3M entrepreneurs to benefit from BSP's microfinance housing program

MANILA, Philippines- The Bangko Sentral ng Pilipinas on Wednesday inked funding for its housing microfinance program, touted as the world's first, which is expected to benefit at least 3 million microfinance entrepreneurs. The central bank has signed a memorandum of agreement with the major developers of the program which includes the Asian Development Bank and the major proponent, the Housing and Urban Development Coordinating Council. The ADB spent $30 million in technical assistance and seed financing for the program. The scheme would allow low-income borrowers access to micro-financing to build low-cost houses. The scheme uses a flexible collateral system and calls for small but frequent payments. The program is set to be jointly jointly implemented by the BSP and HUDCC with participating banks initially led by the Development Bank of the Philippines. "Poor people don't have the big incomes that will allow them to pay big monthly amortizations. Using the microfinance techniques, they can generate savings and pay for their loans," Vice President and housing czar Noli De Castro said at the MOA signing ceremony. BSP deputy governor Nestor Espenilla Jr. told reporters that the program initially targeted about 3 million existing microfinance entrepreneurs who were already familiar with the concepts and discipline of microfinancing. "They are the natural targets of the program because they already have the cashflow that would support micro housing loans," Espenilla said. Espenilla told reporters over the weekend that the micro-loan model has been tried and tested among low-income borrowers already used to schemes such as the traditional "paluwagan" and "hulugan" models. "To start with, housing loans already have a very high repayment rate. It's in the culture of the Filipino to want to own a home and not to lose it," Espenilla said. Espenila explained that the Housing Microfinance Product involved the application of microfinance principles and best practices to the provision of housing finance for home improvements, house construction as well as house/ lot acquisition. He said the home improvement loans have a maximum of P150,000, similar to microfinance loans, while house construction and acquisition may be up to P300,000. As an incentive to participating financial institutions, Espenilla said the product would be classified as a type of microfinance loan which would enjoy the incentives granted to regular microfinance loans such as no collateral requirements or the acceptance of collateral substitutes, as well as simpler documentary requirements. - GMANews.TV