The State of Housing Finance in the Philippines

RBAP-MABS Deputy Chief of Party Meliza Agabin shares her learnings from the Housing Forum held on December 7 at the Asian Institute of Management (AIM)
Professor Veronica Cacdac Warnock, a Visiting Professor at the Asian Institute of Management (AIM), highlighted findings of her comparative assessment of housing finance around the world at the forum to rethink housing policy, reshape the housing and urban landscape, and reinvigorate communities. The cross-country study conclusion indicates that countries with stronger legal rights, better provision of credit information, and a less volatile macroeconomic environment have larger housing finance system.
Based on these variables, according to the study, the “Philippines lags behind other countries in the provision of housing finance because its bankruptcy and collateral laws are not conducive to the provision of housing finance, and its credit information systems are not strong enough to allow lenders to easily assess the riskiness of prospective borrowers.”
The forum, held on December 7 at the Asian Institute of Management (AIM), was attended by senior executives and leading representatives of the government, banking sector, private business developers, non-profits, and academic community.
The forum was intended as the first of a series of conversation about housing issues in the country with the intention of finding out what strategies work and how every sector can contribute to addressing the demand and supply constraints in the Philippines where the population is quickly urbanizing. In 2005, the country’s urban population comprised 62.7%; by 2030 urban population is projected to comprise 77% of the Philippine population. As a consequence, the urban population slum is expected to increase in number (close to 23 million) and will make up more than 43% of the urban population. Providing decent and affordable housing for them as well as others at the bottom of the economic pyramid becomes a major challenge. Discussions during the forum point to the need to scrutinize past government policies and strategies on housing, and the imperative of using a different set of lenses for crafting more effective policy and regulatory options that ensure the poorer sector really benefit.
The presentation made by the USAID-supported RBAP-MABS Program on the initiative to support rural banks in offering and developing housing microfinance products emphasized why it is important for banks to focus more on character-and-cashflow-based lending rather than only collateral-based lending.  The presentation also emphasized the response of private rural banks to the demand for housing microfinance without the need for government wholesale funds and/or guarantees. Rural banks have so far served mostly the demand for incremental home improvement and repairs of micro business owners, a market that rural banks are familiar with. They also finance clients who are incrementally building their homes step-by-step.

RBAP-MABS Deputy Chief of Party Meliza Agabin shares her learnings from the Housing Forum held on December 7 at the Asian Institute of Management (AIM)

Professor Veronica Cacdac Warnock, a Visiting Professor at the Asian Institute of Management (AIM), highlighted findings of her comparative assessment of housing finance around the world at the forum to rethink housing policy, reshape the housing and urban landscape, and reinvigorate communities. The cross-country study conclusion indicates that countries with stronger legal rights, better provision of credit information, and a less volatile macroeconomic environment have larger housing finance system.

Based on these variables, according to the study, the “Philippines lags behind other countries in the provision of housing finance because its bankruptcy and collateral laws are not conducive to the provision of housing finance, and its credit information systems are not strong enough to allow lenders to easily assess the riskiness of prospective borrowers.”

The forum, held on December 7 at the Asian Institute of Management (AIM), was attended by senior executives and leading representatives of the government, banking sector, private business developers, non-profits, and academic community.

The forum was intended as the first of a series of conversation about housing issues in the country with the intention of finding out what strategies work and how every sector can contribute to addressing the demand and supply constraints in the Philippines where the population is quickly urbanizing. In 2005, the country’s urban population comprised 62.7%; by 2030 urban population is projected to comprise 77% of the Philippine population. As a consequence, the urban population slum is expected to increase in number (close to 23 million) and will make up more than 43% of the urban population. Providing decent and affordable housing for them as well as others at the bottom of the economic pyramid becomes a major challenge. Discussions during the forum point to the need to scrutinize past government policies and strategies on housing, and the imperative of using a different set of lenses for crafting more effective policy and regulatory options that ensure the poorer sector really benefit.

The presentation made by the USAID-supported RBAP-MABS Program on the initiative to support rural banks in offering and developing housing microfinance products emphasized why it is important for banks to focus more on character-and-cashflow-based lending rather than only collateral-based lending.  The presentation also emphasized the response of private rural banks to the demand for housing microfinance without the need for government wholesale funds and/or guarantees. Rural banks have so far served mostly the demand for incremental home improvement and repairs of micro business owners, a market that rural banks are familiar with. They also finance clients who are incrementally building their homes step-by-step.