appendix 15 169

05 Virtual Consultative Meeting with Key Shelter Agencies

Prepared by: Reviewed and approved by:

Joy de Leon Joji Reyes
Date of Meeting: Venue and Time:
26 May 2021 Zoom, 10 AM
Participants

KSA’s Representatives:
1 Florencio Carandany, Social Housing Finance Corporation (SHFC)
2 Philip Robert Flores, SHFC
3 Naden Ortega, SHFC
4 Carmela Cecile Artates, SHFC
5 Isabella Abustan, SHFC
6 Angelo Belvis, SHFC
7 Abigail Marinay, National Housing Authority (NHA)
8 Gillian Capoguian, NHA
9 Cynthia Cariaga, NHA
10 Wilma Mendoza, NHA
11 Cecile Malota, National Home Mortgage Finance Corporation (NHMFC)
12 Princess Riza Ong, NHMFC
13 Romeo Roldan, NHMFC
14 Napoleon V. Ala II, Home Development Mutual Fund (HDMF)
15 MJ Talens, PhilGuarantee

Other Participants:
1 Rowena P. Dineros, DHSUD PHSS
2 Engr. Jessie Figuerrez, DHSUD PHSS
3 Maquee Mc Stay, DHSUD PHSS
4 Edward Maghirang, DHSUD PHSS
5 Loyce Bonto, DHSUD PHSS
6 Noel Telles, DHSUD PHSS
7 Arthur Martinez, DHSUD PHSS
8 Ana Liza Mirador, DHSUD PHSS
9 Dr. Joji Reyes, ADB Consultant/GlobalWorks Study Team
10 Ma. Felicidad de Leon, GlobalWorks Study Team
11 Paul Daniel Isip, GlobalWorks Study Team
12 Jennifer Belizar, GlobalWorks Study Team
13 Gloria Guevarra, GlobalWorks Study Team

Introductions

1. Ms. Rowena Dineros welcomed the representatives of key shelter agencies and other attached
corporations that are present.
2. Ms. Loyce Bonto led the prayer.
3. Ms. Rowena Dineros introduced the representatives of the participating key shelter agencies then
continued to give a background of the Regional Technical Assistance (RETA (9513), a Study on
Scaling Up Green and Inclusive Housing Microfinance in the Philippines. Ms. Dineros discussed the
series of consultative meetings already conducted with various stakeholders to present the survey
results.
4. Ms. Joy de Leon introduced the study team and the team leader, Dr. Joji Reyes. Ms. De Leon and
briefly stated that the presentation of Dr. Reyes would focus on the highlights of the survey results
conducted on various housing microfinance institutions (MFIs), both banks and nonbanks.
5. The presentation of Survey Results Highlights by Dr. Joji I Reyes followed.
170 Appendix 15

Matters Discussed

1 Key shelter agencies’ (KSAs) representatives gave their comments, reactions, and experiences
relevant to the presentation, which are summarized below. These will serve as inputs to the road
map preparation.

2 Collection Efficiency is Still High Despite COVID-19 Pandemic

▪ Mr. Carandang asked about the collection efficiency of MFIs, to which Dr. Reyes responded
that prior to the COVID-19 pandemic, the collection efficiency of most MFIs was close to
100%. Ms. de Leon confirmed that collection efficiency ranged from 97% to 99.7% in 2019
prior to the start of the COVID-19 pandemic in 2020. Even with the pandemic, the collection
efficiency for large MFIs like ASA Philippines declined to 85%-87%, which is still relatively
high.
▪ Mr. Carandang pointed out the difference in the collection efficiency rate of MFIs against
programs of government agencies such as SHFC and NHA. He requested a more detailed
discussion of the collection methodology used by MFIs to reach such level of collection
efficiency.
▪ Ms. Dineros explained that based on studies, lessons learned, experience, and best
practices, microfinance institutions such as the Grameen Bank clearly showed that the poor
could pay if given the opportunity to access finance. However, there should be adequate
learning on credit discipline and adoption of the methodology of group guarantee relative to
payments. It is also best to structure payments based on the borrowers’ income generation
cycle. All these combined, a high range of collection efficiency is reached. Housing
microfinance is one of the modalities that look into as a strategy to match the financial needs
and capacity to earn and pay of member-borrowers. This assistance under the ADB RETA
covers Bangladesh, Indonesia, and the Philippines.

3 NHFMC and other KSAs need to undergo capacity-building activities to fully understand the
microfinance technology, which covers instilling credit discipline, small business finance, and efficient
collection mechanism in exchange for building the capability of MFIs in housing design, construction,
and cost estimation. Mr. Carandang of SHFC raised interest on the need for a liquidity facility for
housing microfinance loans granted by MFIs. Ms. De Leon referred to the mismatch of fund sources
as indicated in the presentation. The main source of funds for housing loan products is the capital
build-up (CBU).
▪ Ms. de Leon explained that one of the highlights discussed by Dr. Reyes was the mismatch,
such as the sources of funds of MFIs since their main product is microenterprise loans, and
they are now deep into granting housing microfinance loans. MFIs have been using the
savings or capital build-up of members that may need to be returned soon as the option to
withdraw as savers is short-term in nature. Thus, housing loans offered by MFIs do not match
the affordable term and amortization amount of borrowers, unlike those offered under the
government’s housing programs, of 15-30 years. Even loans availed of from commercial
banks by the MFIs usually bear the average tenor of loans granted to their member-clients
ranging from a minimum of 6 months to 3 years. Incremental home improvement loans are
generally payable within 3-6 months based on the payment capacity of the clients. What could
have been the full loan amount to complete home improvement features, affordable and
payable monthly amortizations for 3-5 years, will probably be completed in 6 or more loan
cycles. The housing microfinance product manual has a maximum term of15 years for the
banking sector like rural and thrift banks.
▪ Dr. Reyes emphasized that the main feature of housing microfinance and even housing for
the poor is incremental or progressive, arising from the constraint of affordability limits. The
length of time to complete home improvements through incremental housing microfinance
takes too long and becomes more expensive for the poor because the cost of materials
continuously rises over time. If there are ways and means to reduce the numerous cycles so
that MFI clients will be able to improve/build their homes within 1-2 years rather than in 5
years, then that would mean a lot to them because they will end up with more cost-efficient
structures.
 Appendix 15 171

▪ Mr. Florencio shared that SHFC has a Community Mortgage Program (CMP), a housing
finance window for the poor and underprivileged informal settler families. The community
loan is granted to duly established and registered homeowners association which initially
caters to land acquisition to secure their tenure on the land where their homes are built. CMP
has 3 tiers of loan entitlement for the qualified community association, and it starts with land
acquisition, site development and then individual housing construction loans. In general, the
community associations do not proceed to site development and housing construction. The
total package has an interest rate of 2% per annum and a maximum of 30 years of repayment
period. There is a possibility for the SHFC to open their facility to accommodate MFIs and
their clients’ loans as long as they continue collection and other social and financial credit
discipline with their members.
▪ Ms. Mendoza of NHA also expressed interest in the benefits of the study in housing provision
for the poor. NHA provides subsidized house and lot packages and currently with climate-
resilient features in pushing for green housing. NHA’s in-house financing is at an annual rate
of 3% and a maximum term of 30 years. Incremental home improvement will assist the NHA
beneficiaries to improve the toilet and shower in their unit. The biggest challenge faced by
NHA is the relatively poor collection efficiency despite the subsidized housing finance.
▪ Ms. Dineros shared that when they started housing microfinance in early 2000, one of the
pilot sites are the NHA resettlement areas in Bulacan, and Cavite which were being serviced
by MFIs operating in the resettlement/relocation areas. In 2017, a committee hearing led by
Sen. De Lima proposed a bill for eviction of households in the resettlement areas of NHA who
could not pay their housing loan for several months or years. NHA would like to explore the
MFI technology that would strengthen the income generation of the households and instill
credit discipline in the beneficiary ISFs. With the NHA funding source, the General
Appropriations Act (GAA), these resources should be recoverable and need to revolve in
order to serve more ISFs.
▪ Dr. Reyes explained that during the implementation of the DPUCSP, they tried to establish a
partnership between NHA and the MFIs. The pilot activity was started at the tail end of the
project, which reached closure in 2010, and after that, this initiative died down. She also
remembered the discussion with DHSUD regional offices that one of their concerns was if
the local government would initiate site development and start-up units, would there be a
possibility of their beneficiaries to avail of housing microfinance to improve their basic housing
units or to build their homes. Dr. Reyes’ response to that was that various forms of institutional
tie-ups and partnerships could be explored. MFIs start by extending training on
microenterprise finance, for example, teaching them basic financial management principles
so that their business can grow. Once their microenterprise becomes stable, lessons learned
show that these MFI clients seek home improvement loans. Using the initial intermediate
activity of giving livelihood opportunities, MFI clients avail of housing microfinance with the
established credit rating as security and evidence that they can pay because they also
address the fundamental problem of access to finance to engage in stable livelihood activities
for themselves. They gave two kinds of loans, microenterprise loans, and housing
microfinance loans, the idea was to strengthen the affordability limits of these people and
give them the ability to repay the loan. The understanding of many is that a microfinance
institution has more resources for microenterprise finance because microenterprise finance
lends small amounts, and the repayment period is shorter. The assumption is many MFIs
can finance their microenterprise portfolio, so if they are working with a particular group, the
first that they will offer usually is microenterprise finance for small businesses. Then they will
provide training in credit discipline, skills training, and value formation to be able to handle
bigger loans. Also, microfinance is an application of microenterprise principles and
methodology that lead to high collection efficiency.
▪ Ms. Gloria added to the statements of Dr. Reyes by emphasizing the non-financial assistance
given to the clients of the MFIs, training, credit discipline, and so on. Microfinance loans are
not given to just anyone but to clients who have proven themselves with good credit standing
over time. Usually, these old clients who have proven themselves by responsibly paying their
dues do not default in loan amortizations. Housing microfinance may be compared to a
reward for member clients in a way.
172 Appendix 15

▪ Mr. Flores asked if online microfinance like peer-to-peer lending (P2P), crowdfunding would
be considered because they have different technology though it is the trend right now. He
saw loans for house construction materials and home renovation as part of the offer, and they
provide very low-interest rates and short-term, as Dr. Reyes mentioned.
▪ Dr. Reyes explained that they look at the established microfinance institutions as their
respondents. However, the study is geared towards identifying innovative financial products
and services that would encourage climate-resilient, affordable, and inclusive housing. Over
time, the advent of digital technologies would be servicing this sector. They will check if the
groups that Mr. Flores mentioned are with the MCPI. But again, in terms of the respondents,
if Mr. Flores could suggest one or 2 groups that the team can talk to, that would be good.
Also, at the same time, when they start with the design of a fund, say, to offer financing to
these housing microfinance institutions, they would have eligibility criteria that will allow new
technology, new types of institutional arrangements for microfinance lending. Of course, there
are indicators that they need to look at, like collection efficiency, which is very important. The
track record of a particular institution in terms of maintaining prudential norms and
acceptability within the microfinance sector will be part of the eligibility criteria. Suppose this
group can show that they are indeed a practitioner of microfinance. In that case, they have
the capacity to deliver, have the institutional mechanisms, and have at least some forms of
track record in this. This study is meant to encourage the scaling up of housing microfinance.
Director Dineros mentioned that there are approximately 3.7 households considered as ISFs.
An accomplishment of 1 million in the PDP is merely a drop in the bucket compared to the
demand that needs to be served. We need an integrated system and methodology ally need
to scale up housing supply. Otherwise, they will never be able to address even half of the
demand.

4 NHFMC and other KSAs may undergo capacity-building activities to fully understand the
microfinance technology in establishing credit discipline, small business finance, and efficient
collection mechanism in exchange for building the capability of MFIs in housing design, construction,
and cost estimation.
▪ Ms. Ong shared the NHMFC BERDE program, which was launched last March 2021. NHFMC
can partner with MFIs in providing liquidity mechanisms through housing loan receivables
discounting program known as the BERDE program. The program's incentives will also
benefit the MFI housing microfinance borrowers through a low annual interest rate of 3%.
The BERDE program extends interest subsidy to the marginalized sector by 0.5 -1% or an
effective 2.5-2.0 % depending on which income category they fall under. Right now, NHFMC’s
originators are mostly developers. NHMFC is interested in extending the Berde Program to
MFIs. For housing design and construction of climate-resilient housing and infrastructure
services, NHFMC is in constant communication with the International Finance Corporation to
adopt their innovations under the LEAD program for green buildings. EDGE’s innovation is
trying to promote green building for the normal Filipino to help them save from utilities and
those with low income. They can also conduct seminars together with other KSAs regarding
efficient housing design and construction aside from providing liquidity facilities.
▪ Dr. Reyes added that it would be beneficial to the MFIs to learn the mechanics of the BERDE
program and the green technology that is available through EDGE. Under the DPUCSP, the
government housing programs were able to reach ISFs belonging to the third income decile,
but the bottom two deciles still had no access to housing finance. Dr. Reyes is interested in
the program's mechanics to gauge the program's ability to address that gap. Maybe there
could still be some adjustments to the program to reach these bottom two deciles. It is an
interesting and innovative program that lends to reaching middle-income levels on the way
down, maybe to the first decile. Ms. Ong will share the mechanics and IRR of the NHMFC
BERDE program and link with the EDGE through Director Dineros.
▪ Ms. Dineros looked forward to the BERDE program as a valuable input to the HMF roadmap.
The BERDE program is a potential window for microfinance institutions to tap into to serve
the needs of the non-formal sector.
▪ Dr. Reyes agreed and shared that one of the challenges raised was establishing a
“wholesaler,” a financier that would cater to the microfinance institutions or even operate a
liquidity window to the MFIs. The experience that they had in DPUCSP suggests that a
 Appendix 15 173

commercial bank like DBP is very stringent because they adhere to the BSP regulations and
function like a commercial bank. It was difficult for housing microfinance to take off. DBP was
not open to lend to microfinance institutions as their available collaterals were microenterprise
loan receivables with almost 100% collection efficiency. Those that DBP granted loans were
short-term loans, matching the average term of the receivables assigned to the bank. With
so many conditionalities and documentations for them to feel secure in lending to the
microfinance institutions, the MFIs, partner LGUs, and community organizations lost interest
to pursue the loans. In fact, even at the start of this study Dr. Reyes and Dir. Dineros were
asked point-blank if they planned to course the fund through DBP again and knew that the
MFIs were familiar with the difficulties that they experience before in DPUCSP. For Dr. Reyes,
now that HUDCC has become DHSUD and other key shelter agencies are also active in
housing for the poor, definitely the implementing agency for the HMF facility will not be a
financial intermediary like the DBP. Qualified key shelter agencies, particularly the financing
institutions, could be the implementing agencies for this kind of a program other than tapping
the banking sector and going through the experience of choking instead of encouraging the
broadening and scaling up of green housing microfinance initiatives.

5 Pag-IBIG has an affordable housing program with 3% Interest rate per annum and a maximum term
of 30 years but with REM as collateral.
▪ Mr. Napoleon Ala indicated that the discussion on the parameters of microfinance was
comparable to the HDMF Affordable Housing Program (AHP), which is lending at an annual
interest rate of 3%. They can already claim that they already cater to a part of the market, but
with REM as collateral. AHP can lend as much as PHP450,000 and most of the borrowers
are self-employed or manages a small business or a regular employee. They gauge their
income requirement based on their presumed income, and their collection efficiency is good.
In fact, before COVID, the performance loan ratio is around 88%. The self-employed are
updated, and if there are arrears, it is up to 3 months.
▪ Dr. Reyes asked how large the AHP portfolio is and how much is the allotment on an annual
basis to the AHP. What is the ballpark estimate of the number of beneficiaries or clients?
▪ Mr. Ala explained that the AHP was implemented in July 2012. The share of socialized
housing in the taken-out units normally is 25% share. For AHP, it is approximately 18% to
20%. In 2020, they lent out to 3,168 units, equivalent to PHP6.2 billion. Normally it has a
bigger share of the taken-out accounts for the year.
▪ Dr. Reyes recalled that when they were implementing DPUCSP, which ended in 2010, they
had several dialogues with Pag-IBIG about this kind of a program, and it wasn’t there yet. A
concept note was prepared for exactly the AHP. Thus, she’s very happy to know that Pag-
IBIG gave attention to establishing the AHP sing with features that provide access to housing
finance. She suggested to Ms. Dineros that they should look at this program of Pag-IBIG so
that they can see how this might be another mechanism. They don’t have to be limited to just
one, the more the financing institutions involved, the better for the sector. As long as they are
governed by the same underwriting principles, have a common objective, and are based on
similar concepts that drive this housing finance, it would be okay. This is the same type of
approach that they did in Mongolia, for instance, green housing. Not only one bank involved,
but any financial institution that will pass the eligibility criteria may participate.
▪ Ms. Dineros added that this consultative meeting has been very productive because the
learning from each other on how each KSA has developed their own program to address the
big universe of informal settlers’ sector and has proven the number of government entities
that are doing their bit to contribute to the lack of supply for this particular segment of income
earners.

6 Home Guaranty Corporation (HGC), now a subsidiary of Philippine Guarantee Corporation

(PGC), has a credit guaranty program for housing microfinance or small housing loans of
accredited banks but differs from the housing microfinance loans.
▪ Right now, they have 3 accredited banks with guaranty lines: Asia United Bank (AUB),
Kantilan Rural Bank, and Lipa Rural Bank. They are enrolling their small housing with them,
and so far, it was okay. The performance is they do not have calls yet.
▪ Ms. de Leon inquired about the range of the housing loan sizes.
174 Appendix 15

▪ Mr. Talens explained that for the maximum loan size under the HGC credit guaranty of up to
P580,000 for house construction and lot acquisition and up to P300,000.00 for home
improvement and repairs. Acceptable collaterals following BSP guidelines are real estate
mortgage (REM), right of usufruct, leases but not rights-based instruments, which qualify the
loans as unsecured. Accredited housing microfinance clients shall pay a 1% guarantee
premium for enrolled socialized housing loans, will benefit from HGC’s tax shield; however,
the entity will have to establish a trust fund (to the extent of 1% of loan amount enrolled) and
in the event of a call on the guaranty, the entity will be entitled to the outstanding balance in
the trust fund. Again, following the provisions of the BSP circular 678 series of 2010, the
maximum term of the loan 15 years.
▪ Ms. de Leon pointed out that this type of guaranty program and its guidelines for coverage is
not the true essence of credit risk cover. The HGC has veered toward a policy reform of all
its guaranty programs being secured, preferably by real estate mortgages. The HGC will
continue to provide benefits from its fiscal incentives, such as tax shield, but not the credit
risk cover.
▪ Dr. Reyes also added that PhilGuarantee is substituting the 1% trust fund as the collateral.
She also asked Mr. Talens if this policy is for unsecured loans, which Mr. Talens confirmed.
▪ Ms. de Leon raised the concern of the premium fee and trust fund totaling to 2% outstanding
loan balance for unsecured loans as a possible deterrent to scaling up HMF.
▪ Ms. Guevarra shared that Kantilan Bank is a member of MCPI as a microfinance institution.
Maybe inquiries may be undertaken on their HMF program and HGC enrollment.
▪ Mr. Talens explained that it’s the same as a regular guarantee. There are still tax exemptions
of up to 11% on interest income other benefits provided for the guarantee line. Supposedly,
guaranteed accounts have zero risk classification since it is a sovereign guaranty. Still, the
trust fund established by the guaranteed entity is the only source of guaranty payment. The
tax exemption acts as a catalyst for fund mobilization and boosts gains from tax-exempt
income up to 11%.
▪ Ms. de Leon asked about the rationale behind the adoption of such policy reform.
▪ Mr. Talens explained that under the HGC charter, accounts could only be covered by credit
guarantee if loans are collateralized by real estate mortgage (REM). The BSP encourages
the acceptance of other forms of collateral, the tax declarations, right of usufruct, leasehold
contracts, and it is not acceptable in their current charter. Their legal team consulted with the
Office of the Government Corporate Counsel (OGCC). The policy adopted then for guaranty
coverage of housing loans that are not collateralized by REM was to require the insured party
to establish a 1% trust fund against the value of guaranteed loans in favor of the HGC for
fund source at the event of call payment and 1% guaranty premium fee on the outstanding
principal balance of guaranteed loans. HGC will source call payment from the insured’s trust
fund means the credit risk cover for the insured no longer exists. Ms. De Leon then raised
concern on the classification of sovereign-guaranteed loans as zero risk considering the
policy that credit risk is no longer in place.
▪ Ms. de Leon added that the review and update of the housing microfinance product manual
would include the credit guaranty of HGC (under Philguaratee Corp.), specifically on the
policy that the home guaranty corporation has veered away from what had been originally
conceptualized as credit risk cover.

7 Dr. Reyes thanked all attendees from the KSAs for their valuable inputs and how very instructive and
productive today’s session as the meeting served as a venue for the exchange of current programs
under implementation in providing housing for the poor. The draft final report for the Green and
Inclusive Housing Microfinance study, which is essentially a roadmap, will be completed by the end
of June – July 2021. Sec. del Rosario looks forward to the future adoption and implementation of
HMF under his administration.

8 Ms. Dineros happily thanked all the KSAs and the PhilGuarantee Guaranty (Home Guaranty
Corporation) for their participation and inputs to the HMF study. There will be a culminating activity,
and they will be invited once again.

9 The meeting was adjourned at 11:53 AM.

 Appendix 15 175

06 Virtual Consultative Meeting with K-Coop

Prepared By: Reviewed and Approved By:

Gloria Guevarra Dr. Joji Reyes
Date of Meeting: Venue and Time:
26 May 2021 Zoom, 2 PM
Participants

MFI Representative:
1 Maria Anna Ignacio – Kasagana-Ka Cooperative

Other Participants:
1 Rowena Dineros, DHSUD PHSS
2 Dr. Joji Reyes, ADB Consultant/GlobalWorks Study Team
3 Ma. Felicidad de Leon, GlobalWorks Study Team (GWIC)
4 Paul Daniel Isip, GlobalWorks Study Team (GWIC)
5 Gloria Guevarra, GlobalWorks Study Team (GWIC)
6 Jennifer Belizar, GlobalWorks Study Team (GWIC)

Introduction

▪ With only one participant for this meeting, Dr. Reyes went straight to the presentation of the survey
results.

Matters Discussed

Ms. Ignacio shared the following vital factors to consider with regard to the MFIs’ participation in this
program.

1 A review of current policies related to housing microfinance need to be undertaken as come

may no longer be applicable to the present circumstances and needs of the MFIs. Per Dr. Reyes, it
is timely that the head of DHSUD is keen on promoting and scaling up green housing microfinance.

2 Multi-partnerships with different organizations should be pursued.

a. Kasagana-Ka Coop has a partnership with Build Change, an international NGO with a
construction guild that helps design disaster-resistant houses and schools, and trains
builders, homeowners, engineers, and government officials to build them. The cooperative
has a project in a relocation site in Tungko, San Jose del Monte, Bulacan. Seven (7)
households were given grants as pilot projects to show the community how to build resilient
homes using the model and plans of Build Change.
b. They are also in partnership with NHMFC where they have offered to pay in advance the
loans of their members with the agency, and then collect from the members themselves.
c. Dr. Reyes agreed with the points and stated that a menu of different types of linkages could
be developed among the private sector groups (which includes the MFIs, other NGOs, and
financing institutions) and government agencies.

3 MFIs should be categorized according to the size of their loan portfolio and the approach
must be tailored accordingly. The road map should consider what would work best or be suitable
for the big MFIs, the medium-sized ones, as well as the smaller ones. The one size fits all approach
should be avoided when it comes to MFIs.
a. The big ones like ASA and CARD can already afford to partner with the government and
international donor agencies. ASA’s housing initiative, for instance, is supported by ADB. In
the case of CARD, it might not need a loan from ADB because it already has its own banking
group among its 21 institutions. They have the full package. Kasagana Ka Coop, on the other
hand, is one of 4 members of the Kasagana Synergizing Organizations.
176 Appendix 15

b. As for the cooperatives, only involve the credit and savings cooperatives as they are the ones
most likely into housing loans.

4 It is important to do a pilot implementation soonest. For this, identify the top 5 or so MFIs who
are ripe for help and provide the assistance. Capitalize on what is available in the present set-up.
Start a project that can have demonstrable effects and create a bandwagon among the MFIs.

5 For the HLURB’s escrow fund: match the interest that the Small Business Corporation gives for
enterprises which is 2% per annum. Create this special fund focused on housing.

6 Ms. Ignacio also advised that MFIs should not be relegated to being collectors for agencies like
NHMFC or SHFC. They should be able to run the credit program themselves. Most of the MFI staff
do not understand mortgage financing.

7 Concluding matters discussed. Dr. Reyes described the road map as a strategic outline of what we
want to do and how to get there. It will be presented to ADB, with the participation of DHSUD and
possibly NEDA. Ms. Ignacio offered to give her comments on the draft road map. Director Dineros
underscored that she would like to see a pilot project emanate as soon as possible from the road
map to go beyond just a study and policy reforms.
 Appendix 15 177

07 Virtual Consultative Meeting with Private Developers

Prepared By: Reviewed and Approved By:

Clarisse Patricia Reyes Dr. Joji Reyes
Date of Meeting: Venue and Time:
27 May 2021 Zoom, 10 AM
Participants

MFI Representatives:
1 Santiago Ducay, Subdivision and Housing Developers Association (SHDA)
2 May Rodriguez, SHDA
3 Francis Villegas, SHDA
4 Bido Dayao, SHDA
5 Gerwin Panghulan, Organization of Socialized and Economic Housing Developers of the Philippines
Inc (OSHDP)
6 Jefferson Bongat, OSHDP
7 Almira Joy D. San Juan, OSHDP
8 Ryan Tan, OSHDP
9 Fiona King, OSHDP
10 Lawrenz Alvarez, OSHDP

Other Participants:
1 Rowena Dineros, DHSUD PHSS
2 Warlito Quirimit, DHSUD PHSS
3 Maquee Mc Stay, DHSUD PHSS
4 Engr. Jessie Figuerez, DHSUD PHSS
5 Edward Maghirang, DHSUD PHSS
6 Loyce Bonto, DHSUD PHSS
7 Noelle Telles, DHSUD PHSS
8 Ana Liza Mirador, DHSUD PHSS
9 Dr. Joji Reyes, ADB Consultant/GlobalWorks Study Team
10 Ma. Felicidad de Leon, GlobalWorks Study Team (GWIC)
11 Paul Daniel Isip, GlobalWorks Study Team (GWIC)
12 Gloria Guevarra, GlobalWorks Study Team (GWIC)
13 Jennifer Belizar, GlobalWorks Study Team (GWIC)

Introduction

▪ Ms. Rowena Dineros introduced the representatives of the participating MFIs, followed by the
introduction of the DHSUD participants.
▪ Ms. de Leon introduced the members of the study team and staff of GWIC.
▪ Ms. de Leon then briefed the participants on the flow of the workshop – presentation of the findings
of Survey Results Highlights and comments/inputs from MFI participants.
▪ The presentation of revised Survey Results Highlights by Dr. Joji I Reyes followed.

Matters Discussed

MFI representatives gave their comments, reactions, and experiences relevant to the presentation, which
are summarized below. These will serve as inputs to the road map preparation.

12 Mismatch of funding from supply and demand from MFIs to clients

d. Ms. Dineros expressed that the needs and demands of the 3.7 million urban poor or informal
settler families cannot be supported by the budget received by the sector from the
government.
e. For the past 10 years, the sector only receives less than 1% of the government's total budget.
178 Appendix 15

f. Ms. Dineros mentioned the possibility of carving out a portion of the escrow fund from
developers to balance housing compliance. This would address the housing requirement for
the urban poor and informal sector families. Ms. Dineros clarified that it is not just limited to
the Escrow fund but other means and ways that the developers' group can buy into the MFIs.
g. The project of Ayala foundation with Habitat for Humanity in Negros Occidental was
mentioned. The private sector has technologies that could make it easier for MFIs to assist
ISFs financially, physically, etc.
h. Atty. Ryan Tan explained qualifiers of the Escrow fund in the past that for as long as this
program will survive the change of administration and if it will not be deemed to be insufficient
as compliance later on, then there would be no problem.

13 Practicability of incremental housing with regards to the current standards

a. Atty. Tan shared the feedback concerning the target end-users, which are the informal settler
families, and the demand for incremental housing.
b. The current standards, including climate-resilient structures are really expensive and we
cannot be certain if our technical framework is feasible from the perspective of the producer.
It was suggested that if it is possible not to be strictly compliant, but have the foundation be
sturdy enough to still satisfy the standards.
c. Dr. Dineros mentioned the longstanding issue of resolution when it comes to CMP and the
possibility of having a little bit of leeway when it comes to the standards, especially since the
technology, particularly for climate resiliency, is expensive.
d. Dr. Joji brought up the longstanding issue of the standards being anti-poor, imposing a certain
set of usually western standards in our local setting.

14 Affordability of sustainable, green, and climate-resilient housing

a. Dr. Joji mentioned that it is important to find a way to incorporate incrementality and the need
for sturdier materials that incorporate green climate features, but simultaneously consider the
affordability to pay of the clients.
b. Suppose there are performance-based grants that could be made available to developers to
develop this kind of approach, with necessary policy reform and policy initiative from the
government side. In that case, this will kickstart the process.
c. The green housing project in Mongolia funded by the Green Climate Fund and ADB was
discussed as an example. Part of the solution is a lot of capacity development and a lot of
policy reforms, including an exhaustive review of standards that would help commercialize
technology that would help the affordable housing segment of the income population have
access to the products needed.

15 Identify roadblocks early on

c. Dr. Joji expressed the need to recognize possible roadblocks and discuss them at the start
of the road map. These should be resolved in a short-term period (by Year 1) of the road
map.
d. Atty. Tan expressed his concern about clients having difficulty getting building permits.
e. He talked about the time OHSDP donated land for socialized housing credit rather than
putting it in escrow but still encouraging the community to organize into incremental housing.
f. Atty. Tan suggested putting up the necessities such as toilet, septic tank, wall to start, then
the rest can be loaned to the clients. The setback, as mentioned, will be obtaining a building
permit. The only thing they can offer is what they are donating as land. However, it is not
certain if they can exempt or give guidance to LGUs to exempt building standards to allow
for incremental housing.

16 5 Participation of private sector

a. Mr. Ducay suggested designing a specific template on the participation of the private sector.
Encourage more participation through direct and indirect incentives, how we can make use
of escrow funds, simplification of permits and licenses.
b. With respect to the standards, it might not be possible to do away with the standards even if
the projects are for the low-income groups. He suggests revisiting specific templates
prescribed by the ITech.
 Appendix 15 179

17 Evaluation of findings
a. Mr. Ducay mentioned including other success indicators such as how many were given
security of tenure, number of families that moved up the income ladder, and degree of
perception and happiness of individuals reached.
b. He also expressed the importance of doing extensive community participation in the
preparation.
c. Dr. Joji responded and said that these questions are, in fact, in the questionnaire. However,
it is difficult to monitor microfinance progress and achievements at the moment because of
the lack of data in the values metrics.
d. Ms. De Leon shared that the MFIs hardly know the technical aspects of the housing sector.
It becomes a burden to the member, having to keep making repairs or repeating the process
due to errors.
e. Ms. Dineros said that in the presentation of the local shelter plan now, they include another
type of funding through the housing microfinance institution, which will cater to the financing
side of the poor urban communities or poor households at the local level.

18 The meeting was adjourned at 11:50 AM.

180 Appendix 15

08 Virtual Consultative Meeting with BSP, MCPI and Water.Org

Prepared By: Reviewed and Approved By:

Gloria A. Guevarra Dr. Joji Reyes
Date of Meeting: Venue and Time:
28 May 2021 Zoom, 10 AM
Participants

BSP Representatives:
1 Cesar Villanueva, Jr.
2 Maynard Mojica
3 Ed Jimenez
4 Joyce Suficiencia, CLIA, Acting Managing Director

MCPI Representatives:
1 Allan Sicat, Executive Director, MCPI

Water.Org Representatives:
1 Gay Santos, Water.Org
2 Dick Pajarillo, Water.Org

Other Participants:
1 Dir. Rowena Dineros, DHSUD PHSS
2 Loyce Bonto, DHSUD PHSS
3 Edward Maghirang, DHSUD
4 Dr. Joji Reyes, ADB Consultant/GlobalWorks Study Team
5 Ma. Felicidad de Leon, GlobalWorks Study Team
6 Paul Daniel Isip, GlobalWorks Study Team
7 Gloria Guevarra, GlobalWorks Study Team
8 Jennifer Belizar, GlobalWorks Study Team

Introduction

1 Ed Jimenez introduced the participants from BSP, Water.Org, and MCPI, stating their designations
and brief background.
2 Dr. Joji Reyes presented the highlights of the MFI survey of MFI conducted as part of the study to
scale up green and inclusive housing microfinance in the Philippines. Prior to her presentation, she
acknowledged the contribution of BSP CLIA.

Matters Discussed

1 Gloria Guevarra prefaced the discussion properly by acknowledging the support and assistance
provided by Allan Sicat of MCPI during the data gathering phase of the study. This was echoed by
Dr. Reyes and asked for the continued support of MCPI.

2 During the discussion, key issues were raised, and inputs were received from the participants, which
are outlined below.

3 Regulatory and policy interventions needed. There was recognition of the potential of HM as a
market-based solution to the housing needs of the target microenterprise clients. Still, at the same
time, this would entail looking at regulations, structural reforms, and identifying specific policy
interventions. In this regard, Dr. Reyes raised the following key issues for consideration:
 Appendix 15 181

a. Updating of the Housing Microfinance Product Manual. Per Dr. Reyes, many changes
have taken place since this manual was formulated and subsequently approved by BSP in
2008. In particular, the following provisions need to be revisited:
▪ Guarantee mechanism. Ms. de Leon explained that the Manual contains provisions for
the availability of a credit guarantee by the Home Guarantee Corporation or HGC, which
covered housing loans extended by the banking sector. Having been absorbed by the
Philippine Guarantee Corporation (PHILGUARANTEE), HGC no longer guarantees 100%
of the principal and up to 11% of interest. Rather, it provides tax and fiscal incentives for
socialized housing wherein housing microfinance falls, like 11% tax shield on interest
income. The survey results show the need for credit risk insurance against default by
our government corporation and help them move faster. With regard to
PHILGUARANTEE, it was pointed out that the agency only accredits lenders under the
BSP supervision, which means only the microfinance banks are covered.
▪ Collateral substitutes. The primary reason for the non-coverage of housing microfinance
loans of the banks is the lack of confidence in terms of recovering the guarantee exposure
through the use of alternative collaterals like CELA, right-based instruments, long-term
leases, and others. The issue with regard to the low acceptance and non-marketability or
negotiability of these collateral substitutes was also raised by banking MFIs who
participated in previous meetings. This is something that needs to be reviewed for policy
purposes.
b. Policy Direction and Proposed Initiatives of DHSUD
▪ Dir. Dineros stated that the very reason for the TA is to address the growing problem of
housing for the urban poor. In particular, these are the estimated 3.7M informal settler
families (ISFs) that are mostly in the urban areas, a segment that developers and financing
institutions sector seem uninterested or don’t want to engage in. The DHSUD Secretary
is keen on coming up with a pro-poor financing program as less than 1% of the government
budget has been given to the housing sector, and an even lower percentage of this is
allotted for the housing concerns of the poorest segment. This prompted the reintroduction
of the housing microfinance and the related project that HUDCC implemented previously.
▪ Instead of a manual like what was produced under the project, DHSUD is seeking to
formulate a policy that can guide all the housing microfinance players both in the banking
and non-banking sectors and one which they can implement. The designated study team
is tasked to draw a roadmap and policy direction for housing.
▪ Dr. Reyes strongly concurred that for the roadmap, the policy should come first. This is
a lesson learned from previous experience where the program was being carried out even
before the supporting policies were put in place.
▪ That said, there are potential policy interventions that have been put forward to the
DHSUD and can be part of the road map:
▪ Utilization of the escrow fund under the balanced housing development requirement. It is
proposed that a portion of this fund established in connection with the developers’
compliance can be carved out to help finance the MFIs, or to be used as seed money to
pilot housing microfinance projects that can be readily implemented. Guidelines for the
utilization of this fund should be put in place.
▪ A parallel experience was cited by Ed Jimenez in the agricultural sector where a
percentage of the penalties for under compliance with the Agri-Agra Law goes to the
Agricultural Guarantee Fund Pool (AGFP). This was initially lodged with Land Bank but
subsequently transferred to PHILGUARANTEE.
▪ Working with MFIs in developing projects that cater to the lower-income segment to be
counted as compliance with the balanced housing mandate. This requires developers to
allot 20% of the total project cost or the number of housing units for socialized housing.
▪ Sovereign financing in partnership with ADB. This can be similar to ADB’s partnership with
Habitat for Humanity for a financing facility under the Private Sector Operations Group
that can be tapped for housing microfinance with commercial banks as conduits.

4 Data on housing microfinance and tracking system. Director Dineros raised that in the
consultative meetings with stakeholders like the developers, an updated or current data on housing
microfinance is needed to better track the progress and demand in the housing sector. Dr. Reyes
182 Appendix 15

added that while data is available among the banks through BSP, there is not much information or
published data on the non-banking side. There has to be a system to track the activities and other
microfinance operation features like loan portfolio, loan sizes, number of active borrowers, and other
issues and problems. With these not readily available or accessible, tracking and monitoring
progress become difficult or unimplementable.

According to Allan Sicat, MCPI does not consolidate the housing microfinance portfolio of its member
MFIs, but it keeps track of their gross microfinance loan portfolio. The study team will continue to
work with MCPI for the needed disaggregated data

5 Greater participation from the banking MFIs. Ms. Suficiencia of BSP recognized the considerable
progress of the size of HM portfolio among the NGOs but noted the low response from the MF
banks. Dr. Reyes pointed that only 2 banks were able to participate in the non-bank forum and
asked for suggestions on how to better communicate with them and whether there are policy,
incentives, or institutional arrangements to enable more of their entry or participation.

As to the discussion points, Dr. Reyes explained that the study team would like to understand the
same things being discussed in the presentation. Ms. Suficiencia offered assistance in convening
the banks engaged or would like to engage in housing microfinance. However, she clarified whether
there is market demand for the product or service to develop housing products for the target clients.
Dr. Reyes agreed that the market constraints need to be addressed for the banks to come in, like
the production side or types of incentive mechanisms (e.g., performance-based grants for the
adoption of technology for climate-resilient housing).

6 Rediscounting facility. The BSP has this facility available only for the banking MFIs. A question
was raised as to whether the BSP has some latitude to extend this to other institutions. Instead of
a guarantee, this type of facility might be a more attractive incentive. Ed Jimenez recalled that the
Landbank, Development Bank of Philippines, and some private commercial banks have long done
rediscounting but only for enterprise activities. Housing loans which can extend up to 18 months
might be difficult for these banks to cover due to the liquidity aspect. Previously, the microfinance
NGOs were able to rediscount their shorter-term enterprise loans with Landbank and PCFC.

7 Role of shelter finance institutions. Dr. Reyes shared that key agency like the Socialized Housing
Finance Corporation (SHFC), National Home Mortgage Finance Corporation (NHMFC), and Pag-
IBIG are all interested in participating in scaling up housing microfinance. This was expressed during
the consultative meeting held with them earlier. Some are even engaged in financing relevant
projects like green buildings and houses and have joint programs with international NGOs and the
IFC. Pag-IBIG has a program that caters to the low-income group and can be explored whether it
can extend to financing the ISFs. The agencies are interested to know how to link better with the
MFIs for housing. With the rediscounting and guarantee facilities catering mainly to banks, Dr. Reyes
put forth the need for equivalent facilities for non-banking institutions within the mandates of
these shelter agencies.

8 Partnership with Water.org. From the presentation of the survey results, Ms. Gay Santos noted
how 40% of the respondents indicated their need for water and sanitation and saw a potential
partnership with Water.org to address this aspect. The organization has been implementing an
innovative financial business model for more than a decade to provide loans on water and sanitation.
Amidst the constrained resources, Ms. Santos suggested looking at the potential to pool resources
to support the low-hanging fruits while pursuing parallel initiatives on the regulatory side. In addition,
Water.org has institutional partnerships with DSWD, Landbank, and even PHILGUARANTEE. She
reiterated that they could complement the efforts of the DHSUD and the team to address housing
issues and would be available for any separate discussion.
 Appendix 15 183

9 Other Matters:
a. Dir. Dineros informed Allan Sicat that NHMC is interested in linking up with MCPI regarding
their BERDE program that involves buying asset-backed securities related to housing
microfinance. She has forwarded MCPI’s address.
b. Ed Jimenez raised the case of the street dwellers and the homeless, many of whom their
group is helping during weekends. He asked whether or not the DHSUD covers them.
According to Dir. Dineros, the DSWD, is the first response to these individuals, in addition
to the LGUs.

10 The consultative meeting was adjourned at 11:22 AM.

184 Appendix 15

09 First Virtual Consultative Meeting with DSHUD BUREAUS of

HREDRB and ELUPDB

Prepared By: Reviewed and Approved By:

Joy de Leon Dr. Joji Reyes
Date of Meeting: Venue and Time:
08 June 2021 Zoom, 10 AM
Participants

DHSUD Representatives:
1 Dong Carreon, Environmental, Land Use, and Urban Planning and Development Bureau (ELUPDB)
2. Ivan Suminag, ELUPDB
3 Jack Nunag, ELUPDB
4 Roberts Marinas, ELUPDB
5 Ibani Padao, ELUPDB
6 Lasam Belmar, Jr., ELUPDB
7 Ruth Roxas, ELUPDB
8 Julie Torres, Housing and Real Estate Development Regulation Bureau (HREDRB)

Other Participants:
1 Dir. Rowena Dineros, DHSUD PHSS
2 Loyce Bonto, DHSUD PHSS
3 Edward Maghirang, DHSUD
4 Dr. Joji Reyes, ADB Consultant/GlobalWorks Study Team
6 Ma. Felicidad de Leon, GlobalWorks Study Team
7 Paul Daniel Isip, GlobalWorks Study Team
8 Gloria Guevarra, GlobalWorks Study Team
9 Jennifer Belizar, GlobalWorks Study Team

Introduction

1 Dir. Rowena Dineros of DHSUD PHSS welcomed HREDRB and ELUPDB, two bureaus under the
DHSUD that regulate housing, land use and environmental planning and development, and the local
government units have accepted the devolved responsibilities. These two (2) bureaus and the HOA
and Community Development Bureau are the three (3) major departments of the former Housing
and Land Use Regulatory Board or HLURB prior to the creation of the DHSUD. Dir. Dineros briefly
explained the housing microfinance (HMF) study funded by the Asian Development Bank (ADB) and
the rapid appraisal survey conducted among microfinance institutions. She stressed the importance
of the DHSUD regulatory functions in the implementation of an expanded housing microfinance
program with various stakeholders, including the private sector developers, MFIs, BSP, Water.Org,
key shelter agencies, Habitat for Humanity. Dir. Dineros called on Dr. Reyes, the ADB consultant,
to introduce the GlobalWorks Study Team.
2 After introducing the GlobalWorks study team members, Dr. Joji Reyes informed the body of her
stint with the NHA for World Bank projects and the continuing work with the public housing sector in
DPUCSP, NISUS, New Urban Agenda for Habitat 3.
3 Dr. Reyes delivered the presentation of the HMF survey results to the body then opened the table
for comments, reactions, suggestions to the findings presented.

Matters Discussed

1 Dr. Reyes emphasized the last two slides of her presentation as closely linked to the operations of
the two bureaus of DHSUD:
 Appendix 15 185

a. Philippine Development Plan (PDP) 2017-2022, Chapter 10 emphasizes the strategy of

Public-Private Partner Partnerships to enable: Building Safe and Secure Communities
Expanding access to affordable, adequate, safe, and secure shelter in well-planned
communities.
b. The last slide focused on policy issues relevant to PPPs, which were expressed as concerns
in PPPs among MFIs, ISFs, and private developers: (i) minimum land development
standards applicable to donated raw land for relocation/resettlement before ISFs may be
transferred; (ii) minimum home building standards under an incremental housing
(construction dependent on funds raised by the homeowner; (iii) standards and guidelines
(including incentives) related to green housing for ISFs; (iv) standards and guidelines related
to water, sanitation and hygiene (WASH).

2 Dr. Reyes pointed out that the PPP strategy is considered as an effective scheme to close in the
gap between the demand and supply in pro-poor housing. The compliance with the balanced
housing provision of the UDHA will pave the way for housing delivery from the private sector. This
is also related to the concerns of the private sector developers whom the PHSS and GW team have
met. The challenge presented by Dr. Reyes is the link that should be established among the MFIs
operating housing microfinance with balanced housing development to scale up the supply of
affordable and climate-resilient housing.

3 Dir. Dineros referred to the function of HREDRB in setting price ceilings and minimum standards to
consider the situation of incremental home improvements. Ms. Torres responded that their Bureau
refers to this as minimum home-building standards for ISFs based on incremental construction and
affordable limits. In the past, the HLURB concern was to ensure that the structural design is safe
and possibly ready for second story improvement. Even SHFC has always requested lower design
standards, but HLURB has kept the standards of BP 220 for the CMP beneficiary communities. The
green building concept was first introduced by Architect Regala of NHA and a member of the United
Architects Association of the Philippines (UAAP). There has been no follow-through as she already
retired from government service. The initial concept was for larger open spaces to be provided even
on rooftops of medium-rise buildings for planting purposes. Quezon City is an LGU that provides
incentives for green buildings and any green features provided by developers through lower tax
rates.

4 Ms. Torres explained that with the pandemic, the balanced housing compliance had been relaxed.
Only at the midpoint of completion will the developers be required to submit required compliance.
Thus, she asked Dir. Dineros what improvement in compliance to 20% balanced housing means.
Will this ask for consideration of other means to comply with the requirement with the involvement
of HMF?

5 Dr. Reyes explained the two options considered during the meeting with private developers. The
first, as mentioned by Dir. Dineros is the partial utilization of the balanced housing escrow fund. The
second is the balanced housing credits of developers who will provide technical assistance to the
MFIs in terms of design, structural standards, bill of quantities of materials, and cost estimation.
Another developer also discussed its ongoing in-house financed housing program that can be
extended to MFI member-clients. The same developer owns a hardware that provides a straight
credit line with MFIs for the needs of its clients, all under a partnership agreement and, if possible,
claim credit for balanced housing credits.

6 Ms. Torres agreed that these schemes might be brought to the review of balanced housing benefits
and compliance schemes while achieving balance housing provision. Dir. Dineros recommended
the inclusion of balanced housing provision when reviewing the price ceiling for socialized housing
is conducted. Dr. Reyes expressed that with an increased price ceiling, the ISFs remain unserved
as developers build toward the price ceiling. Ms. Torres suggests that the lowered standards and
price ceilings may take a path through the BALAI program. Support to the HMF to be given
accreditation under the BALAI program with the relevant performance-based features of HMF.

7 Dr. Reyes and Dir. Dineros agreed that the BALAI program approach is most appropriate and pilot
186 Appendix 15

projects may be implemented.

8 Ms. De Leon raised the concern of private developers on minimum design standards and permits
for home improvements and land development under the housing microfinance program. Some
developers would like to provide the land with partial land development and housing starts to
communities subject to relocation or resettlement. However, the level of subsidies in kind may not
be within the required development standards of the HREDRB, which constrains such activities.

9 Ms. Torres admitted such situations have arisen and that HREDRB is currently studying and
strategizing to accommodate incremental construction and development, even considering the
community mortgage program where the required open spaces, the width of major and inner roads
as well as alleys between housing units are not complied with and may present difficulties and
danger in the event of a fire. Dialogues and consultative meetings with community-based
organizations, private developers, and MFIs aim to reach acceptable and affordable distinct designs
and rules applicable to such situations.

10 Dir. Weng mentioned considering the balanced housing escrow fund being utilized for the MFIs’
housing microfinance operations. Ms. Torres stated that this would be another methodology of aptly
using the balanced housing funds for the marginalized sector, over and above funding projects of
the LGUs for rental housing. It was agreed that PHSS Division and the HREDRB would work
together in their forthcoming planning and strategizing activities in the near future to ensure that
community-level planning and development concerns are considered in design standards and
compliance thereto.

11 Mr. Padao and Mr. Carreon emphasized their interest in the formation of links with MFIs and the
LGUs. The ELUPDB officers and staff would gain from some form of capacity building to enhance
their knowledge on housing microfinance and introduce microfinance programs in the local
government projects for livelihood and housing.

12 Dr. Reyes noted the Bureau’s role in establishing climate change adaptation and mitigation in
housing settlements and urban development at the local government level. She continued to
emphasize that the response of MFIs reflected the need to adopt such practices to alleviate the
difficulties of ISFs with the occurrence of typhoons causing flooding, damaged houses, landslides,
destruction of roads and bridges. Client members would highly appreciate cost savings features in
payment of utilities.

13 Mr. Carreon expressed strong support for climate resiliency and low carbon emission housing
program at the LGU level. Also, he reacted positively to the inclusion of green technology for housing
development which he acknowledged to be a salient feature of the study being undertaken and the
indication of MFIs to favor green technology. The rain-harvesting facility and solar panels instead
of electricity are some of the features that may be considered depending on the LGU-led climate
change adaptation and mitigation policy and guidelines. Both Mr. Padao and Mr. Carreon informed
the body that these have not been brought down to the community and household level.

14 At this point, Mr. Padao discussed their project entitled Building Climate Resiliency Through Urban
Plans and Designs (BCRUPD), which was a three-year German-government-funded project
implemented in five pilot cities by the United Nations Human Settlements Program (UN-Habitat) in
partnership with the Housing and Land Use Regulatory Board (HLURB) and other Philippine
governmental agencies. It is a highly relevant project which envelops climate resiliency
methodologies that may also benefit the housing microfinance program. 1 Mr. Carreon and Dir.
Dineros agreed to share the lessons learned and best practices from the BCRUPD with the
participation of 5 pilot cities of Angeles, Cagayan de Oro, Legazpi, Ormoc, and Tagum. Dir. Dineros
suggested that ELUPDB request the donor for additional technical assistance to bring down the
climate change adaptation and mitigation guidebook for the LGUs to the community level.

1 www.unhabitat.org.ph (Design Resilience-U.N. Habitat Philippines)

 Appendix 15 187

15 Dr. Reyes appreciated the discussion points raised by DHSUD’s ELUPDB, which will enrich the
study on scaling up green and inclusive housing microfinance. Dir. Dineros and Dr. Reyes
concluded the meeting with words of appreciation for the participation of the bureaus and the inputs
given, which confirm that DHSUD bureaus and their programs are all crucial but need stronger
integration to deliver their respective objectives together with much needed participation in the
adoption of policy and institutional reforms to strengthen housing microfinance and other ongoing
programs of DHSUD.

16 Notes to the meeting have been provided by Dir. Dineros separately to present the regulatory
functions of HREDRB, which relate to socialized housing minimum standards, price ceilings, and
balanced housing compliance:
a. implementation of B.P. Bldg. 220, which covers the levels of socialized housing and P.D.
957, which provides the guidelines for economic housing construction and land development;
b. approval of the price ceilings and loan values for developed land and constructed housing
units are likewise imposed by the HREDRB as guided by the approved type of land
development and housing designs;
c. Imposition of Minimum design standards such as open spaces for parks, playgrounds and
road network are part of the house construction and land development approval;
d. issuance of the necessary permits for housing construction and land development with a
prescribed date of completion except for areas wherein the local governments have accepted
responsibility for the devolved functions;
e. issuance of license to sell and advertisement permit for every approved project depending
on project readiness;
f. Registration of licensed brokers and accredited salespersons for projects
g. Determine and set all pertinent fees for application of permits, licenses, and other approvals;
h. Issuance of cease-and-desist order on developmental works, when necessary;
i. Takeover of unfinished, incomplete, or abandoned projects; and
j. Manage and monitor the balanced housing compliance and development as well as rent
control.

17 A summary of ELUPDB’s major functions is presented below:

a. Ensure the comprehensive land use plans (CLPs) are updated by the provincial governments
in coordination with their towns through the provision of technical assistance in establishing
or review of provincial physical framework plans (PPFPs) and local shelter plans, which also
cover land use and zoning classification;
b. Encourage the creation of local housing boards to strengthen the LGUs in management of
their housing and urban development programs, including establishing fund sources such as
local taxes on real estate properties;
c. Oversee and monitor LGUs and NGOs on housing and urban development, including regular
submission of relevant data and information;
d. Lead the establishment of estates, new towns, prototypes, urban renewal, and government
centers in the country;
e. Promote the use of indigenous materials and new technologies; and
f. Encourage climate change adaptation and mitigation toward resilient housing and
settlements.

18 Meeting adjourned at 11:50 AM.

188 Appendix 15

10 Highlights of the Virtual Consultative Meeting with NEDA

Prepared by: Reviewed and approved by:

Joy de Leon Joji Reyes
Date of Meeting: Venue and Time:
10 June 2021 Zoom, 10 AM
Participants

NEDA Representatives:
1 Ramon Paul Falcon, National Economic and Development Authority (NEDA)
2 Girlie Casimiro-Igtiben, NEDA
3 Dune Aranjuez, NEDA
4 Jade Calay, NEDA
5 Dulce Paloma, NEDA
6 KC Tapnio, NEDA
7 Loida Panopio, NEDA

Other Participants:
1 Dir. Rowena Dineros, DHSUD PHSS
2 Loyce Bonto, DHSUD PHSS
3 Edward Maghirang, DHSUD
4 Dr. Joji Reyes, ADB Consultant/GlobalWorks Study Team
5 Ma. Felicidad de Leon, GlobalWorks Study Team
6 Paul Daniel Isip, GlobalWorks Study Team
7 Gloria Guevarra, GlobalWorks Study Team
8 Jennifer Belizar, GlobalWorks Study Team

Introductions

1. Dir. Dineros firstly thanked the Secretariat of MATATAG for the ADB RETA and presented the study
background and objectives.
2. Dr. Joji Reyes presented the preliminary draft final report to scale up green and inclusive housing
microfinance in the Philippines.

Matters Discussed

During the discussions, below are the key issues raised and questions from participants:

3 Housing microfinance was highlighted in PDP 2011-2016 and PDP 2017-2022 as one of the
housing financing modalities that may help low-income groups. Mr. Falcon shared that housing
microfinance was highlighted in 2011 to 2016 Philippine Development Plan (PDP) and 2017 to 2022
PDP.
a. To help low-income groups serve better and access housing finance opportunities through
housing construction, home improvements, and microenterprise loans.
b. It has been a policy and a knowledge product when they implemented DPUCSP from 2004
to 2010. He also commended DHSUD efforts and initiative in developing further housing
microfinance as a viable financial modality.

Right now, NEDA is pursuing the adoption of alternative housing solutions for low-income markets,
which is a welcome development.

4 Mr. Falcon observations in the presentation, particularly on the survey highlights of rapid appraisal
results, are as follows:
a. Portfolio at risk (PAR) may be used to assess the microfinance industry performance:
The impact of the pandemic COVID-19 and some adverse effects in the microfinance
 Appendix 15 189

landscape may reduce performance indicators. The reported collection efficiency rate was
as high as 97%, but the pandemic may reduce the collection efficiency rate. It could be
highlighted in the report to feel the halt of a microfinance industry performance. Portfolio at
risk (PAR), the proportion of microfinance portfolio with arrears behind 30 years repayment,
may assess the microfinance industry performance on how this could be addressed in green
and inclusive housing microfinance programs or recommendations.
b. Housing design and standard features
How to elaborate more on the descriptions of housing design features? How are the housing
microfinance green and inclusive housing designs and standards visualized? Would this
entail costs or mere executive action?
c. What would be the major features of the fund? Would this entail legislation or mere
executive action? What would be the nature and purpose of this fund? How would it be
sourced following the fiscal responsibility act and justify the fund sources in establishing it?
d. More viable housing rediscounting facility
There was a recommendation for the survey from a more viable housing and rediscounting
facility from a microfinance institution. In 2002, legislation was on the special purpose asset
vehicle. The idea was to incentivize special-purpose asset vehicles or institutions with the
stock corporation to buy and sell rediscounting and restructuring non-performing loans and
non-performing assets. Microfinance may be feasible for such rediscounting window.
Although these are dominated by banks and big corporations but microfinance, as mentioned
in the presentation, the lending tenure is up to Php300,000 loans for a maximum of 10 years.
In 2018, the social housing ceiling was adjusted to Php480,000-Php580,000. How does it
affect the microfinance product manual in terms of the lending tenure that has been
established on the way forward? It could be sharpened to have a more robust and enhanced
presentation of the green and inclusive housing microfinance.

5 Dr. Reyes responses to Mr. Falcon are as follows:

a. To look at the financial statistics and performance of microfinance institutions. Review the
impact of COVID-19 on their operations. Some MFIs are being affected because their
collection becomes slower, but the collection efficiency is around 90%. It is still high compared
to National Housing Authority’s collection efficiency. In terms of other indicators, still looking
at that, PAR will be included to better set financial indicators and performance indicators
during the next round.
b. Many green and inclusive housing microfinance designs and funding are already being
piloted, and a lot of technology is also available. Habitat humanity is piloting some housing
designs and structures, and tools for planning with microfinance institutions. It will be
incorporated into the report and see how more affordable housing and resilient will be
developed. Existing practices already in place will also be cited, whether in the Philippines
or other countries.
c. Dr. Reyes also mentioned that this could be a challenge to the private sector on translating
more of this incremental approach and balancing it with the need for resiliency and climate
low carbon approaches. But again, COVID-19 has affected some of this.
d. Regarding the fund, Dr. Reyes was hesitant to use the word fund instead of financing facility,
which could be lodged in one of the key shelter agencies. The wholesale financing facility
should be designed properly to maintain the sustainability of the MFIs and make sure that
the necessary credential norms and standards are observed. It should be a financing
institution. It can’t be DHSUD or any other organization that is not specialized income. The
policy on lending mechanisms and everything has to be properly written and articulated. The
governance mechanisms of this facility must be put in place to determine who is eligible and
not, and liberalized collateral requirements should also be very clear.
e. To look at the existing laws already in place, including guarantee facilities that need to be
set up to pilot a rediscounting facility. It should be piloted as soon as possible before losing
momentum.

6 Mr. Falcon added regarding the institutional funding arrangement, look at the previous business
model provided by the People’s Credited Finance Corporation (PCFC), a provider of wholesale
microfinance loans to MFIs, banks, NGOs, cooperatives, etc. Which are quite was able to provide a
190 Appendix 15

loan portfolio that started a balance between risk and returns and try to offer them the most liberal
rates possible. Social Housing Finance Corporation can be considered the same as Pag-IBIG, Home
Development Mutual Fund, or other institutions that we can consider serving this purpose.

7 Dr. Reyes explained that it is necessary to have a financing facility that is more specialized in
housing. The most appropriate candidate is the SHFC. NHMF and Pag-IBIG are interested in
participating. It could have several windows in this facility that addresses various needs and could
have guaranty mechanisms that part of the facility.

8 Dir. Igtiben raised the following:

a. The need to contextualize the study on the larger housing: A growing backlog of housing
is reaching almost 6 million. There are many different modalities to respond to this need, and
a bulk of it is coming from the public sector or government but came from the private sector.
Contextualizing microfinance in this whole housing need is very important. To look not just at
the supplies side but also the demand side. What is the current demand for such modalities
in creating housing? Is there a demand for accessing microfinance loans?
b. It is also necessary to incorporate other components like land because it is important in
building housing. Will land be incorporated in the roadmap in the partnership of LGU and
private sector developers with microfinance?
c. In terms of the response of the microfinance institutions on the types of loans that they have
catered to in the last year's programs, we noticed that most of it are on housing improvement
but not necessarily on housing construction. Is there a need or demand for housing
construction, or is it more on housing improvements towards resilient housing? It is also
necessary to look at the market cost of climate-resilient housing, not just climate-resilient
housing but pandemic resilient housing. In the updated PDP, pandemic-friendly or pandemic
resilient types of housing are being pushed. Size and types of housing should be considered
when it comes to pandemic resilient or friendly housing because the currently 20 sqm is not
good enough when you have a family of five (5).

9 Dir. Dineros’ response to Dir. Igtiben is as follows:

a. When presented the request for technical assistance to ADB, it’s like presented data from the
Local Shelter Plan (LSP) generated out of the 1,634 local government units nationwide with
assisted 1,571 LGUs in preparing the Local Shelter Plan. Basically, under the LSP is the
roadmap and the delivery of housing for any local government unit. It incorporates both formal
and non-formal sector housing needs. What was able to find out from the data of LSP since
2012 to date 6.5 million, and 3.69 million out of that is ISF. It was determined in the LSP the
land needed 37,373 hectares. It was 78,000 hectares identified available land for housing,
and it is much greater for housing. However, it is to the local government to identify this land
for housing.
b. When it comes to demand, out of the 6.4 housing needs, almost half of that is ISF. These are
the bottom two or underserved families. We are talking about the bottom four for socialized
housing, but those 3rd and 4th income deciles are being addressed in the informal settlements
in urban areas. This study shows that a pro-poor financing strategy is necessary because
ISFs are hesitant to go to banks due to stringent requirements.
c. During DPUCSP days, there was this strategy to improve first their borrowing capacity and
then seasoned them. This project with ADB in 2010 showed the importance of housing
microfinance because it addresses their entrepreneurial needs and improves their lot. It is
important to do this in microfinance institutions, even the non-banking microfinance
institutions, and scale up now with the onslaught of climate change, disaster, and others. The
head of Kasagana Ka Coop also saw the need to improve their housing incremental because
their clients are those in the resettlement areas beneficiaries of resettlement programs of the
National Housing Authority. The head of this coop is the former General Manager of the
National Housing Authority. How can this bottom 2 do the green housing if it is expensive?
Maybe through housing microfinance technology because they have this savings counterpart.

10 Dr. Reyes's response to Dir. Igtiben includes:

 Appendix 15 191

a. Missing bottom: The Local Shelter Plan (LSP) analysis then needs to fold into this strategy
to set the context as Dir. Igteben was saying. There is an underserved market segment
because LSP has very good tables to determine the missing bottom. In agricultural finance,
they called this the missing middle, which refers to the underserved portion of agriculture
small and medium enterprise. In housing, the missing bottom is illustrated at the prices
offered by the market. There is no sizeable nature and delivery process on how they are
offered for the bottom two deciles, even partially the 3rd decile. It can be contextualized in the
study.
b. To determine who will borrow and afford to borrow: Dr. Reye explains the difference
between effective and notional demand. By looking at the demand and supplies constraints,
it is important to determine who will borrow and afford to borrow. But, even if the target is just
a million out of that, that is still a very sizable number. We should also look at LSP and try to
tighten up the link between Local Shelter Planning and green and inclusive housing
microfinance to make sure that we address the demand side.
c. Land, the answer is the LSP and the PPP. Sometimes, much of our experience land is
provided by the local government that has Public-Private Partnership. Sometimes the land
was provided by the private sector, so the reason for PPP because one of the proof is the
competitive skills and resources in one particular input that is required to the housing
production process. It could be the management, the technology, financing, marketing, or it
could be just the land.
d. To look at the market cost in incorporating green climate features: Looking at market
cost, incorporating green climate features is expensive for us to impose additional standards.
It would be a difficult and technical challenge. We need to think of the affordability constraint,
borrowers, and clients. How do we address this in technical terms? If we look at the strategic
planning, we are also looking at how to incentivize this and eventually how to come out with
the performance-based mechanism and set up incentives to get the private sector to work
on this and then get it up to up a scale that is affordable to adopt this kind of technology. In
other countries, developers could tap up a facility called the green building facility in
Mongolia. They could get reimbursement for the type of green climate features they
incorporate. We should look at that kind of thing and try to see whether that could be folded
into the roadmap. It is a roadmap, and some when you say roadmap, it’s just a way to
articulate better the planning for how we proceed—many of what we did to do needs more
careful study. Many of them need calibration and looking further into how things should be
designed. Unfortunately, I don’t think we have enough resources under this technical
assistance right now to proceed with much more details than what we already have, plus
responding in general to some that published already.

11 Ms. Panopio asked regarding the roadmap on capacitating the housing sector to identify further who
among the actors and sectors should be capacitated and be clearer on the institutional arrangement
and their rules. Also, ensuring that they do not compete to one target market and program offering
but instead complementing.

12 Dr. Reyes agreed to Loida that she had been involved with meetings where some agencies are
buying the same type of service. They must be complementing rather than offering the same types
of products to the same market. Maybe we will be a little bit clearer when we write the text to these
strategic objectives. It will be clearer concerning demands and supply context, the barriers to both
demand and supply that we need to address

13 Ms. Paloma's follow-up question was: What type of tenure and security or legal right needs to be
present by the beneficiaries to access the loans? The target market is ISFs and the urban poor, if
most who avail are those in resettlement projects of NHA as mentioned by Dir. Weng, they have
amortization for this housing microfinance at the same time. How does that work?

14 Per Dr. Reyes, it is not just about the project of NHA and projects of NHMFC. If there is an existing
mortgage, they would most likely not be able to avail of this opportunity unless there is a need to go
back to them and improve upon their service or housing.
192 Appendix 15

In terms of secure tenure, DPUCSP worked a lot on this scale. Because there is a famous study by
De Soto, in the Philippines that it takes about 13 years and about 230 signatures to be able to
formalize the ISF by giving them a transfer certificate of title, it is not the kind of thing that we want
our urban poor to wait for because it's not only time-consuming but also very costly. During DPUCSP,
several types of instruments were developed, called rights-based instruments. These are acceptable
instruments as providing secure tenure, so this would be usufruct, factory arrangements, long term
lease, lease with option to purchase, perpetual lease with the 15 years tenure. Hence, all of these
things and including NHA’s issuance of the certificate of entitlement, CELA, all of these are in the
housing microfinance product manual, which identifies them as eligible rights-based instruments.
There is a way of evaluating them with the valuation methodologies of these RBIs. When we talked
to the bank, they recommend looking over these instruments to design it so that it is much more
acceptable, more broad-based acceptability as a collateral substitute than today because this is
unknown to them. More risks have not yet covered in the existing instruments the way it was
designed. To make this RBI more marketable, acceptable, and recognized as legitimate instruments
for just a collateral risk in the banking system. That is their request, but they are familiar with it
because it is part of the housing microfinance product manual.

15 Ms. Paloma asked how do we ensure the safeguard of housing microfinance? How do we ensure
that the loan proceeds will be used for home improvement and according to green design standards
that we would like to introduce, is it include in the rule of MFIs, or would it be the DHSUD? Will
DHSUD accept the capacity to monitor all of this?

16 Dr. Reyes explained that it would have to go for MFI because it is part of their credit risk, part of their
governance systems. For example, if a wholesale housing facility with them, the entire ESG,
Environment Social Government Framework that must be adhered to in that facility has to specify
the monitoring mechanisms and all the necessary mechanisms that we will put in place for them to
be able to ensure that this goes to right borrower. For example, they need to have eligibility criteria
because not all kind of housing can be financed, we have to make sure, for example, if only the raw
land they do not have access to basic resources, then that’s not qualified under the system, because
no access in water, basic services. If you give them a house, they remain unserviceable. There
should be basic requirements and standards that need to be put in place, and MFIs need to adhere
to that if they borrow under the facility. Of course, DHSUD will monitor the numbers. Still, in terms of
whether they were complying with the program requirements, that must be the undertaking of the
MFI as part of borrowing from a facility targeted towards green and inclusive housing microfinance.

17 Dr. Reyes thanked Ms. Paloma and asked if her question was answered, and her reply was all were
answered. Dr. Reyes recognized all the substantive comments that the participants contributed. It is
very helpful in fine-tuning and improving the draft of the road map that they have and try to be more
responsive to all these concerns. Also, she emphasized that this is just a means of getting additional
inputs on how the strategy should be written before finalizing it for submission.

18 Dir. Igteben requested if they would be given a copy of the final draft for review before the
presentation to the Secretary and the MATATAG.

19 Dr. Reyes and Dir Weng both agreed to give them a copy for their review process because they are
the technical working group of the committee.

20 The meeting was adjourned at 11:41 AM.

 Appendix 15 193

11 Highlights of the Virtual Consultative Meeting with HOACDB

Prepared By: Reviewed and Approved By:

Clarisse Patricia Reyes Dr. Joji Reyes
Date of Meeting: Venue and Time:
11 June 2021 Zoom, 10 AM
Participants

HOACDP-MED Representatives:
1 Dianne Bartolini, Homeowners Associations and Community Development Bureau (HOACDB-MED)
2 Krestiani Tello, HOACDB-MED

Other Participants:
1 Dir. Rowena Dineros, DHSUD PHSS
2 Loyce Bonto, DHSUD PHSS
3 Edward Maghirang, DHSUD
4 Dr. Joji Reyes, ADB Consultant/GlobalWorks Study Team
5 Ma. Felicidad de Leon, GlobalWorks Study Team
6 Paul Daniel Isip, GlobalWorks Study Team
7 Clarisse Patricia Reyes, GlobalWorks Study Team
8 Jennifer Belizar, GlobalWorks Study Team

Introduction

▪ Ms. Rowena Dineros introduced the representatives of HOACDB.

▪ Ms. Dineros then briefed the participants on the flow of the workshop – background of the project,
survey and consultation highlights, and comments/inputs from participants.
▪ The presentation of Survey and Consultation Highlights by Dr. Joji I Reyes followed.

Matters Discussed

Bureau representatives gave their comments, reactions, and experiences relevant to the presentation,
which are summarized below. These will serve as inputs to the road map preparation.

1 Participation of HOACD in the housing microfinance program implementation

▪ Ms. Dineros mentioned that the MFI clients who want to get a loan for housing are the members
of the HOA.
▪ Ms. Bartolini discussed the possible roles the HOACD Bureau can play. These include repairs
and retrofitting in case of disasters and calamities. Ms. Bartolini brought up the issue that there
is no maintenance plan for the existing housing programs in community development.
▪ Ms. Joji asked if HOA can contribute to the community-based shelter resilience planning being
drafted for the roadmap, to which Ms. Bartolini agreed.
2 Shelter activity planning in DHSUD
▪ Ms. Dineros said that because of the incidence of disasters, maybe we can also have a section
on new housing and existing units focusing on resiliency, retrofitting, and maintenance.
▪ She suggested offering this post-registration then have this housing microfinance intervention
where the clients can be matched with them.
▪ She talked about capital build-up where the members can ask for loans gradually. This can be
done in levels, depending on the MFI’s standards. For example, if the MFI sees that you can
now ask for a bigger loan, your next loan can be for the toilet or an additional room. This can
be another possible program from the HOA bureau, rather than them going to five-sixes.
3 The support should not stop after registration.
194 Appendix 15

▪ Ms. Dineros continued that part of the program is that the HOA will assist the clients up until
implementation. It will not stop at registration.
▪ She said that we could make the shelter plan more disaster-resilient, but DHSUD can set
templates, which the HOAs can follow. DHSUD will be facilitating the process for them as a
strategic partner.
▪ Extend the help even after building the house, because again, there are calamities and
disasters that can cause damage to these. It is very important to come up with a resiliency
plan.
▪ Ms. Joji said that we could incorporate this in the roadmap, but these are plans, and we will
still present this to the secretary. We will present very concrete ideas to accelerate the provision
of housing finance to the ISFs.
▪ Habitat for Humanity, even international NGOs involved with HMF, do this, and they call it “self-
help housing.” You complete the house yourself.
▪ Dr. Dineros mentioned the importance of the aftercare service. There are still a lot of concerns
post-registration.
4 Housing design with resiliency perspective
▪ For those developers who want to engage in housing microfinance
▪ Ms. Joji brought up the CMP standard plans for structure and how to improve the CMP structure
in a resilient way. There could be minor and major improvements over time, so how do you
improve a CMP or an NHA unit in a resilient way while still conforming to the standards.
▪ Pandemic resilient housing was mentioned. In terms of this, rather than focusing on a bigger,
more socially distanced space that will cost more, we can focus on access to water, for
example. Given the affordability constraints, we need to be more innovative.
▪ Dr. Dineros mentioned a roof deck for more space, Ms. Joji said that the structures could be
higher for when it floods, and Ms. Bartolini suggested a garden rooftop.
▪ Ms. Joji mentioned the design challenge, which can possibly be included in the roadmap. An
example is to give a scholarship to the student whose design is chosen.
5 A summary of HOA’s major functions is presented below:
▪ Implementation of RA 9904, The Magna for Homeowners & HOAs
▪ Implementation of the Code of Ethics and Ethical Standards
▪ Supervision of HOA Elections
▪ Training of Officers
▪ Implementation of imposable fines and penalties
▪ Allowable fees and contributions in HOAs
▪ Coordination and linkages of HOAs with NGAs and LGUs
▪ Grievance Mechanism and Dispute Resolution
▪ National Registry of HOAs and Federations
6 The meeting was adjourned at 11:23 AM.
 Appendix 16 195

DRAFT FINAL REPORT PRESENTATION TO DHSUD SECRETARY

196 Appendix 16
Appendix 16 197
198 Appendix 16
Appendix 16 199
200 Appendix 16
Appendix 16 201
202 Appendix 16
 Appendix 17 203

MICROFINANCE AND FINANCIAL TECHNOLOGY

A. Financial Technology: Transforming and Disrupting Traditional Processes

The Bangko Sentral ng Pilipinas (BSP) defines financial technology or FinTech as “the application
of technology in financial services in a manner that drives the transformation or disruption of the
traditional processes in the financial system” (Box 1).

The US Chamber of Commerce similarly

stated that FinTech companies have
disrupted virtually every aspect of the
financial industry over the past few years.1 Box 1. Inclusive FinTech
For technology to bring positive disruption, it must
Some consider FinTech solutions as an not only be additive but instead be transformative
additive because they help enhance the in reaching new markets and effectively
experience and promote the convenience of addressing needs, particularly of those who have
long been unserved or underserved. This is
existing customers. Broadly, FinTech called inclusive FinTech.
encompasses many different technologies
(e.g., online banking, mobile payment apps, Source: Bangko Sentral ng Pilipinas, Financial
Inclusion in the Philippines. Issue 8, Series of 2018
e-wallet). Still, the primary objectives are to
change the way consumers and businesses
access their finances and compete with
traditional financial services. Today, FinTech has made it possible to invest, borrow, save, and
transfer funds through online and mobile services without stepping foot inside a bank.

B. FinTech and Digitalization in the Philippines: Slow and Cautious

In the Philippines, FinTech only became possible in 2000, when the BSP enabled internet banking.
However, many Filipinos were still not adept with technology during that time, so it took a while for
FinTech to flourish in the country truly.

Taking a cautiously supportive stance—a test and learn approach—and at the same time
acknowledging the potential introduction of new risks (e.g., cybersecurity issues, reliability of third
parties, fraud, and heightened procyclical forces) in the development of the FinTech sector, the BSP
has for the last several years, been working with the financial industry to enable the expansion of
financial technology in the country. (Box 2)

The first of these “test and learn” pilots started in 2004. At the time, the BSP allowed the two largest
telecommunications companies, Globe and PLDT (through its subsidiary Smart), to pilot new mobile
money products to their customers.

March 2009, the BSP issued its “Guidelines on Use of Electronic Money” in response to the country’s
growing electronic money business led by these two telco giants. Both have launched

1 https://www.uschamber.com/co/run/business-financing/what-is-FinTech
204 Appendix 17
successful FinTech offshoots since—PLDT launched the PayMaya mobile wallet in 2013, while
Globe introduced the now popular wallet card GCash in 2015.

Box 2. The Test and Learn Approach

For the last 15 years, the BSP has taken what it calls a “test and learn” or regulatory sandbox approach
to the application of new technologies in the financial sector.
The idea is that before issuing new rules the BSP prefers to “fully understand the business model, assess
risks and determine how appropriate regulations can be applied to mitigate these risks.” In practice, this
means financial institutions under the BSP’s supervisory jurisdiction may approach their regulator with
proposals for pilot projects or pilot partnerships with FinTech firms that fall outside of the current
regulatory framework.
The BSP typically allows such experiments to go forward for a limited amount of time and a limited
number of users. Only after observing the initial outcomes of the new service does the BSP issue
regulations to guide further development.
Source: J. Schellhase and A. Garcia. Milken Institute. FinTech in The Philippines: Assessing the State of Play

Despite these developments, however, a 2015 country diagnostic done by the Better Than Cash
Alliance (BTCA)2 revealed that 99% of the country's 2.66 billion monthly financial transactions were
still made by either cash or check. Businesses and individuals accounted for only 1% and 0.3% of
electronic payments, respectively.

The BSP’s Financial Inclusion Survey in 2017 likewise showed that even among the small number
of banked Filipinos, only 18 percent had used their account for payments. Nearly two-thirds of 64
percent of Filipino adults preferred to use cash, and 20 percent did not know they could use their
accounts to make payments.

Given the dominance of and heavy reliance on paper-based payments, the Philippine system needed
new directives and standards to facilitate a transition to an electronic retail payments platform. Well
aware of its potential to increase efficiency and overcome traditional barriers to financial access, the
BSP launched the National Retail Payment System in 2015, which aimed “to create a safe,
affordable, efficient, and reliable electronic retail payment system in the country that is
interconnected and interoperable.” In April 2018, the BSP launched InstaPay, a real-time electronic
fund transfer service that can be used for retail or bill payments.

C. The Microfinance Sector: Embracing Digital Technology

The microfinance sector, which is made up of microfinance NGOs, rural banks, thrift banks, and
cooperatives, have had limited capacity to reach out to a wider market, especially in rural areas, and
can only offer a few financial products and services.

Since 2000, the Asian Development Bank (ADB) has been working closely with the Philippine
government, particularly the BSP, and other development partners to support the country’s goal of
increasing the poor’s access to finance and addressing high-income inequality in the country.

2 The Better Than Cash Alliance (www.betterthancash.org) is an UN-based partnership of governments, companies, and
international organizations that accelerates the transition from cash to digital payments to help achieve the Sustainable
Development Goals.
 Appendix 17 205

In 2018 the Microfinance Council of the Philippines, Inc. (MCPI) reported that its members serve five
million active clients, with four million borrowers taking average loans of P10,000. Typically, a loan
is given face-to-face to the borrower by the account officer, whose optimum caseload is 500 clients.
Traditional loan processing is labor-intensive because banking services are brought to the doorsteps
of the clients. It took decades for microfinance to reach its critical scale, with an impressive collection
rate of at least 99 percent.

On the other side of the spectrum is financial technology innovations, which is gaining traction for its
cost-effectiveness and faster service delivery in terms of scaling up. The MFIs are starting to see the
benefits of new digital technologies, including greater efficiency, lower transaction costs for
institutions and clients, and extension into new markets.

In his January 2018 article entitled, Microfinance

and Financial Technology,3 Julius Adrian R. Alip
of CARD-MRI made this observation: “These
developments in FinTech amaze a traditional Box 3. Defining Cloud-based Systems
microfinance practitioner like me for the reason
that through the use of data analytics, microloan
processing can be completed within minutes even
without meeting the client. This deviates from the
usual procedure wherein a first-time microfinance
borrower is interviewed first by the account officer
and unit manager prior to loan disbursement.
Thus, FinTech can solve issues of labor
intensiveness and can effect tremendous scale In a nutshell, cloud services are information
faster.” technology resources that are provided over
the internet. Simply, the 'cloud' is the ability
An ADB report pointed out that investments in to host a software platform or service from a
digital technology, such as cloud-based systems, remote location that can be freely accessed
can instantly bear fruit for the microfinance sector and used anywhere via Internet access.
as their revenues increase with wider reach and Instead of installing a suite of software
higher volume of transactions (Box 3). programs on multiple computers, only one
application log in is required similar to signing
into an email account.
Some MFIs have taken the step forward.
Moreover, since the cloud is a hosted
Microfinance institutions (MFIs)—both NGOs and service, it reduces the need for physical
small banks—in the Philippines have in recent infrastructure and is a much lower financial
years moved into digital technology. This comes investment. Many cloud-based services are
as they pursue operational efficiencies while even designed as a “pay as you go model”.
offering more services to the unbanked and In effect, what was previously only available
underserved portion of the country’s over 100 to large multinationals is now available to the
million population. smaller companies.

In January 2016, ASA Philippines4 interconnected all of its 1,150 branches using a cloud-based
system that was developed in-house for their use.

3 https://www.manilatimes.net/2018/01/25/opinion/analysis/microfinance-financial-technology/376301
4 ASA Philippines is a microfinance non-government organization (NGO) that offers collateral-free loans as little as
PhP5,000 ($93) to women entrepreneurs all over the country. With its first branch established 2004, it has expanded its
operations nationwide to 1,683 branches, and caters to more than 1.8 million clients whom they call as
microentrepreneurs. ASA’s loan portfolio stands at PhP24.25 billion and employs 10,816 staff. Their operations reaches
Itbayat, a town in the northern Philippine province of Batanes, down to Sitangkai is the southernmost municipality of the
Philippines.
206 Appendix 17
Taking this step has enabled ASA to achieve in 2 years what it struggled to do in the first 12 years
of its operations. It expanded to the remotest places in the country and increased its product offerings
fourfold.

After introducing its cloud-based platform, ASA’s net income jumped more than 150% in 2016 from
a year earlier, while its loan portfolio climbed 57% in the same period. Its loan portfolio further
increased by an annual 52% in 2017.

Moreover, the cloud-based system helped diversify its products. From just two kinds of loans—
business loans as well as water and sanitation loans—it has added 7 other loan products that include
educational financing, housing loans, and agriculture financing. ASA considers diversifying its
portfolio as the most important achievement with this technology. Managing multiple loans would not
have been possible without the cloud system.

In an interview with ADB, ASA Philippines President and CEO, Mr. Kamrul Hasan Tarafder, had this
to say: “We used to be known as a company with only paper and pencil, but now we have an
automated system. Now I can check our financial standing any moment, anytime. Previously, I had
to wait almost until the end of the month to understand the performance, audited status of the
institution, profitability, portfolio quality. That gave us the courage, both the management and the
board, for greater expansion. Our system helped us to get even to remote places, we are in Itbayat
and Sitangkai.” (ADB news feature, 18 September 2018)

The BSP is fully aware that digital technology offers huge financial opportunities for micro-lenders
and has supported microfinance banks as they have adopted this innovation in recent years.

 In 2017, Cantilan Bank, Inc, a leading rural bank based in Surigao del Sur and established in
1980, was the first in the country to seek the approval of BSP to adopt a cloud-based core
banking system. In keeping with its “test and learn” approach, the BSP gave the green light
to Cantilan Bank to proceed. With the support of the BSP and a US$150,000 grant from the
ADB, Cantilan Bank migrated its core banking processes to a cloud-based system operated
by Oradian, a global technology company focused on expanding financial inclusion in
emerging markets.

Commenting about this initiative and partnership, the late BSP Governor Nestor Espenilla Jr.
stated: “The pioneering introduction of cloud banking in the Philippines is a key moment in
solving the challenges of financial inclusion. Cloud technology can upgrade the
competitiveness of rural banks and enable them to provide affordable, high-quality financial
services. With this in mind, we are excited to support and observe the collaboration of ADB,
Cantilan Bank, and Oradian.” (ADB News Release, 26 July 2017)

 Another microfinance-oriented rural bank CARD Bank, Inc., also explored the core banking
system (CBS), a centralized banking software used to support a bank’s regular banking
transactions. CARD Bank invested in advanced technologies and banking systems for them
to be able to cope with trends in banking. Most importantly, they believe that through digital
innovations, they will create more value for their clients.

In 2017, CARD Bank launched its mobile banking service called konek2CARD to serve its
growing multi-channel of customers. It allows the clients of CARD Bank to enjoy a hassle-
free banking transaction anytime, anywhere using their smartphone.

By downloading the konek2CARD app in the Google play store, clients can link their CARD
Bank savings accounts to the app and use it to check their account balance and transaction
 Appendix 17 207

history, pay loans, transfer funds, and deposit (cash in) and withdraw (cash out) funds. Clients
will also be able to pay bills and buy e-load. CARD Bank also organized a pool of
konek2CARD agents in every key area where it operates. The konek2CARD agent is CARD
Bank’s partner in the community.

In 2018, CARD Bank made history within the microfinance industry by launching its digital
cash machine (DCM). The DCM allows CARD Bank clients to withdraw their savings even
without using their Matapat ATM card or pledge savings passbook. Their clients can now
easily withdraw their savings using the QR code generated in the konek2CARD mobile
application.

To date, CARD Bank has more than 100,000 konek2card users and eleven branches with
DCM.

As of 2018, the Rural Bankers Association of the Philippines (RBAP) and its 454 member banks—
some of whom are microfinance banks—have taken the steps in preparation for the digital shift,
including a move to cloud-based core banking technology.

The direction right now is to achieve a much-needed change in the core banking system. This is
going to be a foundational enabler, aligned with regulations and business opportunities. Everybody
is now looking in that direction. No one wants to be left behind in terms of relevance to clients and
sustainability.

C.1 AppendPay: The Next Generation Mobile Application and Online Platform

A discussion on financial technology for microfinance will not be complete without including
AppendPay, which was launched in April 2021. This is a collaboration between leading software
solutions company Multisys Technologies Corporation and APPEND, Inc., the first microfinance
network in the country.5 Envisioned to be the next generation online system and mobile application,
AppendPay seeks to ease business processes and create seamless transactions for APPEND’s 8.5
million participating microfinance members. It will link APPEND members around the country to a
wide array of microfinance platforms and eCommerce channels. Once operational, it will allow users
to:

 Borrow and withdraw money

 Pay and deposit money
 Transfer money to other AppendPay users
 Pay bills
 Top up mobile with the prepaid load
 Donate

AppendPay aims to expedite the process of approving and disbursing microfinance loan proceeds
to its members. Apart from providing them with a convenient and secure environment for their
microfinance and money transactions, the system will also encourage transparency within the
organization and lessen human error. Not only will the AppendPay technology better service the

5 APPEND Inc. was established in 1991 as a network of microfinance NGOs to mobilize resources and facilitate the growth
and viability of its member NGOs using microenterprise development as a strategy. It is known as the pioneer group of
microfinance NGOs in the Philippines. The APPEND network is presently made up of the following member organizations
and partners who use the platform of microenterprise development to reach out to poor people: (1) Alalay Sa Kaunlaran,
Inc. (ASKI), (2) Kabalikat Para Sa Maunlad Na Buhay Inc. (KMBI); (3) Taytay Sa Kauswagan, Inc. (TSKI); (4) Tulay sa
Pag-unlad, Inc.; (5) Katuwang Resource Center Incorporated (KRCI); (6) People’s Alternative Livelihood Microfinance
Foundation of Sorsogon, Inc. (PALMFSI); and (7) HOPE, Inc.
208 Appendix 17
APPEND members, it will also help underserved sectors in the country through the promotion of
electronic service inclusion. This will provide additional livelihood opportunities in remote areas and
offer alternative and secure credit services.