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Economy

Palace allows govt agencies set up provident funds

August 2, 2007 9:43pm
President Gloria Macapagal Arroyo has allowed government agencies to establish provident funds as an alternative source of loan financing and welfare benefits to their employees.

"The Provident Fund shall serve as a savings and loan credit facility that may cater to the needs of government officials and employees and shall provide supplementary welfare benefits from the Fund," the President stated in Executive Order (EO) 641.

Employees are encouraged to contribute as much as they can to the fund and not withdraw their share before retirement or separation. They should also have "strong legal protection with government enforcement capabilities against the loss of provident fund assets due to fraud, theft or fiduciary mismanagement," the order said.

Funding sources can include members’ contributions, initial government agency counterpart contribution, and cash contributions from future savings. A board of trustees, with equal representation from employer and employees, will manage the fund "prudently."

Among the board’s functions are to promulgate and enforce rules, determine the type of loans that may be granted, determine benefits due members, create regional boards, and impose sanctions.

Membership to the fund will be strictly voluntary. All members must also have "guaranteed access" to the fund, as well as equal rights and privileges under it. Government agencies are allowed to establish provident funds from service fees they collect under the General Appropriations Act. Not all state agencies have this kind of income, however.

The Committee on the Protection of Income of Government Employees, headed by Alberto A. Bernardo, assistant executive secretary for internal audit, advocated the passage of the order.

The committee is now working with Land Bank of the Philippines on an entrepreneurial lending program with affordable terms for members using the provident fund as a conduit. - Josefa Labay Cagoco/BusinessWorld
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