Philippines: Capacity Building for Housing Microfinance · TA 4293: PHILIPPINES CAPACITY BUILDING...

Technical Assistance Consultant’s Re

port Project Number: December 2009

Philippines: Capacity Building for Housing Microfinance (TA 4293-PHI) P

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

F C

repared by GHK International Ltd. UKG

or: Development Bank of the Philippines (DB P) and Housing and Urban Development oordinating Council (HUDCC) Philippines

Report

December 2009

UK GHK International

Volume 1 Main Report

Final

TA 4293: Philippines Capacity Building for

Housing Microfinance

TA 4293: PHILIPPINES CAPACITY BUILDING FOR HOUSING MICROFINANCE FINAL REPORT

VOLUME 1: MAIN REPORT

December 2009 PAGE i

TABLE OF CONTENTS Page

1. INTRODUCTION ................................................................................................................. 1

2. UNDERSTANDING OF THE TECHNICAL ASSISTANCE.............................................. ... 3 2.1 The DPUCSP Framework for Developing Urban Poor Communities............... ... 3 2.2 The Consultants’ General Approach and Methodology.................. ..................... 4

3. DPUCSP FINANCING FACILITIES IN RETROSPECT ...................................................... 8 3.1. Status of Part A: Site Development and Distribution of Secure Tenure ............ 8 3.1.1 LGU Financing and Subprojects ................................................................. 12 3.1.2 HOA Financing and Subprojects ................................................................. 17 3.1.3 PPP Financing and Subprojects.................................................................. 19 3.2 Status of Part B: Shelter Finance for Low-Income Communities ...................... 21 3.2.1 Linking MFIs to LGUs ................................................................................... 24 3.3 Overall Project Implementation Status for Parts A& B ....................................... 27

4. KEY ISSUES, RECOMMENDATIONS, AND ACTIONS TAKEN...................................... 29

5. SHELTER SECTOR POLICY SUPPORT ......................................................................... 36 5.1 Setting of Social Housing Sector Reform Agenda .............................................. 36 5.2 Institutionalizing Market-Based And Accessible Housing Finance .................. 38

5.2.1 Approval of the Housing Microfinance Product Manual .......................... 38 5.2.2 Accreditation of Banks Implementing Housing Microfinance .................. 40 5.2.3 Partnership with Rural Banking Sector ...................................................... 41

5.3 Securing Government Owned Land for Low-Income Housing.......... ................ 41 5.4 Enacting Reform Measures to Provide Secure Tenure....................................... 41

5.5 Enhancing Private Sector Participation in Socialized Housing Supply ............ 43 5.6 Policy Impacts of the Advisory TA ....................................................................... 44

6. CAPACITY BUILDING ACTIVITIES ................................................................................ 45

6.1 Housing Microfinance Forum ............................................................................... 45 6.2 Knowledge Management and Appraisal Tools ................................................... 46 6.2.1 The DPUCSP Website .................................................................................. 46 6.2.2 The DPUCSP PPMS ..................................................................................... 46 6.2.3 The HOA Appraisal Tool ............................................................................. 47 6.3 Supplemental Technical Assistance............................. ....................................... 48 6.3.1 PPPs for Sustainable Low-Income Housing............................................... 48 6.3.2 e-Tools for Pro-Poor Housing ..................................................................... 49 6.4 Case Studies................................................................................. .......................... 50



December 2009 PAGE ii

7. CONCLUSIONS AND THE WAY FORWARD...................................................................51 7.1 Summary and Conclusions .................................................................................. 51 7.2 Forging Ahead ....................................................................................................... 52

LIST OF APPENDICES Appendix 1 The Technical Assistance Framework Appendix 2 D-PPMS: Summary of DPUCSP Subprojects under Part A Appendix 3 DPUCSP Presentation on CAP Process Appendix 4 DPUCSP Process and Approval Chart for Part A Appendix 5 DPUCSP Presentation on the Financing Flow for Part A Appendix 6 D-PPMS: Summary of DPUCSP Subprojects under Part B Appendix 7 DPUCSP Presentation on MAP Process Appendix 8 DPUCSP Process and Approval Chart for Part B Appendix 9 DPUCSP Presentation on the Financing Flow for Part B Appendix 10 D-PPMS: Disbursement Report Appendix 11 The Urban Land Reform Conference Policy Action Plan Appendix 12 Urban Land Reform Conference Proceedings Appendix 13 HUDCC Policy Paper on Housing Microfinance Appendix 14 Housing Microfinance Product Manual Appendix 15 BSP Memorandum Circular on Housing Microfinance Appendix 16 Memorandum of Agreement between HUDCC and BSP Appendix 17 Draft EBI Housing Microfinance Product Manual Appendix 18 Memorandum of Agreement between RBAP, DBP, and HUDCC Appendix 19 Omnibus Guidelines on Land Proclamation Appendix 20 Primer on Land Conversion Appendix 21 Draft Ordinance for the Creation of a Local Housing Board Appendix 22 Preparing A Shelter Plan Appendix 23 HUDCC Policy Paper on Rights Based Instruments Appendix 24 Highlights of the 1st and 2nd Inter-Agency Conference Workshop on

Accelerating the Distribution of Secure Tenure through Rights-Based Secure Tenure Arrangements



December 2009 PAGE iii

Appendix 25 Draft Executive Order on “Accelerating the Distribution of Secure Tenure

through Rights-Based Secure Tenure Instruments Appendix 26 Draft Implementing Guidelines for Rights-based Instruments Appendix 27 Draft Standardized and Harmonized Rights-based Instruments Appendix 28 HLURB Memo Circular No. 25 Appendix 29 Policy Impact Assessment of the Technical Assistance (new JIR Appendix 30 DPPMS Summary of Capacity Building Activities Appendix 31 Impact Assessment of the Capacity Building Activities JIR Appendix 32 Draft Procurement Guidelines for LGU Subprojects Appendix 33 The DPUCSP Website Appendix 34 Draft HOME Indicators Scoring Sheet Appendix 35 Case Study for Butuan Appendix 36 Case Study for Enterprise Bank, Inc.

ABBREVIATIONS

ADB – Asian Development Bank ALMANOVA – Alyansa ng Maralita ng Novaliches ASHI – Ahon sa Hirap, Inc. ASKI – Alalay sa Kaunlaran, Inc. BAC – Bids and Awards Commitee BSP – Bangko Sentral ng Pilipinas CAP – Community Action Plan CARD – Centre for Agriculture and Rural Development, Inc. CBO – Community-based Organization CCT – Center for Community Transformation CDS – City Development Strategy CEPEDECO – Cebu People’s Development Cooperative CEV – Community Economic Ventures, Inc. CMP – Community Mortgage Program CREBA – Chamber of Real Estate Builders Association Inc. CRIFI – Capiz-Roxas Islamic Foundation, Inc. CWS – Cities Without Slums DAR – Department of Agrarian Reform DBP – Development Bank of the Philippines DED – Detailed Engineering Design DENR – Department of Environmental and Natural Resources DOH – Department of Health DPUCSP – Development of Poor Urban Communities Sector Project DPWH – Department of Public Works and Highways



December 2009 PAGE iv

EBI – Enterprise Bank, Inc. ECC – Environmental Compliance Certificate EGGAR – Engineering, Geological, and Geo-hazard Resettlement Report FS – Feasibility Study GHK – GHK International GK – Gawad Kalinga HDMF – Home Development Mutual Fund HGC – Home Guarantee Corporation HLURB – Housing and Land Use Regulatory Board HOA – Homeowners Association HUDCC – Housing and Urban Development Coordinating Council IEE – Initial Environmental Examination IMPACT – Integrated Approaches to Poverty Reduction at the Neighborhood Level JFLFI – J.F. Ledesma Foundation, Inc. KMBI – Kabalikat para sa Maunlad na Buhay, Inc. LED – Local Economic Development LGU – Local Government Unit LOI – Letter of Intent LRA – Land Registration Authority LUPAHO – Local Urban Poor Affairs and Housing Office MAP – Microfinance Availment Plan MFC – Microfinance Resource Center MFI – Microfinance Institution MOA – Memorandum of Agreement MRB – Medium-Rise Building NGO – Nongovernment Organization NHA – National Housing Authority NHMFC – National Home Mortgage Finance Corporation NSLP – North and Southrail Linkage Project NWTF – Negros Women for Tomorrow Foundation, Inc. OP – Office of the President OPG – Operating Policy Guidelines PBSP – Philippine Business for Social Progress PCFC – People’s Credit and Finance Corporation PCUP – Presidential Commission on the Urban Poor PMO – Project Management Office PPMS – Project Performance Monitoring System QCBS – Quality-Cost Based Selection RFP – Request for Proposal RMC – Regional Marketing Center SEAD – Sustainable Economic Activity Development, Inc. SHDA – Socialized Housing Developers Association SHFC – Social Housing Finance Corporation SP – Sangguniang Panglungsod SPIU – Subproject Implementation Unit TA – Technical Assistance



December 2009 PAGE v

TOR – Terms of Reference TPP – Tulong Pabahay Program TSKI – Taytay sa Kauswagan, Inc. TWG – Technical Working Group USCIP – Urban Services and Community Infrastructure Project WBIII – Wholesale Banking III

TA 4293: PHILIPPINES CAPACITY BUILDING FOR HOUSING MICROFINANCE

FINAL REPORT

December 2009 PAGE 1

1. INTRODUCTION

In accordance w ith the con tract be tween GHK I nternational, U nited K ingdom ( GHK) and the Asian Development Bank (ADB) covering the Philippines Capacity Building for Housing M icrofinance Advisory T echnical A ssistance, this Fi nal R eport ha s be en prepared for submission to the ADB and the co-executing agencies (EAs) of the ADB-funded Development o f P oor U rban C ommunities Sector P roject (DPUCSP), t he Housing an d Urban D evelopment an d Coordinating C ouncil ( HUDCC) an d the Development B ank o f the P hilippines ( DBP).1 Since M ay 20 04, t he Advisory T A through t he G HK C onsultants (referred he nceforth in this r eport as the Consultants) has been assisting HUDCC and DBP in implementing DPUCSP, which is funded by a ¥3,318,552,500 loan (US$29.48 million equivalent in current prices) from the ADB.

DPUCSP was designed to make a di rect and significant contribution to reducing both income- and asset-based poverty in the Philippines. The objectives of the Project are to (i) improve the access of poor urban households to secure land tenure, affordable shelter, basic municipal infrastructure, serv ices, and community facilities; ( ii) improve access t o financial serv ices for ho using i mprovement an d livelihood; a nd ( iii) he lp decentralize she lter activities t o st rengthen the cap acity o f l ocal government un its (LGUs) to meet their sector mandates as set out in the Local Government Code. The Project initially targeted the ci ties and first class municipalities outside Metro Manila. However, at the r equest o f H UDCC ba sed on reports an d inquiries from L GUs, the Project‘s coverage has been expanded to all cities and municipalities outside Metro Manila.

DPUCSP ha s t hree components. I n Part A , S ite Development an d Distribution o f Secure Tenure, DBP is relending to qualified LGUs or other project proponents with the support of LGUs, to enable the detailed design and provision of secure, serviced plots in exi sting low-income neighborhoods a nd at identified ne w si tes. Project proponents i nclude private socialized ho using de velopers, no ngovernmental organization (NGOs), and cooperatives approved by DBP. In February 2007, the ADB further approved the inclusion of homeowners‘ associations (HOAs) as eligible project proponents under Part A.

In Part B , S helter Fi nance for Lo w I ncome Communities, D BP relends to l ocally identified intermediaries, which w ill onlend t o po or and l ow-income ho useholds. Eligible intermediaries un der P art B are m ostly m icrofinance i nstitutions ( MFIs)2 but other qualified financial institutions with an established track record in mortgage and/or microfinance l ending may be ap proved f or pa rticipation as appropriate. I n Part C , HUDCC i s t he l ead executing a gency for s trengthening t he de centralized she lter delivery f ramework an d D BP l eads project implementation support. I t i s un der t his component that con sulting serv ices are being prov ided to the proj ect management office (PMO) at HUDCC f or secto r st rengthening an d at DBP f or pro ject implementation support mainly through the ADB-funded Philippines Capacity Building for Housing Microfinance (henceforth referred to in this report as the Advisory TA).

The U S$1.5 million A dvisory T A was envisioned t o help t he G overnment i mplement DPUCSP by building and st rengthening systems to en able t he formulation an d implementation of housing projects that serve the needs and meet the affordable limits

1 TA 4293-PHI Capacity Building for Housing Microfinance, contract for Consultant’s Services between the Asian Development Bank and

GHK International, dated 5 May 2004.

2 MFIs are defined under the project as both banking (rural banks and thrift banks) and nonbanking (NGOs and cooperatives) engaged in microfinance.


FINAL REPORT


of t he t argeted urban poor. M ore spe cifically, t he A dvisory T A ai med t o enable HUDCC, D BP, LGUs, community-based or ganizations (CBOs), an d other p roject proponents formulate and ad opt co mmunity-based mechanisms f or slum upgrading and l ow-income ho using. The Advisory TA was al so pl anned t o ass ist DBP and participating MFIs strengthen their financial systems for financing shelter subprojects for the poor, particularly in relation to the delivery of housing, home improvements, and microenterprise loans to eligible urban poor households. In addition, the Advisory TA was intended t o he lp H UDCC in de signing and conducting sector strengthening activities focused on sustaining the preparation of pro-poor housing programs.

This Fi nal R eport su mmarizes the acco mplishments o f t he A dvisory T A si nce i ts inception in May 2004. The report comprises three volumes.

Volume 1 of the report is structured as follows:

Sections 1 an d 2 prov ide an overview of the r eport, di scuss the D PUCSP framework, an d present t he g eneral ap proach and methodology use d by t he GHK Consultants to implement the Advisory TA;

Section 3 examines the status of t he two DPUCSP financing facilities─specifically Part A and Part B─ and the role played by the Advisory TA;

Section 4 r eviews the key i ssues en countered and the r ecommendations formulated or actions taken through the Advisory TA to address the identified concerns and bottlenecks in DPUCSP Part A and Part B;

Section 5 summarizes the accomplishments ach ieved under P art C with support from the Advisory TA to implement the DPUCSP policy action plan and strengthen the shelter sector policy environment;

Section 6 de scribes the cap acity bu ilding activ ities performed by t he Consultants as part of the Advisory TA, including the knowledge management tools con sisting o f the DPUCSP website and the D PUCSP P roject Performance Monitoring System (commonly referred to as D-PPMS); and

Section 7 presents the Consultants‘ findings and conclusions as well as preliminary r ecommendations for ho w t o m ove the P hilippines she lter sector agenda forward based on the DPUCSP experience.

Volume 2 of the report compi les the v arious tools an d templates produced by t he Consultants throughout the Advisory TA to strengthen systems within DBP, HUDCC, LGUs, and MFIs─in the process helping to develop, finance, and implement pro-poor and low-income shelter projects.

Volume 3 presents the D-PPMS, an integrated, digital project performance monitoring and management t ool de veloped by the C onsultants as part o f t he A dvisory TA t o facilitate the implementation of DPUCSP and other similar projects in the future. The framework of the Advisory TA is shown in Appendix 1 of this report.


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2. UNDERSTANDING OF THE TECHNICAL ASSISTANCE

In this sec tion o f t he Final R eport, t he DPUCSP f ramework i s r eviewed t o help understand t he general ap proach and m ethodology use d by t he C onsultants to implement the Advisory TA.

2.1 The DPUCSP Framework for Developing Urban Poor Communities The urban population of the Philippines continues to grow at an unprecedented rate and by 2010, it was estimated that about 60 percent or more than 50 million Filipinos will b e living i n the urban areas. I n 2002, n either t he housing no r t he l and m arkets were able to cope with the demands posed by the country‘s rapid pace of urbanization, which contributed to escalating urban poverty. Of the estimated 5.5 million urban poor households in 2000, about 1.4 million lived in impoverished slums characterized by (i) inferior quality ho using, (ii) l imited or lack o f access t o ba sic infrastructure services, such as r oads an d footpaths, drai nage, w ater sup ply, and san itation, (iii) i nsecure tenure, and (iv) environmental and hygienic conditions hazardous to public health. The majority of these families also suffered from irregular or limited sources of income and livelihood. T he Philippine G overnment recognized these probl ems as manifested by the President‘s proclamation of war against poverty, and emphasis on redistribution of assets, in her 2001 and 2003 State of the Nation addresses. However, institutions at the national and local levels were weak, unable to expand the urban poor‘s access to basic services, secure tenure, housing and livelihood in a sustainable manner. Against these challenges and constraints, DPUCSP was envisioned by the Philippine Government an d designed by a GHK-led P roject P reparatory T echnical A ssistance (PPTA) Team. As designed, DPUCSP aims to reduce urban poverty in the Philippines through a three-pronged approach that (i) improves access by urban poor households to secure land tenure, a ffordable shelter an d ba sic m unicipal i nfrastructure an d services through the development of upgrading and new sites, (ii) enables access by urban poor households to financial serv ices for housing and livelihood activities, and (iii) st rengthens t he c apacities of na tional and local i nstitutions and project stakeholders for decentralized urban and shelter delivery (Figure 1).

The Philippines C apacity Building for H ousing M icrofinance A dvisory T echnical Assistance (Advisory T A) w as designed with ADB sup port t o help t he G overnment implement D PUCSP, b y st rengthening sy stems to enable the formulation and implementation o f ho using pro jects more ap propriate t o t he needs and w ithin t he affordable limits of the targeted urban poor. The Advisory TA aimed to enable HUDCC, DBP, local government units, community-based organizations, and other project proponents to formulate and adopt community-based mechanisms f or sustainable slum upgrading and l ow-income ho using. It a lso aimed to help DBP and participating microfinance institutions (MFIs) in strengthening their systems, for a more inclusive shelter finance g eared towards the e fficient and sustainable delivery of housing, home i mprovement, and m icroenterprise l oans t o eligible urban poor families. In addition, given the magnitude of the need for affordable shelter amid the country‘s accelerated rate of urbanization, the Advisory T A w as envisioned to strengthen HUDCC, through design and conduct of sector strengthening activities aimed at sustaining t he prepa ration of pro -poor ho using pr ograms an d projects.


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2.2 The Consultants’ General Approach and Methodology

The Consultants‘ general approach and methodology was based on a comprehensive understanding of t he i ssues at stake, knowledge and analysis of the Project‘s political context, previous experience in dealing and working with the project stakeholders, and GHK‘s corporate track record in designing and implementing urban and shelter projects around the world. The following general principles were used:

Facilitating t he prov ision of co mmunity- and de mand-driven ho using f or the urban poor. The Consultants‘ experience worldwide suggests that housing for t he poor can on ly t hrive if t he ne eds, i ncome l evels, an d preferences o f t he t argeted beneficiaries were at the core of the planning and implementation processes. Supply-led proj ects, i ncluding t hose implemented u sing hi ghly cen tralized an d overly bureaucratic procedures, often did not reach the intended beneficiaries because they tended t o produce ex pensive ho using that exceeded the aff ordable limits o f t he targeted p oor. In the P hilippines, t his w as best ex emplified by t he U nified Le nding Program which failed to reach the majority of the urban poor but consumed billions of pesos. A G HK t eam, w orking cl osely with ADB st aff du ring t he p roject preparat ion phase o f DPUCSP, developed a community ac tion pl anning ( CAP) ap proach and template f or the Project. The C onsultants bu ilt on t hese accomplishments an d

Figure 1. The DPUCSP Framework for Developing Urban Poor Communities in the Philippines

PROJECT CONTEXT PROJECT GOAL &

OBJECTIVES PROJECT COMPONENTS &

OUTPUTS

Growing & Deepening Urban Poverty in the

Philippines

Overall Reduction of Both Income and Asset-based Poverty in the Philippines

Lack of secure tenure, basic services, and affordable

housing

Acute constraints in accessing financing for

shelter and livelihood needs

Weak institutional capacities at the national & local levels for decentralized urban and

shelter delivery

Objective 1: To improve the access of poor urban households to secure land tenure, affordable shelter, basic municipal infrastructure, services and community facilities Objective 2: To improve access to financial services for housing improvements and livelihood

Objective 3: To help decentralize shelter activities and strengthen the capacities of LGUs to meet their shelter mandate

Part A: Site Development & Tenure Distribution 30 upgrading sites with over

8,000 household beneficiaries 30 new sites with over 8,000

household beneficiaries

Part B: Shelter Finance for Low Income Communities About 2,300 microfinance

home improvement subloans About 10,000 microenterprise

subloans About 12,000 housing

subloans

Part C: Capacity Building & Implementation Support Implementation Support Sector Strengthening & Project

Implementation Support LGU Financial Strengthening

for Shelter Provision


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facilitated community action planning in eligible DPUCSP subprojects through a highly participatory approach. This was meant to enable poor communities to articulate their urban infrastructure and housing needs in accordance with their willingness and ability to pay.

Promoting a market-based approach, using targeted subsidies only to address instances of market failures. DPUCSP was designed to veer away from subsidized interest r ates which were (i) crowding ou t p rivate sector i nvestments i n housing, ( ii) imposing a heavy fiscal burden on the government, and (iii) constraining the ability of the g overnment to deliver shelter at the m agnitude an d scal e warranted. Hence, DPUCSP‘s successful implementation was premised on the participation o f a wholesale ba nk, DBP, a nd M FIs (both banking and no nbanking) whose D PUCSP financing were offered at market-based interest rates. Subsidies under DPUCSP were targeted to the poorest of the poor and was meant to be delivered through various self-targeting m echanisms which included (i) ad option o f othe r secu re l and tenure arrangements or ri ghts-based i nstruments that po stponed or r educed payments on the land such as lease-to-own or long-term lease; (ii) promotion of the use of ―sweat equity contributions‖ to reduce labor cost and consequently, that of the serviced plots; and ( iii) promotion o f the use o f no ntraditional l ow-cost housing productio n technologies and physical and environmental standards deemed more responsive to the a ffordability con straints of the target be neficiaries. As a last resort, t he use of targeted, up front sub sidies, particularly t o address market failures such as inefficiencies i n t he land m arket were available. Under the A dvisory T A, the Consultants continued to assist HUDCC and DBP in advocating the shift away f rom subsidized interest rates by he lping t o implement, an d promote the po litical acceptance o f, the targeted sub sidy m echanisms pl anned under t he P roject. T his initially included eff orts to establ ish the S helter Fi nance T rust Account an d Local Government S helter Finance Funds; ho wever, po licy d ialogues w ith the con cerned national ag encies, pri marily t he D epartment o f Fi nance ( DOF) and the LGU s underscored the lack of support for these policy initiatives.

Adapting microfinance str ategies and sy stems for financially su stainable housing f or t he po or. The Consultants‘ analysis of m any l ow-income ho using projects in the Philippine indicated financial failure due to poor cost recovery from the targeted beneficiaries. Poor collection pe rformance an d t he consequent m assive subsidies incorporated into the projects made the government‘s low-income housing efforts financially unsustainable. They also perpetuated the myth that the poor cannot save, constricting their ability to access the formal financial markets. In keeping with the design features of DPUCSP, the Consultants recognized that microfinance, rather than conventional financing s trategies, o ffered a promising mechanism for f inancing the urban poor‘s housing and livelihood needs. Earlier discussions with MFIs during the design ph ase o f DPUCSP indicated that existing m icrofinance s trategies and systems, such as the RB 2000 and the Microbanker, can be adapted to f inance the housing an d livelihood needs o f the urban poor. Thus, un der t he A dvisory T A, the Consultants worked with MFIs and the DBP, in an effort to strengthen their capability to i dentify and serv ice t he housing-related microfinance needs of DPUCSP‘s urban poor communities.

Leveraging additional donor funds f or a more cost-effective A dvisory T A implementation. During the project preparation phase of DPUCSP, estimates of the capacity bu ilding r equirements o f H UDCC, D BP, L GUs, M FIs and t he urban poor communities to achieve the goal and ob jectives of the project ranged f rom $10-$15 million. G iven this, t he C onsultants r ecognized that t here was a ne ed to l everage additional funds for a more effective TA implementation. Well aware of this need, the


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Consultants co-sponsored activities w ith USAID‘s Microfinance Policy Improvement Project to brief DBP and HUDCC officials on microfinance best practices. In addition, the Consultants continued to assist HUDCC and DBP in sourcing additional grants for DPUCSP‘s capacity building requirements.

Supporting the D PUCSP P olicy A ction P lan. DPUCSP was pr emised an d complemented by a set of policies that still needed to be enacted or institutionalized. The p olicy actio ns agreed included (i) l iberalizing collateral r equirements to allow banks t o l end against long-term l eases an d other secu re tenure agreements, (i i) improving the implementing rules and regulations for the practice of proclaiming land for socialized housing, and (iii) developing additional mechanisms to encourage the creation of local housing boards. GHK helped to identify many of these policy reform initiatives during t he proj ect prepa ration technical assi stance (PPTA) an d fully understood the analytical and advocacy requirements of the DPUCSP policy agenda. Thus, the Consultants readily supported the policy analysis and advocacy activities of HUDCC and DBP to achieve the policy reform agenda of DPUCSP.

Documenting lessons learned and conducting learning exchanges for sustained pro-poor housing development. A key pro ject component of DPUCSP was sector strengthening for a ccelerated pro -poor ho using de velopment. D PUCSP, at be st, marked the beginnings of concerted efforts between the government and the private sector t o de liver financially sustai nable and market-based ho using t o urban poor communities. It was essential to bridge the widening gap be tween housing demand and sup ply for the urban po or. To fast t rack t he process, lessons l earned no t only from D PUCSP bu t from other similar projects, bo th locally an d internationally, were discussed and incorporated into the Consultants‘ on-the-job t raining and oth er capacity building activities agreed with HUDCC, DBP, LGUs, MFIs and private sector groups eligible to participate in DPUCSP. Information and communications technology (ICT) applications were used to develop electronic templates aimed at expediting the subproject preparation, approval, and implementation of DPUCSP subprojects by the LGUs, MFIs, an d private sector proponents. A web-based proj ect performance monitoring system (PPMS) was developed and made operational by the Consultants to help DBP and HUDCC manage DPUCSP more efficiently and effectively. Figure 2 provides an overview of the Consultants‘ approach and the key tasks performed in the course of implementing the Advisory TA.


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PART A: SITE DEVELOPMENT & DISTRIBUTION OF SECURE TENURE

Key Project Activities

LGUs/Subprojects Identification DBP Accreditation of Eligible LGUs and Other

Proponents LGUs/Subprojects Selection Community Action Plan (CAP)/Feasibility Study

Preparation CAPs/Feasibility Study Review & Subloan Approval Subproject Implementation Plan (SIP) & Detailed

Design Preparation SIP and Detailed Design Review & Approval Subproject Implementation Subproject Monitoring and Reporting

PART B: SHELTER FINANCE TO LOW-INCOME COMMUNITIES

Key Project Activities MFIs/Subprojects Identification DBP Accreditation of Eligible MFIs MFIs/Subprojects Selection Microfinance Availment Plan (MAP)/Feasibility

Study Preparation MAPs/Feasibility Study Review & Subloan

Approval Subproject Implementation Plan (SIP) Preparation SIP Review & Approval Subproject Implementation Subproject Monitoring and Reporting

PART C: CAPACITY BUILDING AND PROJECT IMPLEMENTATION SUPPORT

Key Project Activities Project Promotion Preparation of Project Administration Manual Development of CAP, MAP, SIP, and Feasibility

Study Templates Development of Subloans Appraisal Templates Design and Installation of Project Performance

Monitoring System Project Reporting & Impact Evaluation Design and Installation of MFI systems Training & Learning Exchange Program for Project

Staff and Stakeholders Relevant Housing Policy Analysis & Advocacy

TA Consultants’ Tasks

Review and help finalize the LGU/Subproject Selection Criteria, Guidelines and Procedures

Assist DBP in enhancing its accreditation guidelines for LGUs and Other Project Proponents, as may be required

Facilitate the CAP and Feasibility Study preparation of eligible LGUs/subprojects

Facilitate the review and approval of CAPs and Feasibility studies

Facilitate the preparation of SIPs & Detailed Design Study Preparation

Facilitate subproject implementation Develop and make operational the subproject

monitoring and reporting system for Part A

LGUs, Other Proponents, Community-Based Organizations (CBOs), NGOs, DBP, and HUDCC

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Review and help finalize the MFI/Subproject Selection Criteria, Guidelines and Procedures

Assist DBP in enhancing its accreditation guidelines for MFIs

Facilitate the preparation of Microfinance Availment Plans (MAPs)/Feasibility Studies for eligible subprojects

Facilitate the review and approval of MAPs/Feasibility Studies

Assist selected MFIs in subproject implementation, ensuring that their systems are tailored to the needs of the Project

Develop and make operational the subproject monitoring and reporting system for Part B

Banking and NonBanking MFIs, LGUs, Community-Based Organizations, DBP, HUDCC (including HGC

and NHA)


Design and help implement a cost-effective Strategic Marketing & Advocacy Program for the Project

Formulate and make operational the Project Administration Manual

Develop/Finalize templates for CAP, MAP, SIP Feasibility Studies, and Subloan Appraisal

Design and make operational the Project Performance Monitoring System; assist in project reporting and impact evaluation

Customize and make operational MFI systems for the Project

Design and conduct relevant training, workshops, and learning exchange program for Project Staff and Stakeholders

Design and conduct relevant housing policy analysis and advocacy activities

HUDCC, DBP, Community-based Organizations, LGUs, Other Proponents, Banking and Nonbanking

MFIs, NHA, HGC, NGOs, Donor Agencies

Figure 2. GHK’s Inclusive Approach To Capacity Building for Market-Based, Community-Driven Shelter Microfinance


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3. DPUCSP FINANCING FACILITIES IN RETROSPECT

3.1 Status of Part A: Site Development and Distribution of Secure Tenure

As of the A dvisory T A compl etion date, there were 14 prio rity sub projects in the consolidated l ist prepared by DBP, HUDCC, an d the Consultants for Part A o f t he Project. Of the 14 l isted, t wo were completed, on e was approved bu t ev entually cancelled, four were approved in 2008 and another in 2009, while the rest have been stalled i n different stages o f prepa ration and processing an d are expected t o be approved by the second quarter of 2010. The approved and completed subprojects required a total f inancing of P519 million ($11.06 million). In terms of housing units, the compl eted an d ongoing sub projects are ex pected t o collectively prov ide 6,178 households with either serviced plots or housing units (Table 1). The consolidated list of DPUCSP approvals and projected disbursement prepared by DBP and HUDCC is in Table 2.

Table 1. Completed or Ongoing Subprojects under Part A

Participation Modality/Subprojects Number of Proponent Applicants

Households to be

Benefited

Estimated Total Project Cost (in P Million)

Actual DPUCSP Financing Required

(in P Million)

Local Government Unit (LGU) Initiated 5 953 179.20 56.3

Socialized Housing Developer Initiated 3 5,173 1,972.13 457.2

NGO 1 52 9.14 6.4

Total 13/a 6,178 2,160.47 519.9 Source: DBP a/

No longer includes the cancelled HOA subprojects.

In terms of physical accomplishment, the Balangayan Land Development subproject of B utuan City w as completed i n November 20 07. T he first sub project to be approved, t he P ulungbulo New S ite Development o f A ngeles City ha s also been completed ( Image 1 ). Two LGU subprojects, namely t he P rovincial G overnment Housing of Antique (P14.5M) and the Passi City Government Housing (P13.5M) were approved for DPUCSP financing in June 2008 and July 2008, respectively. Passi City made two subloan drawdowns during the 2nd and the 3rd quarters of 2009.

On August 28, 2008, two PPP subprojects were approved na mely, t he P amayanang M aliksi subproject by R-II B uilders an d t he P rovincial Government of Cavite ( P400 m illion) and t he subproject o f K apayakan Lands C orporation (P18.9 million). D BP di sbursed a t otal o f P191.16 million ( $4.06 million) to b oth subprojects in D ecember 2008 and a t otal of P116.8 in 20 09. R-II B uilders m ade their final drawdown of P100 million during the 1 st quarter of 2010. Two other subprojects were approved in 20 09: t he sub project of R alf R ealty Development C orporation for P 8.2 million i n March and t he subproject of P agtambayayong Foundation Incorporated ( PFI) in K alunasan,

Cebu for P6.4 million in November. DBP fully disbursed the subloan of Ralf Realty in June 2009. A summary report on the completed and ongoing subprojects is provided in Table 3.

Image 1: Pulungbulo Subproject in Angeles City


FINAL REPORT


Table 2: DPUCSP Approvals and Disbursements

DEVELOPMENT OF POOR URBAN COMMUNITIES SECTOR PROJECT DISBURSEMENT SCHEDULE OF SUBPROJECTS (in Peso Million) As of 31 December 2009

DEVELOPMENT OF POOR URBAN COMMUNITIES SECTOR PROJECTDISBURSEMENT SCHEDULE OF SUBPROJECTS

As of 31 March 2010

NS UG EL HIL HL Total NS UG EL HIL HL Total NS UG EL HIL HL Total

1 Butuan City 1 NS 220 15.00 15.00 Mar-07 15.00 - - - 2 Pulungbulo (Angeles City) 2 NS 66 6.00 6.00 Oct-04 5.00 - - -

3 Passi City Gov't Housing (Passi City) NS 233 58.20 13.50 Approved July

2008 - 5.00 5.00 5.00 5.00

4 Province of Antique NS 350 40.00 14.50 Approved June

2008 - - - 5 Kidapawan NS 84 60.00 7.30 January 2010

Sub-total LGUs 953.00 179.20 56.30 20.00 5.00 5.00 5.00 5.00

6 Pinagmangalucan HOA (Line cancelled) NS 3.10 Mar-07 1.47

7 RII Builders (General Trias, Cavite City) NS 4,800 1,700.00 430.00 Approved Aug

2008 187.00 48.30 48.30 15.00 15.00 49.70 49.70

8 Kapayakan Lands Corporation NS 294 90.00 19.00 Approved Aug

2008 4.16 3.45 3.45 - 0.35 0.35

9 Ralf Realty Development Corporation NS 244 182.13 8.20 Approved March 09 - 8.20 8.20 -

10 Pagtambayayong Foundation NS 52 9.14 6.40 Approved Dec

2009 - - - 11 Steel Building Systems and Technologies NS 336 96.23 - Q2 2010 - - - 12 Ubay Oraville Development Corp. NS 215 77.00 - Q2 201013 Hausplus Ventures, Inc. NS 1,079 232.50 - Q2 201014 Globe Asiatique Realty Holdings NS 15,000 3,630.00 - Q2 2010 - - -

Sub-total Private Sector Groups 22,020 6,017.00 466.70 192.63 51.75 - - - - 51.75 23.20 - - - - 23.20 50.05 - - - - 50.05 SUB-TOTAL (PART A) 22,973.00 6,196.20 523.00 212.63 - - - - 51.75 - - - - 28.20 - - - - 55.05 In US$M (US$1 =P47) 131.83 11.13 4.52 1.10 0.60 1.17

Omnibus Line 15 Enterprise Bank, Inc. (EBI) 2,000 35.00 47.73 - 4.42 4.42 16 Alalay sa Kaunlaran sa Gitnang Luzon (ASKI) 2,105 50.00 49.75 - - - 17 CARD (Line expired in 2006) 50.00 35.2 - - - 18 TSKI (Line expired in August 2007) 50.00 30.0 - - - 19 NWTF (Line expired in May 2007) 50.00 3.21 - - - 20 PCFC (Line expired in September 2007) 450.00 13.5 - - - -

S UB- TOTAL (PART B) 4,105 - 685.00 179.39 - - - - - - - - - - 4.42 - 4.42 In US$M (US$1 =P47) - $14.57 $3.82 $0.00

TOTAL (Parts A & B) 27,078 6,196 1,208 392.02 - - - - - 51.75 - - - - - 28.20 - - - 4.42 - 59.47 In US$M (US$1 =P47) $131.83 $25.70 $8.34 $1.10 $0.60 $1.27

Cumulative Disbursement (as % of DPUCSP Loan) 74% 24.06% 27.26% 28.99% 32.64%

Legend: $1= 47.00 $30.50 ADB Loan =NS- New SiteUG- Upgrading 1/ for preparation of subproject completion reportEL - Enterprise Loans 2/ for preparation of subproject completion reportHIL - Home Improvement Loans HL- Housing LoansTBD - To Be Determined

LOCAL GOVERNMENT UNITS (LGUs)

PRIVATE SECTOR GROUPS

MICROFINANCE INSTITUTIONS (MFIs)

SUBPROJECTS Type of Development

# of Households

Estimated Project Cost in P million

CUMULATIVE DISBURSEMENTS as of December

2008 in P Million

Q1 2009/ACTUAL Q2 2009/ACTUAL Q3 2009/ACTUALApproved DPUCSP

Financing in P million

Actual or Target Date of Approval

(in Peso Million)


FINAL REPORT


DEVELOPMENT OF POOR URBAN COMMUNITIES SECTOR PROJECT DISBURSEMENT SCHEDULE OF SUBPROJECTS (In Peso Million) As of 31 December 2009

DEVELOPMENT OF POOR URBAN COMMUNITIES SECTOR PROJECTDISBURSEMENT SCHEDULE OF SUBPROJECTS

As of 31 March 2010

2009 DISBURSEMENTS

2010 DISBURSEMENTS

NS UG EL HIL HL Total Actual NS UG EL HIL HL Total Actual

1 Butuan City 1 NS 220 15.00 15.00 Mar-07 15.00 - - 15.00 - 15.00 2 Pulungbulo (Angeles City) 2 NS 66 6.00 6.00 Oct-04 5.00 - - 5.00 - 5.00

3 Passi City Gov't Housing (Passi City) NS 233 58.20 13.50 Approved July

2008 10.00 10.00 - 10.00

4 Province of Antique NS 350 40.00 14.50 Approved June

2008 - - 5 Kidapawan NS 84 60.00 7.30 January 2010

Sub-total LGUs 953.00 179.20 56.30 20.00 10.00 30.00 - 30.00

6 Pinagmangalucan HOA (Line cancelled) NS 3.10 Mar-07 1.47 1.47 1.47

7 RII Builders (General Trias, Cavite City) NS 4,800 1,700.00 430.00 Approved Aug

2008 187.00 30.00 30.00 143.00 330.00 100.00 100.00 100.00 430.00

8 Kapayakan Lands Corporation NS 294 90.00 19.00 Approved Aug

2008 4.16 2.07 2.07 5.87 10.03 10.03

9 Ralf Realty Development Corporation NS 244 182.13 8.20 Approved March 09 8.20 8.20 - 8.20

10 Pagtambayayong Foundation NS 52 9.14 6.40 Approved Dec

2009 - - 11 Steel Building Systems and Technologies NS 336 96.23 - Q2 2010 - - 12 Ubay Oraville Development Corp. NS 215 77.00 - Q2 201013 Hausplus Ventures, Inc. NS 1,079 232.50 - Q2 201014 Globe Asiatique Realty Holdings NS 15,000 3,630.00 - Q2 2010 - - -

Sub-total Private Sector Groups 22,020 6,017.00 466.70 192.63 32.07 - - - - 32.07 157.07 349.70 100.00 100.00 449.70 SUB-TOTAL (PART A) 22,973.00 6,196.20 523.00 212.63 - - - - 32.07 167.07 379.70 100.00 100.00 479.70 In US$M (US$1 =P47) 131.83 11.13 4.52 0.68 3.55 8.08 2.13 2.13 10.21

Omnibus Line 15 Enterprise Bank, Inc. (EBI) 2,000 35.00 47.73 4.43 4.43 8.85 56.58 1.42 1.42 1.42 58.00 16 Alalay sa Kaunlaran sa Gitnang Luzon (ASKI) 2,105 50.00 49.75 - - 49.75 15.27 15.27 15.27 65.02 17 CARD (Line expired in 2006) 50.00 35.2 - - 35.20 35.20 18 TSKI (Line expired in August 2007) 50.00 30.0 - - 30.00 30.00 19 NWTF (Line expired in May 2007) 50.00 3.21 - - 3.21 3.21 20 PCFC (Line expired in September 2007) 450.00 13.5 - - 13.50 13.50

S UB- TOTAL (PART B) 4,105 - 685.00 179.39 - - - 4.43 - 4.43 8.85 188.24 16.69 16.69 204.93 In US$M (US$1 =P47) - $14.57 $3.82 $0.09 $0.19 $4.01 $0.36 $0.36 $4.36

TOTAL (Parts A & B) 27,078 6,196 1,208 392.02 - - - - - 36.50 175.92 567.94 116.69 116.69 684.63 In US$M (US$1 =P47) $131.83 $25.70 $8.34 $0.78 $3.74 $12.08 $2.48 $2.48 $14.57

Cumulative Disbursement (as % of DPUCSP Loan) 74% 24.06% 34.88% 34.87% 34.87% 42.03% 42.05%

Legend: $1= 47.00 $30.50 ADB Loan =NS- New SiteUG- Upgrading 1/ for preparation of subproject completion reportEL - Enterprise Loans 2/ for preparation of subproject completion reportHIL - Home Improvement Loans HL- Housing LoansTBD - To Be Determined

TOTAL ACTUAL CUMULATIVE

DISBURSEMENTS (2004-2010)

TOTAL ACTUAL CUMULATIVE

DISBURSEMENTS (2004-2009)

LOCAL GOVERNMENT UNITS (LGUs)

PRIVATE SECTOR GROUPS

MICROFINANCE INSTITUTIONS (MFIs)

SUBPROJECTS Type of Development

# of Households

Estimated Project Cost in P million

Q1 2010/ACTUAL CUMULATIVE

DISBURSEMENTS as of December

2008 in P Million

Q4 2009/ACTUALApproved DPUCSP

Financing in P million

Actual or Target Date of Approval

(in Peso Million)


FINAL REPORT


The r emaining p riority sub projects o f D PUCSP listed i n the ap proval an d disbursement table are in various stages of processing. The subprojects considered by D BP t o be i n the advanced st age of p rocessing w ere: (i) Ub ay O raville Development Corporation subproject in Ormoc, Leyte; (ii) V illa Alicia Subdivision of the S teele Building & Technologies Incorporated i n Malaybalay, B ukidnon; ( iii) Hausplus Ventures, Incorporated in Cavite; and (iv) the Globe Asiatique in Zambales. Details on the priority Part A subprojects of DPUCSP are summ arized in Appendix 2, i n a summary r eport g enerated from t he D -PPMS, the project‘s electronic and web-based P roject P erformance M onitoring S ystem w hich is de scribed fully i n Volume 3.

Table 3. Summary Report on Part A Completed and Ongoing Subprojects

Subproject/Proponent/ Location

Participation Modality

Type of Development # of HH

Actual DPUCSP Financing (in P

Million) Status

APPROVED SUBPROJECTS

1. Pulungbulo, Angeles City LGU New Site 66 6.0 For subproject completion report by DBP with HUDCC’s assistance.

2. Balangayan, Butuan City LGU New Site 220 15.0 For subproject completion report by DBP.

3. Passi Government Housing, Passi City

LGU New Site 233 13.5 Subloan approved in July 2008. The LGU undertook site development after the groundbreaking ceremony which was held last 16 April 2009. A first release of P5 million was made on the 2nd quarter of 2009. A second subloan release of P5 million was made in the 2nd quarter. Total disbursed amount to date is P10 million, with a remaining unreleased

amount of P3.5 million.

4. Provincial Government Housing, Antique Province

LGU New Site 350 14.5 Subloan approved in June 2008. Awaiting release of the Order of Finality from the Cebu Regional Trial Court regarding the acquisition of the land. The order is necessary for the DAR issuance of certificate of non-tenancy which is required before site development can begin. The LGU is also addressing its unpaid taxes amounting P700,000.

5. Kidapawan LGU LGU New Site 84 7.30 The subloan will be approved in January 2010.

6. Pamayanang Maliksi, Cavite Province & R-II

Builders, Trece Martirez, Cavite

Private Developer-LGU PPP

New Site 4,834 430.0 Subloan approved on 28 August 2008. Project implementation started in December 2008. Total disbursement as of 31 August 2009 is P330 million. The remaining unreleased amount of P70 million was canceled and a new line amounting to P100 million was approved by DBP in December 2009.

7. Pagtambayong Foundation, Inc. (Kalunasan Housing)

Housing NGO New Site 52 6.40 Subloan approved by DBP on November 18, 2009. The ECC permit was made a pre-release requirement for the approved loan. PFI still has to comply with this pre-release


FINAL REPORT


Subproject/Proponent/ Location

Participation Modality

Type of Development # of HH

Actual DPUCSP Financing (in P

Million) Status

requirement.

8. Villa Jesusa Subdivision, Kapayakan Lands

Corporation Ilagan, Isabela

Pure Private Developer

New Site 294 19.0 Subloan approved in August 2008. P7.52 million released as of 1st quarter 2009.

The subloan may have to be revised from a credit line to a term loan to give the proponent a better cash flow and thus enable the company to manage subproject construction more efficiently.

9. Rosmont Village Ralf Realty Development

Corporation Tarlac, Tarlac

Purely Private Developer

New Site 45 8.2 Subloan fully disbursed as of the 2nd

quarter 2009. The proponent has requested an additional subloan of P15 million to finish the construction of the socialized housing units.

The processing branch will be revalidating the credit investigation due to adverse findings on key officers of the RRMC.

Total 6,178 P 519.90 (US$ 11.06 million equivalent)

@US$1.00 = P47.00

DBP= Development Bank of the Philippines; FS=feasibility study; HH=households to be benefited; MFI = microfinance institution; LGU= local government unit; LOI = Letter of Intent; PPP=public-private partnership; SP = Sangguniang Panlalawigan.

3.1.1 LGU Financing and Subprojects The D BP an d HUDCC con ducted joint m arketing efforts with support f rom the Consultants which resulted in a r obust inventory of LGU pipeline subprojects during the initial 18 months of DPUCSP implementation. As of the third quarter of 2005, a total of 21 subprojects initiated by 9 LGUs ha ve been identified and included in the pipeline. From this pi peline, there were 2 approvals f or i mplementation na mely, Pulungbulo subproject of Angeles City for new si te development and the Barangay 21 subproject of Victorias City for site upgrading. However, the list was reduced to 14 subprojects by D BP by the 24 th month of project implementation due t o t he slow movement i n many of t he sub projects i n the pi peline. T he sl ow m ovement w ere traced by t he C onsultants to the following r easons: (i) di fficulties of the LGUs i n complying with the highly participatory community action planning (CAP) process of DPUCSP and the DBP documentary requirements; (ii) problems associated with the requirement by DBP for clean titles to the properties proposed for development; ( iii) confusion within DBP on DPUCSP‘s operating policies especially those relating to the acceptability of r ights-based instruments and what constituted pre-approval and pre-release r equirements; ( iv) pro tracted de lays among the v arious government agencies involved in processing the proposed proclamation of land in Mandaue and Butuan cities for the approval of the President; and (v) continued reluctance of local government o fficials, pa rticularly m embers o f t he local cou ncil, t o borrow f unds for the propo sed sub projects an d using their i nternal r evenue al lotment (IRA) as the collateral. T he l atter necessitated transfering a po rtion o f t heir IRA de posited i n another government financial institution (GFI) to DBP. Approvals f or proposed LGU pipeline subprojects became even slower f or t he first three q uarters of 2006. O nly 1 sub project, the Passi C ity E mployees V illage, was approved in November 2006. At this stage, the purely LGU-initiated subprojects had decreased to 8.


FINAL REPORT


To build up the inventory of pipeline subprojects, DBP and HUDCC further intensified their marketing efforts especially following ADB‘s approval in 2006 of the expanded project scope to include all local governments outside Metro Manila (i.e., provinces, cities and municipalities), and the clarification on the el igibility of employee housing subprojects. Out of the 39 LGUs that were met and briefed, 36 submitted their LOIs to participate, and only 16 SP resolutions were received. The C onsultants focused t heir ad visory sup port on Part A t o he lping market DPUCSP, scr eening su bprojects ba sed on a preliminary cr iteria, an d assisting the LGUs in preparing their C APs f or propo sed up grading sub projects an d their Feasibility Studies (FS) for proposed new site development subprojects. Under the Advisory T A, a total o f 13 LGUs were assisted by t he C onsultants t hrough the conduct of CAP and FS writeshops from November 2004 to September 2009. Table 4 summarizes the C APs/FS prepar ed an d the LGU subprojects de veloped an d assisted with support from the Advisory TA. The CAP process adopted for DPUCSP is in Appendix 3.

Table 4: Summary of CAPs and FS Prepared for LGU Subprojects

LGU / Name of Subproject(s) Target # of

HH

Actual/ Estimated

Project Cost (P million)

CAP/ FS Preparation Status as of Advisory TA

Completion

COMPLETED SUBPROJECTS

1. Angeles City, Pampanga

Pulungbulo - NS (Pilot site)

66 6.0 CAP prepared and submitted to DBP

For subproject completion report.

2. Butuan City

Balangayan Butuan Land Site Development

220

15.0

For subproject completion report

SUBPROJECTS UNDER IMPLEMENTATION

3. Passi City, Panay Island

Passi City Government Housing - NS

150

13.5

Draft FS submitted to DPUCSP-PMO on June 20, 2005

Final FS submitted to DBP Iloilo Branch on April 26, 2006

The FS had to be revised due to changes in the project site, house design and cost estimates.

Subproject initially disqualified due to the 90:10 ratio (informal to formal) that was enforced at that time. The subproject was later determined to be eligible for DPUCSP financing after HUDCC and ADB clarified that the 90:10 ratio referred to the entire DPUCSP. After the clarification process a subloan of P7M was approved in November 27, 2006 but with no availment. DBP investigation revealed that the deed of donation to the LGU was being contested. An alternative site was proposed in 2007 by the LGU and a new approval was granted in July 2008. P10M has been disbursed as of the third quarter of 2009.

4. Province of Antique

Provincial Government Housing

350 52

Loan approved in June 2008. No availment to date.

SUBPROJECTS WITH PREPARED CAPs/ FS

5. Cagayan de Oro, Misamis Oriental

Macabalan (Pilot Site)

366

Draft CAP submitted to DPUCSP team on June 21, 2004

LGU had decided to participate in the Project through Part B only. Proposed MFI partner, MILAMDEC, was not accredited by DBP.


FINAL REPORT



HH

Actual/ Estimated



Completion

6. Bocaue, Bulacan

Bocaue Housing Project - NS

1,000 10.0 CAP preparation by the Community Association started in September 2004

LGU withdrew from the Project and made arrangements with NHA and a private developer to fund the relocation site for families affected by the North Railway Transit Project

7. Victorias City, Negros Occidental

Barangay 21 Housing Project - UG

Resettlement Site Brgy 20 - UG

Daan Banwa - UG

280 168 311

6.0 5.0 6.0

Conduct of CAP writeshop for 3 proposed subprojects started on Nov. 10-12, 2004. LGU finalized CAP of Brgy 21 Housing Project on 22 March 2005 and submitted to DBP. Transmitted to ADB on 21 July 2005

Loan was approved on 7 November 2005 but the LGU held off signing of the subloan agreement mainly due to the commitment fees being charged by DBP after the 45-day period granted for loan documentation. A secondary issue was the disapproval of the LGU’s request to extend the grace period from 1 to 3 years.

8. Bago City, Negros Occidental

Napoles

Louisiana Housing

365

375

15.0

13.0

Draft FS for 2 subprojects prepared

Subproject appraisal derailed due to changes in political priorities. The final City Council approval on the proposed subprojects and the issuance of a Council Resolution authorizing Mayor to undertake the loan was contingent upon the passage of the Housing Ordinance which did not happen.

9. Cebu City, Cebu

Sitio Sapatera, Barangay Luz

Laguna, Brgy Duljo-Fatima

Lowerville, Brgy Lahug

Sitio Sun-oc, Brgy. Lahug

Dorado, Brgy Pit-os

Tunacao, Brgy Binaliw

St. Michael, Brgy San Jose

Laguerta, Brgy Lahug

156 240 61

212 -- --

168 --

2.8 5.7 3.5 5.5 7.6 6.6 2.1 12.5

CAP preparation of all 8 subprojects started in December 2004.

LGU had exceeded its borrowing capacity. Proposed partner of the city, Pagtambayayong Foundation, Inc. (PFI) did not meet eligibility criteria of DBP and was not accredited.

10. Mandaue City, Cebu

Eversly Site - UG

Canduman Housing Project – NS

708

30

CAP prepared with assistance of Consultants Preparation of community development plan and site mapping

Subproject was stalled due to existing questions on land ownership of a portion of the land proposed to be developed; this delayed the proposed proclamation of the land for socialized housing. This subproject was considered for DPUCSP financing but a change in local leadership delayed the process and eventually, a decision was made to finance the subproject from a World Bank grant.

300 30.8 FS prepared under USCIP-WB and submitted on October 2006

11. General Trias, Cavite

Sto. Rosario Villages (Phase 1)

208

FS prepared by the developer reviewed by DPUCSP Team. A plan was also prepared to cover the linkage with an MFI, Taytay sa Kauswagan, Inc. (TSKI).

Subproject did not push through due to lack of clear participation of and support from the LGU. The developer (SLRPC) also expressed preference to avail of a Pag-IBIG subloan which they considered to be cheaper. TSKI, the MFI partner, also decided to withdraw from the Project in early 2006.


FINAL REPORT



HH

Actual/ Estimated



Completion

12. Iloilo City, Iloilo

Barangay North East Timawa - UG

Review and evaluation of draft CAP done on July 28, 2005

Subproject dropped from the list as neither the LGU nor the MFI signified commitment to pursue their loan application with DBP. The LGU did not want to be the borrow for the proposed loan while the proposed MFI also encountered operational problems which could not accommodate the bigger loans proposed for housing microfinance.

13. Cadiz City, Negros Oriental

Tinampa-an (Phase 1) - UG

Tinampa-an (Phase 2) - NS

12.0 32.0

Draft CAP for mixed site upgrading and new site development submitted by the LGU on 26 May 2006. Needed updating and revision due to increase in cost of construction materials.

The LGU local council did not approve the proposed subloan and decided to concentrate on their proposed commercial development in the port area for which they obtained financing from the Philippines National Bank.

14. Bacolod City, Negros Oriental

Purok Riverside, Brgy Banago (Pilot site) - UG

Draft CAP submitted Subproject dropped. Main issue was the high cost of the proposed subproject due to the need to institute the required mitigating measures to address environmental concerns such as flooding. The LGU was not willing to subsidize the subproject, opting to develop their commercial business district through financing from Landbank of the Philippines.

15. Municipality of San Teodoro, Mindoro Oriental

Poblacion Urban Poor Housing Project

100

20

Draft FS prepared by SPIU was presented to DBP, HUDCC and Consultants on September 13, 2007.

Subproject was in a highly sloping terrain and was put on hold due to to the estimated subproject cost and its adverse implications on affordability.

16. Cebu City LGU/Habitat for Humanity/Pagtambayayong Foundation, Inc.

Kalunasan (row house) - NS

Lorega-MRB (old cemetery) - NS

Kalunasan (MRB) – NS

42 120

120

8.4 10

10

Draft FS, an output of the CAP/FS Writeshop on September 20-21, 2007 was submitted to DBP-Cebu in October 2007

Subprojects put on hold due to various issues: the proponents’ request for lower interest rate and a requested exemption from local ordinance requirement on medium rise buildings (MRBs) which prescribed one parking space per MRB unit.

17. Province of Pangasinan

Socialized Housing -- UG

FS drafted after writeshop held on June 2-3, 2009

Typhoon “Pepeng” which adversely hit the central part of Pangasinan in September 2009 has delayed the LGU’s plans. Given this developments and the closing date of DPUCSP in April 2010, HUDCC requested DBP to consider funding the LGU’s subproject from other sources, including the second generation funds comprising DPUCSP subloan repayments.

Notwithstanding t he as sistance extended by t he C onsultants to the LGUs, this financing modality of D PUCSP faced a number o f cha llenges t hat ha mpered t he approval process and disbursement of approved subloans. As a result, subprojects were ei ther dropped by D BP from the p ipeline or approved sub loans w ere not disbursed by the LGUs at all such as in Victorias City which encountered delays from


FINAL REPORT


removal of Spanish liens through a court process and competition from another GFI which offered similar if not better terms to the LGU. The Consultants identified some of the key factors which delayed the approvals and disbursements of LGU-initiated subprojects, as follows:

Prolonged delays encountered in proclaiming t he prop osed sit es for socialized housing. This was experienced i n the case s of the DPWH resettlement site in Brgy. Pagatpatan, Butuan and the Eversley subproject in Mandaue. D BP‘s branch in Butuan, due to their closer working relationship with the LGU approved the Butuan subloan despite the lack of proclamation. However, the Cebu branch decided not to process the subloan for Eversley until t he land issues hi ndering the p roclamation o f t he si te for socialized housing were resolved. Despite the increased coordination by HUDCC with concerned agencies such as t he Office of the President, DPWH and DENR, the Eversley site was p roclaimed in 20 09 and w ith t he change i n t he LGU leadership and priorities, this subproject was not pursued. Another example was V ictorias City wherein t he subloan release w as st alled due t o the required r emoval of a Spanish lien on t he l and which necessitated court action. In the end Victorias City opted not to proceed with the subloan.

Shifting political pr iorities o f L GUs. It was al so ex perienced that many

LGUs, wh ile initially i nterested i n DPUCSP participation, cha nged their priorities. This w as partly cau sed by t heir ap prehension t o borrow for socialized housing g iven t heir other prio rities which necessitated t he use o f their IRAs as collateral. The change in the priorities of the LGUs derailed the submission of their CAPs and feasibility studies to DBP.

Dissension in the ran ks of the l ocal co uncils. Inadequate support f rom

their local councils also caused delayed in Bago, Cadiz, Bacolod, and Iloilo. When t he local cou ncil m embers come from di fferent pa rties, there were inevitably lesser support for the Mayor‘s projects.

Proposed LGU sites were technically and environmentally unsound. A

few LGUs keen to avail of DPUCSP financing submitted sites that were later found to be either technically or environmentally challenged such as Masbate City‘s proposed site for its government housing project. In this case, the site was in an elevated area which had a relative high slope resulting in a costly subproject if the mitigating measures were to be put in place. The LGU was not w illing t o subsidize the subproject, the calculated sel ling price was thus beyond the affordable limits of the target beneficiaries.

Aversion of LGUs to borrowing from DPUCSP. This stemmed from several

reasons: ( i) limitations on their borrowing capacity; (ii) the seemingly higher interest r ate offered by D BP f or DPUCSP compared t o the GFI with wh om most of the LGUs deposited their IRAs accounts; (iii) the limited capability of DBP branch personnel to effectively market the DPUCSP facility f rom other competing facilities such as Pag-IBIG, CMP, and loans offered by Land Bank of the Philippines; and (iv) the perception that borrowing from DPUCSP and other facilities is politically risky.

Lack of technical capacity among t he LGUs. Many of t he L GUs di d not

have the t echnical c apacity t o prepare the C APs, FS , de tailed en gineering


FINAL REPORT


design and environmental assessment as well as mitigating measures due to the l imited nu mber o f technical st aff av ailable t o prepa re t he plans and documents r equired u nder the P roject. They r elied t oo m uch on t he Consultants w hich had v ery limited r esources t o assist t hem on a more regular basis.

Inadequate reso urces alloted by DBP to eff ective DPUCSP marketing, subloan processing, an d subloan ad ministration. Unlike the other G FI, DBP had lesser branches and regional offices to market DPUCSP effectively. In many i nstances, many of t he acco unt o fficers al so demonstrated limited knowledge of DPUCSP and the socialized housing sector, particulary during the ea rly st age of pro ject i mplementation. The project m anagement o ffice (PMO) of DBP had other priorities and was reorganized several times. These contributed to the the delays in the more efficient dissemination of DPUCSP operating policies and guidelines, and subsequent revisions, to the branches and regional o ffices. I n t he l ater st age of project i mplementation, the D BP PMO be came more pr oactive in marketing D PUCSP an d assisting the branches and regional offices in processing and implementing the subloans. However, m omentum w as lost particularly i n the i nitial ph ase when more LGUs seemed to be interested in DPUCSP.

The D PUCSP process and approval cha rt for Part A i s i n Appendix 4 and documents t he l engthy process entailed, pa rticularly du ring t he first t wo years o f implementation. Based on t he first 18 months of pro ject i mplementation, the subproject development and approval process for Part A subprojects took as much as 300 working days or 13.6 months. The DPUCSP financing flow is summarized in Appendix 5. Figure 3 illustrates the D PUCSP sub project development an d implementation cycle.

3.1.2 HOA Financing and Subprojects The homeowners‘ association (HOA) financing modality, which w as i ntroduced through the Cities Alliance-funded IMPACT Project3 in 2006 and approved as eligible subproject propon ents by A DB i n February 20 07, seemed to gain momentum with the ap proval of the pi lot HOA4 in the f irst quarter o f 20 07 an d the propose d participation of a t least eight others. Over time, however, a key constraint to these HOA subprojects emerged—all the HOAs required intensive and continued technical assistance and capacity building in subproject preparation and development. When IMPACT con cluded i n 2007 an d the technical as sistance st opped, subproject preparation efforts slowed down or came to a complete standstill. This development led to the marked slowdown of DBP‘s marketing to HOAs, in favor of the more capable and ―bankable‖ private sector groups, particularly the private developers.

3 Integrated Approaches to Poverty Reduction at the Neighborhood Level, a technical assistance provided by the Cities Alliance,

implemented by UN-Habitat for capacity building for shelter upgrading in support of DPUCSP. 4 The Pinagmangalucan HOA in San Vicente, Palawan was approved for a P3.10 million loan in March 2007. However, this loan was

cancelled in February 2008 when the LGU withdrew the subproject site and sold the lot to a private property developer.


FINAL REPORT


Figure 3. The DPUCSP Subproject Development and Implementation Cycle

4 6

5 7

7

Project Briefings Press Releases Consultations & Workshops Promotional Materials

DBP: Program Management,

Program Lending, Bank Branching,

Wholesale Banking Groups HUDCC: Policy Formulation &

Review Group, Regional Offices TA Consultants

Promotion 1 Prequalification of Proponents/ Accreditation of MFIs

For LGUs: Confirmation of borrowing capacity

For Private Developers:

Coordination with developers on submission and evaluation of prequalification documents For Housing NGOs, CMP Originators:

Review/Develop DPUCSP prequalification criteria for NGOs and CMP Originators Coordination for evaluation and submission of documents

For MFIs:

Review/Develop DPUCSP accreditation criteria for MFIs

Coordination for evaluation and submission of documents

DBP: Program Management, Program Lending, Bank Branching, Wholesale Banking

Groups HUDCC: Policy Formulation & Review Group, Regional Offices (Follow-up role with LGUs

and private developers) TA Consultants (Advisory Capacity Only)

2

2

Subproject Identification and Prioritization

For Part A: Meetings with prequalified LGUs,

developers, NGOs Site visits Subproject prioritization training- workshops

For Part B:

Meetings with accredited MFIs Site visits Subproject prioritization workshops

DBP: Program Management, Program

Lending, Bank Branching, Wholesale

Banking Groups HUDCC: Policy Formulation & Group,

Regional Offices TA Consultants

3

CAP & MAP Preparation

For Part A:

CAP Orientation CAP Writeshops Consultation meetings and dialogues For Part B:

MAP Orientation MAP Briefings and Workshops Consultation meetings

Subproject Implementation Units

With assistance from:

TA Consultants HUDCC: Policy & Formulation Group,

Regional Offices

4 CAP & MAP Appraisal & Approval

CAP/MAP verification, evaluation, and approval

Site visits Meetings with loan proponents Proposed subloan processing and

approvals


Program Lending, Bank Branching,

Wholesale Banking Groups TA Consultants (limited to CAP/MAP

review and approval)

5 Subproject Implementation

For Part A:

Preparation of Subproject Implementation Plan (SIP)

Detailed Engineering Procurement & Contract Supervision For Part B:

Social Intermediation & Marketing Processing and approval of loans

applications

Subproject Implementation Units

With assistance from:

TA Consultants HUDCC: Policy & Formulation Group,

Regional Offices

6 Subproject Monitoring & Evaluation

Assessment of Financial and Physical Progress

Site Inspections

Periodic meetings with SPIUs

Subproject Implementation Units With assistance from:

TA Consultants HUDCC: Policy & Formulation

Group, Regional Offices


Program Lending, Bank Branching

Groups

7


FINAL REPORT


A few HOAs also expressed interest to borrow for land acquisition but this was beyond the financing scope of DPUCSP. In the third quarter of 2008, it was decided, after careful deliberation, that all the HOA subprojects owing to lack of capacity and other issues identified during DBP‘s subproject appraisal would be removed from the DPUCSP pipeline. The Consultants also proposed that HUDCC play a stronger role in institutionalizing a capacity bu ilding pro gram for the HOAs an d categorizing t hem ac cording t o t heir capacity building needs using an agreed criteria. The Consultants further advised that this initiative m ay require grant financing, similar to t he approach used f or microfinance institutions (MFIs) during the infancy stage of their development.

The experience with the IMPACT-assisted HOA subprojects also prompted the need to institutionalize a scoring system for determining the creditworthiness of the HOAs and asse ssing their capacities t o i mplement pro-poor or l ow-income housing. T he rating system formulated by the Consultants is based on the methodology used by MFIs in the Philippines to evaluate and regulate performance.5 The proposed rating system called HOME has the potential to become a vital tool in identifying bankable HOAs and assessing their need for technical assistance.

Despite the i ssues which surrounded t he pilot HOA sub projects of D PUCSP, D BP and HUDCC agreed t o further t est the m odality on C ommunity Mortgage P rogram (CMP)6 sites. This de cision i s ba sed on a lesson learned—that i t i s be tter to work with HOAs which have already acquired their land rather than to attempt to work with those with no land. Subprojects initiated by HOAs and NGOs are se en by HUDCC, DBP, an d the C onsultants as important i f t he Project i s t o respond to t he ho using needs of the poorer f amilies belonging t o the 1 st to t he 3rd income de ciles of the Philippines.

3.1.3 PPP Financing and Subprojects In the l ight of the LG Us‘ constraints to borrowing for pro -poor and l ow-income housing at the scale warranted by demand, the forging of PPPs as an approach to social ho using de velopment ha s be come a pivotal proj ect design feature of DPUCSP. Af ter n early si x years of pro ject i mplementation, t he l ocal governments and t he private sector seemed t o view PPPs as a promising alternative t o the development of low-income housing at a faster, steadier pace and on a much larger scale compared to other modalities. The DPUCSP supports public-private partnerships (PPPs) in low-income housing by allowing ―qualified enterprises,‖ defined to include private developers, NGOs, cooperatives, and H OA, t o be l ead propon ents o r bo rrowers under the S ite Development and Distribution of Secure Tenure Component or Part A of the Project. On the other hand, private banks and NGOs qualified as MFIs, were equally eligible to take on the role of providing housing microfinance loans to deserving poor clients under the Shelter Finance to Low-Income Communities or Part B of the Project.

5 A common set of performance standards, called PESO standards, for all institutions engaged in microfinance was formulated and

developed to allow greater transparency in the operations of MFIs. More particularly, the standards will provide the user the necessary basic tools that will facilitate the evaluation and assessment of the operations of MFIs and compare their financial performances, regardless of whether it is a bank, cooperative, or an NGO.

6 CMP is a government-funded program administered by SHFC that assists organized informal settlers secure land tenureship.


FINAL REPORT


As a result of the marketing efforts of both HUDCC and DBP with assistance of the Consultants, a number private of developers indicated their interest to participate in the P roject i n January 2008. To da te, there are three private de veloper-initiated subprojects approved by DBP including R-II Builders‘ subproject which is the biggest in DPUCSP in terms of subloan size and volume of production.

Subprojects i nitiated b y soci alized ho using de velopers either through P PP agreements with LGUs or as purely private developer initiated comprise nearly 84% of the total estimated number of households to be benefited by Part A of the Project and 88% of the total DPUCSP financing required under Part A (Table 5).

Table 5. Part A Subprojects, by Participation Modalities

Participation Modality/Subprojects Households

to be Benefited

% to Total Households

Actual DPUCSP Financing Required

(in Peso Million)

% to Total DPUCSP Financing Required

Local Government Unit (LGU) Initiated 953 15.42 56.3 10.82

Socialized Housing Developer Initiated 5,173 83.73 457.2 87.90

Housing NGO 52 0.84 6.4 1.23

Total 6,178 100.00 519.9 100.00

In comparison, subprojects initiated by LGUs are expected to contribute 15% of the total targeted ho useholds an d nearly 11 % of t he total DPUCSP f inancing. T hese notably lower numbers demonstrate that many LGUs continue to be a difficult market for socialized housing finance. The Consultants observed that many LGUs continue to be politically averse to borrowing for socialized or pro-poor housing projects and prefer financing to come from grants and subsidies. On the other hand, the growing interest and participation of socialized housing developers confirm their demand for the D PUCSP P art A financing facility. H owever, sub projects i nitiated by soci alized housing developers tend to cater more to low-income households in the 3rd to the 5th income deciles unlike the HOA modality described earlier which caters to the bottom 2 deciles of the Philippine income groups. A major i ssue with the PPP subprojects financed by DPUCSP, to date, is their reliance on the Pag-IBIG fund as a means for the de veloper and DBP t o recoup t heir sub project i nvestments. This ex cludes households from the informal sector who are no t members of the Pag-IBIG fund yet deserve the access to housing finance. The Pamayanang Maliksi subproject, as well as other PPP subprojects considered by DBP, are discussed in a study f unded by another ADB technical assistance─Regional Technical Assistance 6421: Sustainable Urban D evelopment in A sia ( RETA─called Philippines: Fi nancing P ublic-Private Partnerships for Sustainable Low-Income Housing Delivery.7 This study is discussed further in Section 6 of this report.

7 See “Financing Public-Private Partnerships for Sustainable Low-Income Housing: Final Report.” ADB Regional TA 6421:

Sustainable Urban Development in Asia, GHK International, May 2009.


FINAL REPORT


3.2 Status of Part B: Shelter Finance for Low-Income Communities From 2005 to the first quarter of 2010, a total of P204.93 million ($4.36M) has been disbursed by DBP to six Part B proponents. This represented 30% of P685 million,8 which was the total amount of omnibus credit lines granted to these MFIs by DBP for onlending for livelihood, home improvement, and housing loans. Of the total amount disbursed, P 103.51 million or 50% was on-lent for m icroenterprise l oans, P97.74 million or 47.7% was released for home improvement loans and the remaining P3.68 million or 1.79% was used for ho using l oans. Table 6 shows t he y early disbursements of enterprise and housing loans to the participating MFIs from 2005 to the first quarter of 2010. Out of the 6 MFIs which have availed of the DPUCSP facility, only two, namely Alalay sa Kaunlaran, Inc. (ASKI) and Enterprise Bank Inc. (EBI), have ongoing programs for home i mprovements and ho using. The other MFIs have ha d no further activities under DPUCSP after their credit lines expired in 2006 and 2007. Expired credit lines of NW TF9 and TSKI,10 could no t be processed for renewal due to: (i) slow or non- submission o f up dated documentary r equirements; ( ii) i mprovements ne eded i n some area s o f t heir pe rformance and/or rating; an d (iii) a relatively hi gh level of indebtedness compared to other MFIs. For CARD,11 issues on the interest rate and initially on t he 60 :40 r atio t hat w as eventually l ifted b y HUDCC affected t heir

8 Includes the P450 million credit line to PCFC 9 Negros Women for Tomorrow Foundation, Inc. 10 Taytay sa Kauswagan, Inc. 11 Center for Agricultural and Rural Development

Image 2: Model house duplex type at the Pamayanang Maliksi Subproject by R-II Builders and the Province of Cavite

Image 3: Site of the proposed Pamplona Subproject by 21st Century Resources in Camarines Sur

Image 4: Balangayan Land Site

Development Subproject in Butuan City

Image 5: Vice President De Castro inaugurates the Pulungbulo Subproject in Angeles City

Image 7: A row house in Pulungbulo Subproject in Angeles City

Image 6: Aerial photo of Pamayanang Maliksi Subproject in Cavite


FINAL REPORT


continued participation under DPUCSP. The subsidiary loan to PCFC which expired in September 2007 had a dismal performance─with a mere P13.5 m illion o r 3% of the total credit line availed. PCFC pointed out that many of their MFI partners did not readily avail due t o l iquidity and interest r ate issues. However, the C onsultants believed t hat a l ack o f un derstanding an d appreciation for ho using microfinance played a role in PCFC‘s performance. Appendix 6 provides a more detailed status report o f the D PUCSP prio rity sub projects U nder Part B as generated by t he D -PPMS. Appendix 7 presents the microfinance availment pl an ( MAP) proce ss required for MFIs to avail of DPUCSP f inancing. Appendix 8 shows t he DPUCSP process and approval chart for Part B subprojects. Subprojects financed under Part B took a total of 111 working days or 5 months during the first 18 months of DPUCSP implementation. Appendix 9 is a summary of the financing flows under Part B.

Table 7. Status of Part B Completed and Ongoing Subprojects

Subproject/Proponent Type of MFI Actual Disbursements (in Peso Million)

Status/Remarks EL HIL HL Total

1. Enterprise Bank Incorporated (EBI)

Rural Bank 34.49 23.52 58 The MFIs’ P35 million credit line was totally disbursed in 2008. The line was renewed by DBP on 6 May 2009. EBI availed of P8.8 million during the last quarter of 2009 and is expected to request an additional P1.42 million by March 2010.

2. Alalay sa Kaunlaran sa Gitnang Luzon (ASKI)

NGO 5.82 57.97 1.23 65.02 ASKI’s credit line was totally disbursed in December 2008. A new line of P50 million was approved by DBP on November 5, 2009. DBP will release P15.27 million to ASKI on February 2010.

3. CARD

NGO 30.00 2.75 2.45 35.20 CARD’s P50 million credit line was approved in 2005 and expired in September 2006. They were granted a new omnibus line of P100 million in June 2007. This line expired without any disbursement but was given an interim renewal until June 30, 2008. A new credit line of P40 million was approved by DBP in July 2008 but CARD has not drawdown from this line, to date.

4. People’s Credit Finance Corporation (PCFC)

FI 13.50 13.50 PCFC’s line with DBP expired in September 2007. The P13.5 million drawdown was for Hometown Corporation (P4.5 million) and Ahon sa Hirap, Inc. (P9.0 million).

5. Taytay sa Kauswagan Inc (TSKI)

NGO 30.00 30.00 The MFI’s credit line with DBP expired on August 14, 2007 and was not renewed.

6. Negros Women for Tomorrow Foundation (NWTF)

NGO 3.20 3.20 Credit line with DBP expired in May 2007 and was not renewed.

Total (actual figures only) 103.51 97.74 3.68 P204.93 M ($4.36M) (US$1.00 = P47.00)

MFI= microfinance institution; EL= enterprise loans; HIL = home improvement loans; HL= housing loans; NGO= nongovernmental organization; FI= nonbank financial institution


FINAL REPORT


Table 6: Yearly Disbursements to MFIs under Part B

Actual Disbursement on Part B (in Peso Million) As of 31 December 2009

Actual Disbursements on Part B (in PhPM)

As of 31 December 2009

TOTAL

TO DATE

Part B EL HIL HL

Sub-

total EL HIL HL

Sub-

total EL HIL HL

Sub-

total EL HIL HL

Sub-

total EL HIL HL

Sub-

total EL HIL HL

Sub-

total EL HIL HL

CARD 30.00 30.00 2.75 2.45 5.20 - - 30.00 2.75 2.45 35.20

TSKI - 30.00 30.00 - - 30.00 - - 30.00

EBI - 9.89 9.89 18.55 8.71 27.26 6.05 4.54 10.59 8.85 8.85 1.42 1.42 34.49 23.52 - 58.01

NWTF - 3.20 3.20 - - 3.20 - - 3.20

ASKI - - 10.43 10.43 5.82 32.27 1.23 39.32 15.27 15.27 5.82 57.97 1.23 65.02

PCFC - - 13.50 13.50 - - 13.50 - 13.50

- - - - - - - -

TOTAL 30.00 - - 30.00 43.09 2.75 2.45 48.29 18.55 32.64 - 51.19 11.87 36.81 1.23 49.91 - 8.85 - 8.85 16.69 103.51 97.74 3.68 204.93

TOTAL DISBURSEMENTS (PART B)

2005 2006 2007 2008 TOTAL2009 2010


FINAL REPORT


Nevertheless, the sub projects un der P art B have e xceeded t he 10,000 t argeted number of livelihood loans and 2,300 loans for site or home improvement under the Project as shown in Table 8 below.

Table 8: Summary of Loans Extended Under Part B MFI / Areas of Implementation

Enterprise Loans

Home Improvement

Housing Loans

ONGOING SUBPROJECTS

ALALAY SA KAUNLARAN, INC. (ASKI)

Bulacan, Nueva Ecija, Pangasinan, Tarlac, Pampanga, Quezon, Isabela, Cagayan

176

4,579

Housing Construction

19

House &/or Lot Acquisition

8

ENTERPRISE BANK, INC. (EBI)

Surigao del Sur, Agusan del Sur, Cebu

Cagayan de Oro, Davao, Tagum

4,115

4,115

COMPLETED SUBPROJECTS

People’s Credit & Finance Corporation (PCFC)

2007

Ahon sa Hirap, Inc. (ASHI)

Cavite; Laguna

435

Hometown Corporation

Santiago City, Isabela

1,500

Rural Bank of Trece Martirez

Trece Martirez, Cavite

2,500

Taytay sa Kuswagan, Inc,

(TSKI)

Iloilo City, Passi City, Roxas City

2006

5,456

Negros Women for

Tomorrow Foundation, Inc.

(NWTF)

Negros Occidental, Negros OrientaL

2006

266

CARD, INC

Bay, Laguna, Oriental Mindoro

2005

3,000

18

8

TOTALS

Enterprise 13,013

Home

Improvement 13,147

Housing 35

3.2.1 Linking MFIs to LGUs The C onsultants assi sted in working ou t l inkages be tween the M FIs and LGUs to respond to the constraints of some local governments participating under Part A of DPUCSP. The L GUs recognized t he po tential be nefit o f ha ving a take-out mechanism for their l oan under P art A through t he M FIs which would provide t he credit services for housing/home improvement and enterprise to the end clients. The benefits w ould extend to the LGUs in terms o f sho rter cost r ecovery pe riod, l ess interest expense on their borrowings, more funds available for other housing projects, improved income g eneration an d v alue transformation for their beneficiaries. T he


FINAL REPORT


MFIs, on the other hand, welcomed the opportunity to expand their reach and impact to a greater number of clients. This was also seen as an innovative scheme to scale-up sustainable housing microfinance. The questions that arose during the early stage of the partnerships focused more on when the take-out will occur and how the MFIs will be able t o serv ice t he community given their selection cr iteria an d ex isting lending methodologies, policies an d procedu res. The M FIs also emphasized t hat their lending will be based on their assessment of the target beneficiaries‘ capacity to borrow, no t ne cessarily ba sed on t raditional measures bu t ba sed o n accepted microfinance practices. Some of the MFI-LGU partnerships which the Consultants assisted in developing and negotiating are the following: ASKI w ith Angeles C ity for their Pulungbulo housing subproject. A lthough

based in Cabanatuan City, ASKI has operations in the nearby provinces of Tarlac and Bulacan and showed willingness to work with the Angeles LGU after several meetings an d exposure v isits f acilitated by t he C onsultants. Toward this en d, ASKI op ened a branch in Sto. Cristo, Angeles C ity on March 8, 2006. T his solidified their partnership with the LGU which was a key feature of DPUCSP. A change i n t he l ocal administration m idway t o sub project implementation due t o the results of the local elections, however, adversely affected this partnership as the subproject lost its momentum.

TSKI with Iloilo City for the Northeast Timawa subproject. The Consultants facilitated meetings between t he MFI and L GU representatives from t he ICUPAO12 and assisted in drafting the MOA which was eventually signed by both parties in January 2008. Although TSKI had not been able to renew their credit line w ith DBP af ter it e xpired i n August 2007, t hey de cided to proceed w ith assisting the LGU using their own funds.

NWTF with Victorias City ( Barangay 20 H ousing P roject). The C onsultants

arranged meetings be tween the MFI and the L GU an d assisted i n drafting the MOA. B oth parties expressed willingness t o work t ogether si nce some of t he target beneficiaries of the subproject were existing clients of the MFI. However, the partnership was stalled indefinitely due to the position taken by the LGU to withdraw from the Project.

EBI and Butuan City (Balangayan subproject). The Consultants participated in

exploratory t alks be tween the LGU and EBI r egarding a partnership for the housing component of the Balangayan subproject. The subproject presented an opportunity to upscale EBI‘s home improvement program since new housing will be provided. Furthermore, EBI was also looking at giving housing loans to their staff which meant a different product l ine from their present home improvement loans. However, the LGU indicated preference for the Gawad Kalinga and Habitat for Humanity approach.

First Macro Bank, Inc. (FMB) and GMA, Cavite. Under the proposed scheme,

First M acro Bank w ill t ap t he D PUCSP P art B facility t o secure funds for on-lending to qualified urban poor clients who will buy the serviced plots produced by the GM A local g overnment. Through the P PP st udy funded by AD B, D BP,

12 Iloilo City Urban Poor Affairs Office


FINAL REPORT


Image 8: HUDCC, DBP, ADB, and the GHK Consultants visit the ASKI’s Angeles City branch which services the enterprise and housing microfinance needs of the Pulungbulo Subprojects and other nearby communities.

Image 9: DBP and CARD, Inc. sign the first DPUCSP subloan under Part B with ADB and HUDCC as witnesses to the occasion.

Image 10: A Davao City-based client of Enterprise Bank shows her renovated house.

Image 11: DPUCSP housing improvement loans are helping to improve sanitation facilities in Mindanao homes.

Image 12: ASKI representatives and Angeles City Housing Staff exchange learnings on microfinance through the ADB Advisory TA.

HUDCC, an d the C onsultants assi sted FMB an d t he G MA l ocal government i n discussing an d negotiating the ba sic po ints of t heir propose d pa rtnership agreement which led to a formal MOA signed on May 13, 2008. Two issues which surfaced regarding this subproject were the lack of funds to effect the transfer of land ownership to GMA and the interest rate to be charged by the MFI which the LGU found to be high given that the subloans will be secured by individualized titles.13

13 See “Financing Public-Private Partnerships for Sustainable Low-Income Housing: Final Report.” ADB Regional TA 6421: Sustainable

Urban Development in Asia, GHK International, May 2009.


FINAL REPORT


3.3 Overall Project Implementation Status for Parts A and B As of the Advisory TA‘s completion date, with an el apsed t ime period of 98 %, t he Project‗s cumulative contract awards amounted to P1.208 bi llion ($25.53 million14) or 74% of t he total A DB l oan15 and a cumul ative con tract disbursements of P684.63 million ($14.57 million) or 42% of the loan. Appendix 10 contains the DPUCSP PPMS report summarizing the project‘s contract awards an d di sbursements in t he ADB format. The largest loan approval was P450.0 million in the during the third quarter of 2006 under Part B for People‘s Credit and Finance Corporation (PCFC),16 while the largest disbursement was in t he f ourth quarter o f 2008 with P187.0 million di sbursed under Part A for R-II Builders under the PPP modality.17 The P450 million subsidiary loan for PCFC was partially cancelled in 2007 with only P13.5 m illion disbursed causing a substantial de cline i n the amo unt of f unds committed. In 2009, the total disbursement was close to P176.0 million, P143.0 million (81.25%) of which represented the funds availed by R-II Builders. A total of P944.89 million ($20.10 million) or 58% of the ADB loan remain undisbursed. In sum mary, the project‘s relatively low level of disbursement can be traced to a confluence of f actors—the w eak cap acity o f t he LGUs, M FIs, N GOs, and HOAs to prepare viable subprojects and comply with the documentary requirements of DBP, the subloan proces sing an d r equirements o f D BP w hich was initially cum bersome and costly f or the t arget clients due in pa rt to t he delay in t he effective dissemination o f DPUCSP‘s operating policies and guidelines to the branch and regional offices, insufficient knowledge o f an d appreciation for ho using microfinance, di fficulties in accessing l and for pro -poor or low i ncome housing, an d policy con straints which adversely aff ected or sl owed do wn subproject implementation particularly t hose relating to the use of r ights-based instruments as col laterals and the fast t racking of the land proclamation process for socialized housing. Specific factors include: Delays i n su bproject preparation, processing an d ap provals. S everal LGU -

originated subprojects, developed with technical assistance from the Consultants, were significantly de layed or put on hold due to the fast and frequently changing priorities of the LGUs concerned or the lack of technical and financial resources at the local level. The latter made it particularly difficult for many LGU proponents to work without the Consultants‘ assistance and resources and comply with DBP‘s subloan approval r equirements. H owever, m ost of t he L GU propon ents al so claimed that DBP seemed to have excessive documentary requirements compared to the other government financial institution (GFI) which accounted for 80% of local government borrowings. This was true initially but changes to DBP‘s PMO, policy changes agreed between HUDCC, DBP and ADB, and the Consultants‘ reports prompted a r eview an d st reamlining o f the po licies and procedures used for DPUCSP. The rest of the documents were required by the BSP given the banking mandate of DBP.

14 Exchange rate: US$1.00 = P47.00 15 Total amount of loan as of December 2009 is P1,629,525,434.54 based on DBP’s project status report. Converted from the current Yen

equivalent. 16 This subsidiary loan is for relending to their member MFIs, specifically for home improvement loans. 17 This is to finance the Pamayanang Maliksi Cavite Mass Housing Project, a joint undertaking of the Provincial Government of Cavite and

R-II Builders Inc.


FINAL REPORT


Inadequate capacity of DBP for lending to MFIs. In the early stage of DPUCSP project implementation, DBP did not have sufficient knowledge of microfinance and skills r equired t o prequalify an d evaluate MFI proposals f or financing. Th ere w as also considerable con fusion as t o which g roup i n D BP was t asked to ha ndle prequalification and lending to the MFIs. This resulted in documents submitted by MFIs getting l ost or m isplaced. In 2006, DBP sen ior management d ecided to establish t he Microfinance R esource Center (MFC) which con siderably improved the pe rformance of P art B . H owever, i n 2008, t he mandate of t he M FC was changed to purely advocacy activities. DBP‘s Part B portfolio was transferred from the MFC to t he Wholesale B anking Group. With t his organizational change, DPUCSP disbursements for Part B subprojects suffered a major setback.

Limited ca pacity of PCFC t o develop, market, an d administer ho using

microfinance products and services on a wholesale basis. With regard to the PCFC sub sidiary loan which could have been r elent t o its member MFIs, P CFC reported that contrary to an earlier survey which indicated that at least P100 million can be disbursed in 2007, many MFIs became either highly liquid or were able to access lower cost funds for microenterprise lending due to the lower interest rate regime prevailing at that time. PCFC‘s had little appreciation and understanding of housing microfinance c oncepts, p roducts an d services and requested t echnical assistance which was beyond the scope of work and resources of the Consultants. As a result, P CFC w as no t ab le to differentiate housing microfinance f rom microenterprise lending; they were also unable to effectively explain why a higher pass on rate could be justified for housing microfinance. In the end, PCFC decided not to avail of DPUCSP ci ting the increased l iquidity of most of i ts member MFIs and the av ailability of o ther funds for m icroenterprise lending a t l ower i nterest rates.

Weak performance of MFIs in housing microfinance. The DPUCSP subloans to MFIs, na mely C ARD N GO ( approved i n March 2005), TSKI, an d NWTF (both approved in the f irst quarter of 2006) peaked in 2006. However, these subloans were not f ully di sbursed, pa rticularly t hose earmarked for housing i mprovement loans and housing l oans be cause the M FIs lacked the technical an d financial resources to develop the requisite products, services, and systems adequately to ensure profitability an d sustai nability. With the ex ception of t wo MFIs—EBI i n Mindanao an d ASKI i n Central Lu zon—the M FIs which participated i n DPUCSP were, thus, not able to scale up their housing microfinance programs.


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4. KEY ISSUES, RECOMMENDATIONS, AND ACTIONS TAKEN

The Consultants categorize the issues encountered on the DPUCSP implementation as either policy- or operations-related in nature. These issues, combined, can explain the de lays ex perienced i n subproject de velopment an d i mplementation. Table 9 summarizes t he policy-related issues met, t he recommendations of t he Consultants, and actio ns t aken or planned by HUDCC, DBP, and A DB with assi stance from the Consultants to address t he i ssues. Table 10 summarizes t he operations-related issues.

Table 9. Key Policy Issues Encountered in DPUCSP

Policy Issue Indicator Recommendation(s) Action(s) Taken

1 Proportion of DPUCSP support for informal and formal sector households

The Passi City subproject which intended to cater mostly to local government employees were initially considered as formal settlers by DBP and therefore not eligible if the 90:10 prescribed ratio between informal to formal settlers in DPUCSP was applied.

The Consultants recommended that HUDCC and ADB clarify the policy with DBP. DBP’s interpretation of the 90:10 ratio is that it should be applied on a per subproject basis. The Consultants understood the policy to apply to the entire Project and not necessarily on a per subproject basis.

In a letter to DBP dated 9 August 2006, ADB agreed with the position of HUDCC that the eligible mixture of beneficiaries shall be at least 90 percent informal settlers and the policy should be applied to the entire project target of 20,000 households. ADB’s concurrence with the HUDCC position was reiterated in another letter dated 21 February 2007.

2 Eligibility of HOAs as proponents for DPUCSP’s Part A facility

HUDCC, in a letter dated 20 November 2006, sought ADB’s opinion on the eligibility of HOAs to participate in DPUCSP in connection with the Pinagmangalucan, San Vicente project assisted by the Cities Alliance-funded IMPACT Project.

The Consultants recommended to the ADB that since HOAs are defined by HLURB as “an association or organization that is registered by the HLURB, HIGC, or SEC” which by its by-laws can be empowered to enter into a contract under DPUCSP, they may be considered as a qualified enterprise for the purpose of borrowing under Part A as defined in the DPUCSP Loan Agreement (Loan 2064-PHI).

ADB, in a letter dated 21 February 2007, clarified that HOAs duly registered with HLURB, HIGC or SEC are eligible to avail of financing under Part A provided that (i) the proposed borrowing is authorized under their approved by-laws; (ii) they meet the applicable eligibility criteria; (iii) land ownership or secure tenure is available for the development of a housing project; and (iv) they follow good banking practices as established in the rules and regulations of the Central Bank. However, HOAs cannot be considered as “qualified enterprises” for microfinance under Part B as according to the Philippine law, providing financing can only be undertaken by finance institutions.

During the 3rd quarter of 2008, however, DBP decided to drop the IMPACT-assisted HOA subprojects in the DPUCSP subproject priority list. Two factors, namely: (a) lack of readiness and capacity on the part of the proponent HOAs, and (b) the experience with the initial HOA subprojects prompted the need to revisit and strengthen the proposed HOA guidelines to determine their credit worthiness.

The Consultants assisted in drafting the “HOME” indicators as a step toward institutionalizing an


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appraisal or scoring system for HOAs.

3 Acceptable land ownership forms

In conformity with DPUCSP’s policy requirement for a “clean title” to be eligible for Part A financing, DBP made freehold conveyance a precondition to subloan approval. This seemed to conflict with another DPUCSP policy which encourages the use of acceptable rights-based secure tenure arrangements. Land tenure issues related to this conflict have delayed subproject processing or even discouraged subloan applications by LGUs.

The Consultants believed that transfer of property rights through usufruct should be an acceptable form of land ownership under Part A of DPUCSP. This is consistent with the project policy of encouraging the use of acceptable rights-based secure tenure arrangements in lieu of the freehold. The Consultants recommended that the policies of DPUCSP on land ownership be clarified by the ADB.

ADB clarified in writing that the following “nationally- or locally-owned land” are acceptable under the Project: (i) public land owned and titled in the name of the Government or a government agency or an entity belonging to the National Government (1) which has been proclaimed for socialized housing, or (2) which the titleholder has ( with authority from the Philippine President) reserved, segregated or earmarked for socialized housing; (ii) untitled public lands that have been (1) proclaimed for disposition to the LGU and/or occupants/ potential subproject beneficiaries, either in the form of usufruct or lease agreements, or (2) which are covered by free or sales patents that have been issued to the occupants/potential subproject beneficiaries; and (iii) land titled in the name of the LGU.

4 Rights-based secure tenure forms for nationally-owned proclaimed land

DBP like most of the banking institutions in the Philippines did not accept rights-based instruments as collateral substitutes even if the Urban Development and Housing Act (UDHA) recognized such instruments as acceptable for the disposition of land for socialized housing to ensure secure tenure.

The Consultants, in response to questions encountered while marketing the Project, requested HUDCC which in turn asked the ADB to clarify the acceptability of rights-based secure tenure forms for nationally-owned proclaimed land. In addition, the Consultants assisted HUDCC in drafting a housing microfinance product manual, which recognized rights-based instruments as collateral substitutes. This manual was subsequently for use by banks by Bangko Sentral ng Pilipinas (BSP).

ADB confirmed in writing that rights-based instruments defined by the UDHA to include “lease with option to purchase, usufruct, or such other variations as the LGUs or the NHA may deem most expedient in carrying out the purpose of the law” are acceptable to DPUCSP particularly when they support the Project’s objective of distributing secure tenure. The BSP for its part after a series of technical reviews, discussions, and revisions approved the proposed housing microfinance product manual proposed by HUDCC for DPUCSP.

5 Public-private partnerships (PPPs)

Many LGUs continue to be averse to borrowing for socialized housing given their other priorities and the perceived political risks that borrowing entails. A number of LGUs also do not have the technical capability to develop and implement their proposed subprojects.

They are also less inclined to borrow for pro-poor and low-income housing at the scale warranted by demand when they have other priority investment areas to consider such as the provision of physical, economic and social infrastructure.

In order to address the limitations and constraints of local governments in producing affordable low-income housing, DPUCSP was designed to include PPPs as an essential project design feature and approach to low-income housing development. There are indications that LGUs and private sector developers specialized in socialized housing look at the PPP modality of DPUCSP as a viable alternative to scaling up low-income and pro-poor housing in the Philippines.

The Consultants underscored the need for DBP and HUDCC to promote and facilitate the formation of LGU-private sector partnerships under the Project by more actively networking with CREBA, SHDA, and housing NGOs.

As a result of the aggressive marketing of the PPP modality by DBP and HUDCC with the Consultants’ support, nearly 96% of the estimated Part A financing comprise PPPs. The biggest subproject, the P1.3 billion Pamayanang Maliksi which is a partnership between the Cavite Province and R-II Builders was approved on September 2008.


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6. Reimbursement vis-à-vis liquidation mode of financing for MFIs.

The issue of a liquidation mode of financing to DBP-accredited MFIs implementing housing microfinance was first proposed in one of the meetings of ADB with selected MFIs during the 12-22 November 2007 ADB Review Mission.

It was argued by the MFIs that the reimbursement modality can be a bottleneck and a limiting factor for them to scale- up their housing loans programs. A liquidation mode of financing, on the other hand, will facilitate liquidity of MFIs as they will not have to source internal funds to finance the bigger loans with longer term structure. This is a key supply-side factor that can help the institutions meet the demand for such loans and allow them to expand their portfolios.

The proposed shift from reimbursement to liquidation mode for loans requiring bigger loan sizes and longer term structure is in keeping with sound financial and liability management principles which indicate that that longer-term housing loans should be funded with capital that matches their longer term structure to avoid a mismatch between the source and use of funds.

The Consultants assisted DBP in drafting a concept paper that presented the rationale for shifting to the liquidation mode and ways to implement the proposed shift.

The proposed implementation guidelines included the following:

Preparation by the MFI of a housing microfinance product manual for accreditation with HUDCC (as agreed with BSP)

Pilot implementation of the liquidation mode by DBP for selected MFIs (mechanics of the pilot program to be prepared and approved by concerned DBP departments and management)

Deed of Assignment covering the amount to be released

Defined schedule of subloan disbursements to the pilot MFIs and repayments by the MFIs to DBP

Participation of pilot MFIs in a housing microfinance guarantee mechanism (mechanics to be developed by DBP with HUDCC and the MFIs, to avoid delays a pilot/interim guarantee program may be considered)

Pilot implementation of an MFI-DBP-Pag-IBIG partnership agreement for housing microfinance (subject to the agreement of Pag-IBIG to the agreement to be developed by HUDCC with inputs from pilot MFIs and DBP).

7. Financing for non-Pag-IBIG members has not been possible despite efforts to address this matter through MFIs.

Without a financing facility for the informal sector, the PPP modality will remain unable to reach the informal target beneficiaries under DPUCSP.

R-II Builders reported that in the Pamayanang Maliksi subproject, 2,700 applicants belonging to the informal sector could not be accommodated because they are non-Pag-IBIG members.

The Consultants proposed that dialogues between MFIs and an alternative financing institution (e.g. SHFC) be facilitated on how to address the housing finance needs of the informal sector on a sustainable basis. These dialogues can also discuss how the BSP-approved housing microfinance product manual can be used to enable households from the informal sector to access DPUCSP financing. The rights-based instruments (RBIs) which HUDCC has been developing through the TA on an inter-agency basis will be pivotal to this initiative.

The proposed mechanics for the Pag-IBIG-MFI linkage was prepared and submitted. However, the senior management of Pag-IBIG did not approve the proposal stating that their priority was to serve their existing members. With the approval of Pag-IBIG’s revised charter, HUDCC believes that there is scope for revisiting the proposed Pag-IBIG-MFI linkage.

Table 9. Key Operational Issues Encountered in DPUCSP


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Operational Issue Indicator Recommendation(s) Action(s) Taken

Task 1 Project Promotion 1. Low LGU

participation Many of the subprojects initiated by the LGUs in Part A did not progress or were put on hold due to changing political priorities or the lack of local capacity to prepare the subproject proposals without the technical and financial support of the Consultants.

The Consultants observed that many of the LGUs were too reliant on the resources of the Advisory TA. They recommended to DBP and HUDCC that LGUs which lacked the technical capacity to complete the required CAP or FS be asked to hire their local consultants which can be charged to the subloan. Due to the long list of subprojects not prospering or on hold, the Consultants also suggested to HUDCC and DBP that some of the subprojects be reformulated as PPPs with the private proponents taking on the subloans.

DBP proposed a project preparation facility as part of DPUCSP to accelerate subproject development. HUDCC also advised LGUs with limited or no capacity to hire local consultants. During a CREBA convention in mid- 2008, ASec Alba of HUDCC announced to the socialized housing private developers that there were several subprojects proposed in DPUCSP which may need their participation. The CREBA members requested DBP and HUDCC to prepare an investment portfolio based on these subprojects to enable them to evaluate and discuss prospects of reformulating them into PPPs for DPUCSP financing.

2. Credit lines of MFIs expiring without being fully disbursed or housing loan availments

The approved P50 million credit lines of CARD, NWTF, and TSKI expired without being fully disbursed and with very minimal or even zero availment for housing loans.

Out of the P50 million credit line of NWTF, the MFI availed of only P3.2 million for livelihood. CARD disbursed P5.2 million for housing and P30 million for livelihood. TSKI used P30 milliion for livelihood.

The Consultants suggested that DBP continue to engage proactively with these MFIs while the issues concerning them such as improving their performance rating and difficulty in complying with documentary requirements were being addressed.

Since the last quarter of 2007, DBP had not renewed the credit lines of many of these MFIs, except CARD. However, they remain as prospective partners since they have signified continued interest in DPUCSP and are still being identified for possible partnerships with certain local governments and private groups like Habitat for Humanity.

3. Continuing market threat from other government financial institutions (GFIs)

DBP is competing with another GFI in servicing the development financing needs of LGUs. Many LGUs use this other GFI as their depository bank for their internal revenue allotments (IRAs). This GFI also has considerably more branches than DBP. LGUs are also indicating that loan processing by this GFI is faster than the loan processing of DBP. All these factors put pressure on DBP to process and approve subloans faster, in a manner that will wean many LGUs away from the other GFI, at least as far as housing is concerned.

The Consultants recommended that DBP review its organizational structure for implementing DPUCSP as well as the processing and approval flows in order to expedite subloan approvals. The Consultants also recommended that DBP consider the asset-based collateral in lieu of the IRAs of the LGU since many of the IRAs were already captured by the other GFI.

DBP reorganized its PMO at least three times since project inception. The most recent reorganization has proven to be the most effective and has led to a stronger DBP-PMO for the Project. This PMO has produced a strategic medium-term plan for DBP in housing and has also initiated a lot of policy and operational reviews designed to make DBP more responsive to the DPUCSP prospective proponents. A key result of these reviews is that DBP is now developing more asset-based collaterals for use in the Project. DBP’s PMO continue to be understaffed, however, and lack the capacity to more effectively implement DPUCSP.

4. The high cost of funds of DPUCSP render the facility uncompetitive

This is highlighted by the case of another funding facility within DBP, the Industrial Guarantee and Loan Funds

The Consultants proposed that DBP consider lowering its DPUCSP interest rates by renegotiating the forex premium charged by DOF and

DBP’s Program Development Department prepared a position paper for submission to DBP Management requesting leniency


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with other similar financing programs, especially since 2008 when the BSP started cutting their interest rates and the subsidized housing loans of Pag-IBIG.

(IGLF), that competes with DPUCSP as it offers lower interest rates for livelihood loans to MFIs. MFIs tended to avail from this facility rather than DPUCSP because of the lower interest rate and lesser requirements.

matching their DPUCSP loan drawdowns from ADB to the shorter-term financing requirements of the LGUs, private sector proponents, and MFIs.

in the imposition of Bank Circular 14 (prescribing minimum spread and premiums to ODA and Bank funds) on ODA funds, including DPUCSP.

Task 2 Prequalification of Proponents

4 Delay in LGU prequalification for project participation

Some LGUs progressed to CAP and FS preparation without DBP’s confirmation that they have the borrowing capacity. DBP has relied mainly on the certification from the BLGF of the borrowing capacity of the proponent LGU. But despite an agreement between DBP and BLGF, there was considerable delay in the receipt of the BLGF’s certification of the LGUs’ borrowing capacity.

The Consultants recommended that DBP conduct their preliminary assessment of the LGUs’ borrowing capacity while waiting for the BLGF’s certification of borrowing capacity for subloan approval. The Consultants emphasized the importance of receiving DBP’s early advice on whether an LGU is eligible for the subloan to maximize the use of the Advisory TA’s resources.

DBP and the Consultants worked jointly to conduct preliminary assessment of the LGUs’ borrowing capacity based on the BLGF’s methodology.

5 Delay in the prequalification of MFIs

In the initial stage of project implementation, DBP did not have the knowledge and skills required to prequalify MFIs interested to participate in DPUCSP. There was also considerable confusion as to which group in DBP will handle the prequalification and lending activities to MFIs. Part B of DPUCSP was handled by various groups which resulted in documents submitted by MFIs getting lost or misplaced. Staff also required training on how to apply the Philippine microfinance standards to accrediting MFIs for DPUCSP.

The Consultants recommended that MFIs be prequalified upfront to streamline the process of subproject development. The Consultants also recommended that the appropriate DBP personnel be trained under DPUCSP on housing microfinance and how the microfinance standards could be adopted for use in the Project.

Upon the request of DBP senior management, the Consultants arranged for them to have a briefing and exposure trips on microenterprise and housing microfinance in December 2005 and February 2006. This resulted in the establishment of the Microfinance Resource Center (MFC) within the 1st quarter of 2006 to handle all microfinance-related activities. In 2008, however, DBP senior management decided that the MFC should focus on advocacy activities. Hence, Part B portfolio was transferred to the Wholesale Banking Group of DBP.

Task 3 Subproject Identification and Prioritization

6 Need for a subproject prioritization framework

Upon receipt of an LOI from an LGU, HUDCC and DBP have tended in the past to simply ask the Consultants to assist with the conduct of briefings and site inspections. However, in some cases, the Consultants found that the subprojects being proposed by the LGUs were not a priority for DPUCSP financing due to legal, technical, environmental, or even social issues.

The Consultants formulated a subproject prioritization framework at the start of the Advisory TA. Despite the orientation and training conducted for DBP and HUDCC staff at the regional levels, the Consultants observed that the subproject prioritization framework was not being used. The Consultants recommended that for a more cost-efficient use of the Advisory TA resources, DBP and HUDCC staff should work on the prioritization of proposed subprojects before requesting the Consultant to assist.

As agreed, the DBP and HUDCC PMOs conduct preliminary discussions with the proponents on their proposed subprojects before requesting the Consultants to conduct the site visits.


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7. Delay in processing of land use conversion with the DAR

Land proposed for development by LGUs often had to be converted for residential purposes since a number of them were classified as agricultural lands. The LGUs and private sector landowners were not knowledgeable on the policies and the process of land conversion, thus, delaying the readiness of their prioritized subprojects for evaluation by DBP.

HUDCC and the Consultants agreed to prepare a document or a brochure that would serve as a basic guide to the LGUs and landowners interested in land conversion.

HUDCC and the Consultants prepared the “Primer on Land Conversion” which ensured that the identified subproject site was exempt under the Comprehensive Agrarian Reform Law provisions.

8. Delay in titling of proclaimed land for housing development purposes

Subprojects for the cities of Butuan and Mandaue involved the development of land proclaimed by the national government for residential purposes and to house specific beneficiary households. It took years to secure the necessary proclamation and conveyance documents.

HUDCC and the Consultants prepared a simple guide to the process to be followed by the proponents. However, there is still a need to expand and develop the guide into a more detailed primer.

HUDCC and the Consultants prepared a basic guide to the proclamation process of identified lands.

Task 4 Preparation of CAP, FS, or MAP

9 Delays encountered in the CAP, FS or MAP preparation

Most LGUs and even MFIs were not able to complete their CAP, FS, or MAP within the timeframe agreed during the planning workshops with the Consultants, HUDCC, and DBP. Staff members assigned to work on the subproject were typically working on other assignments and were not able to devote the necessary time required. Some LGUs also did not have adequate or capable staff to complete the CAP, FS, or MAP, particularly the detailed engineering aspects.

Participating MFIs also stressed the need to simplify the MAP template originally used to prepare the subproject proposals.

The Consultants recommended that a more thorough evaluation of the institutional capability of the LGU expressing interest to participate in DPUCSP be conducted upfront to determine whether they will need local consultants to assist them in subproject preparation. The Consultants prepared a sample TOR for hiring local consultants to work on the detailed engineering and environmental impact assessment of their proposed subproject.

DBP, HUDCC, and the Consultants discussed strategies for how LGUs can be encouraged to hire local consultants to assist them with subproject preparation. It was observed that private sector developers engaged in PPP subprojects were using local consultants to assist them with conducting market studies, financial analysis, and master planning for the site and were able to submit their FS in considerably shorter time.

To respond to the request of the MFIs, the Consultants assisted DBP and HUDCC in simplifying the MAP and make it a concise and more user-friendly document. The original MAP template underwent significant revisions since July 2008 with a final draft submitted for review by DBP and HUDCC in November 2008. Upon the recommendation of DBP, this template was further refined in 2009 to strengthen its focus on housing microfinance.

Task 5 CAP, FS, and MAP Appraisal and Approval Process

10 Lengthy and tedious subproject processing

A number of LGUs and MFIs expressed their frustration with DBP’s subloan application process, describing it as too cumbersome compared to the

The Consultants provided the necessary feedback to DBP for them to address issues being raised by some DPUCSP proponents. They also advised DBP, when

The latest DBP-PMO has been proactive in initiating the review of their operating policy guidelines to fast track DPUCSP implementation. In


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process used by another GFI. Some MFIs decided to withdraw their subloan applications and access other financing facilities due to confusing and even conflicting requirements from the officers assigned to handle their accounts.

called upon, to help resolve issues and to streamline certain aspects of the subloan application process. The Consultants also actively assisted the LGUs and MFIs in complying with DBP’s documentary requirements, to the extent possible.

close coordination with HUDCC and the Consultants, they also facilitated the resolution of issues arising from negotiations on a specific subloan application.

11 Feedback mechanism on subloan applications

A number of LGUs and MFIs claimed that they did not receive adequate feedback on the status of their subloan applications.

The Consultants recommended that DBP and HUDCC institute an adequate and reliable feedback mechanism for DPUCSP subloan applications.

DBP, HUDCC, and the Consultants agreed to meet regularly to discuss the status of each subproject and to agree on strategies for how to address issues affecting the subloan application.

Task 6. Subproject Implementation

12 Coordination difficulties with other socialized housing initiatives

In the case of the Pulungbulo subproject in Angeles, considerable delay was experienced when Gawad Kalinga abruptly pulled out of implementing their component of the subproject.

The Consultants recommended that the LGU should have a back-up plan in case Gawad Kalinga was not able to implement its component.

The LGU agreed and made arrangements with other civil society groups in the city to volunteer their services to help the urban poor beneficiaries in Pulungbulo construct their houses. However, this also did not go as smoothly as planned and the subproject implementation suffered due to difficulties with implementing the “sweat equity component.”


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5. SHELTER SECTOR POLICY SUPPORT

DPUCSP had a policy agenda for changes in the socialized housing sector principally focused on a ffording full r ecognition an d acceptance of rights-based secure t enure instruments and further liberalizing bank lending rules and po licies t o acce lerate t he provision of pro -poor h ousing i n the P hilippines. These reforms w ere intended to regularize informal settlements and give legal tenure to the poor and homeless while at the same time i mproving their access to a ffordable she lter finance through t he introduction and promotion of housing microfinance best practices.

Key social housing sector reforms under DPUCSP‘s policy action plan have been achieved or set in motion by HUDCC and DBP after four years of policy analysis and advocacy with assistance from the Consultants. The most notable accomplishments of these accomplishments are discussed in the ensuing paragraphs.

5.1 Setting of Social Housing Sector Reform Agenda The Urban Land Reform Workshop/Conference was held on 14-15 October 2004 at the Holiday Inn, C lark S pecial E conomic Zone, A ngeles City, Pampanga. The workshop/conference was an i nitiative of H UDCC, t hrough the sup port of DPUCSP, as one of i ts k ey activ ities for t he commemoration o f that year‘s National Shelter Month. In line with the celebration‘s theme of ―Katiyakan sa Pabahay, Yaman ng Buhay,‖ the workshop/conference gathered 14 di fferent government ho using, l and management, an d public regulatory agencies t o di scuss an d formulate effective strategies and action plans to accelerate pro-poor housing through al ternative secure t enure arrangements and housing finance mechanisms.

The overall objective of the workshop/conference w as t o help i mprove l and administration sy stems, broade n support and acce ptance f or rights-based secu re tenure options, and achieve consensus on how pro-poor housing can be accelerated using r ights-based security of tenure and i nnovative she lter finance prov ision. Specifically, it aimed to:

■ Review an d assess t he cu rrent l and distribution, ad ministration, r egistration, and shelter financing systems relative to urban land reform initiatives especially on rights-based instruments in the provision of secure land tenure; and

■ Formulate and integrate specific agency action plans that will carry out agreed urban land r eform initiatives an d secu re tenure m echanisms and t o build consensus on an overall urban land reform action plan on rights-based security of tenure.

Presentations on t he st ate of l and management an d government soci alized ho using programs served as the major inputs for the conference. Focused group discussions on improving the land management system, distribution of secure tenure, and shelter finance provision followed.

Image 13: Urban Land Reform Workshop in Clark Special Economic Zone, Angeles City, Pampanga


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In view of the many issues and challenges identified, recommendations based on the past experiences an d l essons l earned were al so di scussed. The prin cipal recommendations w ere t he following: first, t o a ddress the growing de mand for p ro-poor housing, both the private sector and the government must work for the provision of de cent an d a ffordable housing. To encourage the priv ate sector t o ac tively participate in this e ffort, t he government must first do away with subsidized interest rates. Second, there was a need to adopt applicable microfinancing methodologies in the provision of pro-poor housing. Third, a demand responsive, and not supply-driven, pro-poor housing program was needed. This meant that the program should address the ne ed for secure tenure; prov ide ba sic i nfrastructure, serv ices and facilities including decent and affordable housing; enable access to shelter and microenterprise financing; institutionalize community pa rticipation; an d ensure replicability an d environmental sustai nability. Fo urth, to deal with the s tructural p roblems of t he country‘s land administration system, the LAMP strongly advocated for institutional reforms that aimed to integrate the various land administration agencies into a single entity.

The main ou tput of the workshop/conference was a con solidated government po licy action plan which constituted government‘s reform agenda to accelerate pro-poor housing in the country. The strategies and specific agency action plans focused on: (1) improving t he p roclamation, land conversion, an d registration processes for p ro-poor housing; (2) distributing secure tenure through rights-based approaches; and (3) adopting appropriate methodologies t o make sh elter financing more responsive an d affordable to the poor. The consolidated government policy action plan for socialized housing an d the main conference proceed ings are sho wn as Appendix 11 and Appendix 12, respectively.

The output of the Urban Land Reform Conference/Workshop was presented to various stakeholders an d to the HUDCC C hairman, Vice President Noli de C astro, in a

Multisectoral Consultation and Conference on 19 October 2004. The stakeholders‘ consultation was he ld t o allow concerned sectors t o review a nd v alidate the strategies and specific g overnment group plans that were formulated during the two-day conference.

The Vice P resident shared t he v iew t hat last week‘s conference-workshop w as truly significant as 14 different government agencies consisting o f t he k ey she lter agencies, l and administration an d management bo dies, a nd she lter finance providers and r egulators g athered

together to discuss and prepare the consolidated government po licy action plan that had been presented to t he bo dy t hat da y. H e said that t he three m ain strategies recommended, na mely: ( 1) improving t he l and proclamation, ad ministration, an d registration sy stems for pro -poor housing; ( 2) distribution o f secu re tenure through rights-based ap proaches; an d (3) i mproving acce ss by t he urban poor to shelter financing, including the specific agency action plans under those strategic thrusts, met the basic elements of a demand responsive and pro-poor housing program.

In a cal l for partnership an d actio n, Vice P resident De C astro i ssued a di rective authorizing the adoption of the formulated action plans as part of the strategies of the KSAs for pro-poor housing. He then called upon HUDCC to create technical working

Image14: Presentation of Policy Conference Outputs to the Multi-Stakeholders with VP Noli De Castro, Holiday Inn Galleria, Ortigas Center, Pasig


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groups that w ould carry ou t t he actio n plans for accelerating p ro-poor ho using services. He also encouraged the active participation of other sectors (LGUs, NGOs, MFIs, and others) in the implementation of the action plans.

5.2 Institutionalizing Market-based and Accessible Housing Finance 5.2.1 Approval of the Housing Microfinance Product Manual

Revisions to ba nking rules an d r egulations that sought to pro mote t he practice of housing microfinance formed an important part of the DPUCSP policy reform agenda.

On 29 October 2004, or a week after the Multisectoral Consultation, HUDCC and DBP, supported by t he C onsultants, gave a formal presentat ion on D PUCSP an d its proposed policy reform agenda to senior BSP officials. During the presentation, BSP officials w ere briefed o n the eme rging pra ctice of ho using microfinance an d how DPUCSP intended to apply this methodology in providing the poor with better access to she lter financing through t he support o f b oth land administration an d bank regulatory agencies.

It was explained that a key reform would be for the BSP to allow microfinance-oriented banks to en gage i n ho using microfinance and t o r egulate the activity as a sep arate portfolio from microenterprise lending. A corollary revision would be to permit the same banks, considering the methodologies applied in housing microfinance, to lend against collateral substitutes such as rights-based or interim titling instruments.

Following the initial presentation, the first Technical Working Group (TWG) meeting for Shelter Finance R eform w as convened on 10 December 20 04 a t t he Holiday I nn Galleria, A DB A venue, M andaluyong C ity. A side from t he o riginal group m embers consisting of HUDCC, NHMFC, Pag-IBIG, HGC, DBP, and BSP, representatives from DOF/NCC, NEDA, RBAP, CTB, and MCPI attended the meeting.

The meeting w as called t o discuss the p roposed bank regulatory r eforms that w ere meant to adopt housing microfinance best practices in shelter finance provision and to support r ights-based se cure t enure mechanisms w ithin acceptable bank p rudential standards. The propos ed r eforms w ere ex plained in the H UDCC policy pa per (Appendix 13) that was distributed to the TWG members prior to the meeting.

The HUDCC Policy Paper on Improving the Urban Poor‘s Access to Shelter Financing was officially sub mitted by V ice President/HUDCC C hairman N oli de C astro t o t hen BSP Governor Rafael Buenaventura. The policy paper discussed the proposed bank regulatory reforms that were meant to: (i) adopt housing microfinance best practices in shelter finance provision for t he u rban poor; and ( ii) support the use o f rights-based secure tenure arrangements as acceptable forms o f collateral. The B SP G overnor endorsed t he P olicy P aper for review and con sideration t o Deputy Governor Nestor Espenilla, Jr., the Chairman of the monetary authority‘s Microfinance Committee.

As a follow-on activity after the formal submission of the Policy Paper, a presentation on shelter finance issues, housing microfinance and the proposed regulatory reforms was made to senior Monetary B oard (MB) M ember Antonino A lindogan, Jr ., M B adviser to the M icrofinance Committee, on 2 0 June 2005. A t t he meeting, M r. Alindogan gave key inputs on how he thought the regulatory reforms could be feasibly carried out from a bank policy perspective. One important advice given was to classify housing microfinance u nder the general ca tegory of microfinance l oans so that the privileges and incentives given to microenterprise lending under the General Banking


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Law of 20 00 m ight al so be ex tended to ba nks t hat w ould like to pro vide ho using microfinance products and services.

Taking into account the relevant suggestions and comments gathered during the TWG meeting and BSP presentations, the Consultants assisted HUDCC in preparing a draft Housing Microfinance Product Manual which was submitted to the BSP Microfinance Unit ( the t echnical secr etariat to the M icrofinance C ommittee). T he P roduct M anual defined the salient features and characteristics of housing microfinance loans, and laid down t he loan po licies, guidelines and proc edures that could be adopted by participating banks.

After the submission by HUDCC t o the B SP of both the P olicy P aper and the dra ft Housing M icrofinance P roduct M anual, a presentation on t he manual was given t o senior BSP officials led by two Monetary Board members, the BSP Deputy Governor, and the Managing Director on 4 July 2006. At the meeting, the key terms and features of the proposed housing microfinance loan product were explained with a focus on the adoption o f r ights-based secure t enure ar rangements as po ssible col lateral substitutes. It was agreed that a special working meeting be organized be tween the BSP an d HUDCC so that the con cerns of t he r egulatory bo dy cou ld be m ore thoroughly di scussed and properl y ad dressed i n the final v ersion of t he p roduct manual.

That technical meeting was held a week after, on 11 July 2006, at the BSP. One of the important suggestions coming from the BSP was to strengthen the security package and risk mitigation mechanisms for the proposed housing microfinance loan product. The availability of an HGC guarantee for the program was also confirmed.

With those inputs, H UDCC, w ith the con tinued he lp of t he C onsultants, quickly reconvened selected members of the TWG on Shelter Finance Reform to incorporate the suggestions and improve the submitted version of the product manual. Thereafter, the manual was revised and substantially completed. A critical technical input required by t he BSP was the inclusion of a proper loan valuation methodology t hat cou ld be applied to non-freehold type secure tenure arrangements. For this purpose, DPUCSP engaged an experienced asset appraisal expert to study and recommend sound loan valuation ap proaches t hat ba nks cou ld consider i n the prov ision o f ho using microfinance loans against rights-based secure tenure arrangements. This l ast input was finished in February 2007.

The f inal version of t he Housing Microfinance P roduct Manual (Appendix 14 ) w as submitted to the BSP on November 2007. After some further refining, the manual was finally de liberated up on an d approved by t he Monetary B oard on 14 Fe bruary 20 08 and was circulated to all banks through a memorandum (Appendix 15).

Under the H ousing M icrofinance P roduct M anual ap proved by the B SP, t he t arget clients would be poor and low-income households who were not being served by or had no access to formal financial institutions including banks, Pag-IBIG, SSS, or GSIS. Participating banks under the program could offer a maximum of P150,000 for home improvement loans an d up to P 300,000 for house con struction or house and l ot acquisition loans, for terms reaching 5 to 10 years.

Banks were also permitted to use simpler documents for loan applications and could accept collateral substitutes in the absence of a land title. The possible use of secure tenure instruments as collateral sub stitutes was a distinct feature of t he ho using microfinance l oan product. Legal i nstruments that effectively prov ided l egal use an d


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possession of real property or convey other valid property r ights, such as usufruct or long-term lease contracts, could be used as loan security instead of a formal title.

Housing m icrofinance l oans would be con sidered by t he B SP as alternative compliance t o t he Agri-Agra Law ( PD 71 7). M oreover, banks could l end up to 90 percent of the appraised value of the real property to be acquired, which was higher than the current level of 60 to 80 percent for ordinary real estate loans and matched the loan valuation levels of other government socialized housing lending programs.

Longer term housing microfinance loans would also not be subject to the stricter PAR requirements under BSP Circular No. 409 but should instead comply with the standard banking pa st du e an d l oan loss provisioning r equirements un der t he Manual of Regulations for Banks.

Finally, q ualified ba nks could apply f or r etail l oan guarantees from H GC. A ccounts guaranteed by t he H GC car ried t he un conditional g uarantee o f t he P hilippine government and interest income from guaranteed accounts would be tax exempt up to a maximum of 11%.

Following the Monetary Board‘s approval, BSP and HUDCC entered into a Memorandum o f A greement da ted 2 April 20 08 ( a copy of w hich is att ached a s Appendix 16 ) t o set the ap plicable accreditation st andards an d pro cedures to determine the capacity of banks that would like to offer this loan product to their low-income clients. U nder the t erms o f the M OA, banks i ntending t o go into housing microfinance under BSP supervision should be accredited first by HUDCC and DBP, which would confirm that the participating bank‘s lending program followed the design features and elements of government sanctioned pro -poor and housing microfinance projects such as DPUCSP.

The Housing Microfinance Loan Product was officially launched at a formal ceremony on 13 May 2008 at the BSP before members of MCPI, BSP officials, HUDCC and KSA representatives, CREBA officers, and the media. 5.2.2 Accreditation of Banks Implementing Housing Microfinance In co mpliance w ith the directive of B SP for ba nks i ntending to implement ho using microfinance, the Enterprise Bank Inc. (EBI) submitted its own housing microfinance product manual to HUDCC in September 2008 (Appendix 17). For this purpose the Consultants facilitated a meeting among the DPUCSP team members to discuss the process of accreditation. It was agreed that the following steps will be observed:

a. DBP issues a confirmation that the MFI is an accredited partner. b. HUDCC evaluates the manual based on the following criteria:

Consistency with the BSP approved product manual Internal con sistency o f the

document Demonstrates t hat the pro gram

conforms to the pu rpose an d design of government-sanctioned pro-poor an d ho using microfinance p rojects such as DPUCSP.

Image15: MOA Signing between BSP and HUDCC


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5.2.3 Partnership with Rural Banking Sector

Anticipating favorable action on the pa rt o f t he B SP, the C onsultants also assisted HUDCC an d DBP cr aft a Memorandum o f A greement w ith the R BAP as a complementary effort to DPUCSP‘s policy action plan. The MOA was signed by t he parties on 12 April 2005 (Appendix 18). Under the MOA, RBAP committed to support the bank regulatory reforms initiated by HUDCC and DBP which were intended t o prom ote and de velop sustainable f inancing sources and m echanisms for p ro-poor ho using in t he Philippines. Arrangements a mong the pa rties were also made to facilitate access by RBAP members to DPUCSP credit facilities a nd A DB-supported housing m icrofinance t echnical assi stance grants.

5.3 Securing Government Owned Land for Low-

Income Housing

In support o f government efforts t o fast track t he de velopment o f prio rity r esettlement areas for ho useholds affected by t he N orth an d S outh Rail P rojects, t he Consultants assisted HUDCC in crafting new rules that would help mobilize private sector investment in those communities. A dra ft m emorandum ci rcular to be i ssued by t he H LURB on alternative compliance to the 20 % mandatory balanced ho using r equirement un der Section 18 of RA 7279 was prepared and presented before the Housing Policy Working Committee of H UDCC. After de liberation by t he boards of H UDCC an d HLURB, t he circular (HLURB M emorandum C ircular No. 25, S eries of 20 06) w as approved an d promulgated in October 2006. For reference, a copy of the signed circular is presented in Appendix 19. The Consultants also helped HUDCC to prepare a primer to facilitate the conversion of eligible land for socialized housing (Appendix 20). In addition, the Consultants assisted HUDCC in encouraging t he cr eation o f l ocal h ousing bo ards ( Appendix 21 ) and t he preparation or updating of local shelter plans (Appendix 22).

5.4 Enacting Reform Measures to Provide Secure Tenure

A pa rallel po licy r eform eff ort t o liberalizing ba nk l ending r equirements for ho using microfinance w as DPUCSP‘s advocacy for the recognition and use of r ights-based arrangements as valid forms of secure land tenure.

To complement the reforms in shelter financing for the poor, the Consultants assisted HUDCC i n completing t he Policy Paper on Alleviating U rban Poverty an d Accelerating Pro-Poor Housing Through Rights-Based Secure Tenure Approaches which was distributed to KSAs and concerned land regulatory agencies (a copy of the Policy Paper is attached as Appendix 23. T he policy paper discussed the importance of secure tenure in community development and presented measures that would lead to the full recognition and acceptance by the key shelter agencies and the land regulatory system of rights-based secure tenure arrangements for urban poor housing. The paper was ci rculated among the ag encies that participated i n the U rban Land R eform Conference sponsored by HUDCC, through DPUCSP, and was intended to be the main

Image16: Conference-Workshop on Accelerated Pro-Poor Housing through Rights-Based Secure Tenure Arrangements (1st Technical Working Group) held in Canyon Wood, Batangas


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input for discussion during the first TWG Meeting for Conference Groups 1 (Improving the Proclamation, Land Conversion and Registration Process for Pro-Poor Housing) and 2 (Distribution of Secure Tenure through Rights-Based Approaches).

The first TWG M eeting w as held on 18 -19 J anuary 20 07 at the C anyon Woods Residential R esort, La urel, B atangas. More than 30 pa rticipants attended the t wo-day meeting/workshop co ming from different government agencies an d priv ate sector groups. Those represented at the w orkshop included H UDCC, D BP, N HA, S HFC, NHMFC, DE NR, L RA, HLURB, DA R, UA R-PMO, HDM F, HGC, P CUP, CRE BA, a nd DPUCSP.

The main objective of the TWG Meeting was to draw up a specific action plan that would carry out the necessary reforms needed to develop lawful mechanisms for the issuance of r ights-based secu re tenure or interim t itling i nstruments for pro -poor ho using an d establishing i nstitutional links among con cerned agencies for t he ad option and recognition of rights-based approaches and land use rights instruments. This work would complement an d support t he related strategy of allowing r ights-based i nstruments a s collateral substitutes for housing microfinance loans through appropriate bank regulatory reforms within acceptable prudential standards. At the TWG meeting, i t was agreed that the key she lter and land regulatory agencies would pursue t he ad option of r ights-based i nstruments by i dentifying acceptable no n-freehold types of tenure that the government either already provided or could include in its secure tenure program, and setting standard terms and procedures for their use and formal recognition. The results and highlights of the TWG meeting are in Appendix 24. Soon after the w orkshop/meeting, a w orking s ubcommittee compo sed o f l egal an d operational personnel f rom the agencies concerned was set up to draft the terms and forms o f t he di fferent t enurial i nstruments. A n organizational m eeting of t he subcommittee was held in Manila on 2 February 2007. The initial meeting was followed up by separate consultations conducted by HUDCC and the C onsultants w ith the di fferent government agencies involved i n t he di stribution of land and other property rights to beneficiaries of public socialized housing programs. As a result of t hese i ndividual m eetings an d consultations, a complete inventory of l egal instruments used in the di stribution o f l and, formal proper ty r ights, and other forms o f secure tenure was put together and samples of the actual documents issued by these agencies were compiled. A pplicable regulations t hat governed the i ssuance of t hese different instruments were also obtained and reviewed. The second TWG meeting/workshop was conducted last 7-8 December 2007 at Punta de Fabian, Baras, Rizal. At the workshop, TWG members discussed ways to harmonize and put t ogether st andard rights-based instruments i ncluding p roposed i mplementing guidelines for their common adoption. The specific objectives of the 2nd TWG workshop were to:

Consolidate, harmonize, st andardize, and possibly r edefine t he t erms an d

conditions o f various rights-based secure tenure i nstruments be ing i ssued by the di fferent g overnment ag encies concerned t o ensure t heir v alidity, uniformity, i ntegrity, sec urity, en forceability, r egistrability, an d bankability as property rights or land use conveyance documents; and

Craft coherent rules and guidelines that would govern the distribution and use of r ights-based secu re t enure instruments i n government soci al ho using programs.


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The i nter-agency T WG r econvened l ast 16 A pril 2008 t o discuss their draft ou tputs w hich were consolidated through t he assi stance o f the GHK Consultants. The following outputs were completed:

Workshop/conference report and

proceedings; Draft executive order directing the use of

standard terms and conditions for rights-based instruments (Appendix 25);

Draft joint implementing guidelines (Appendix 26); and

Draft standardized and harmonized rights-based instrument forms (Deed of Sale, Contract to Sell, Lease, Usufruct, CELA as shown in Appendix 27).

These outputs w ere reviewed at the A pril m eeting. A fter t he di scussion, TWG members w ere given a dditional t ime to review an d comment on t he ou tputs. Fi nal comments w ill be consolidated at a last meeting t o be he ld in June. Thereafter, t he outputs w ill be sub mitted to the respective agency he ads an d endorsement t o the Office of the President for the signing of the executive order and the issuance of the joint guidelines by HUDCC, DENR-LMB, DILG, LRA, SHFC, and NHA.

5.5 Enhancing Private Sector Participation in Socialized Housing Supply One o f t he key po licy i nitiatives supported by DPUCSP is t he m obilization of greater private sector participation to p romote p ro-poor and l ow-income ho using. Budget constraints at the national level have continued to restrict public investment, limiting the Government‘s socialized housing programs. The structural reforms introduced under the Urban Development and Housing Act (UDHA) more than 15 years ago have generated modest gains—much lower than desired b y t he Government—particularly, i n enabling and providing i ncentives t o LGUs to fully assu me the she lter sec tor responsibilities devolved to them by the Local Government Code. The critical concern of the growing urban poverty in the country may be addressed through the involvement of the private sector. DPUCSP was designed to address the limitations and constraints of local governments in producing affordable low-income housing. It supports PPPs in low-income housing by allowing ―qualified enterprises,‖ defined to include private developers, NGOs, cooperatives, and HOA, t o be l ead proponents or bo rrowers under t he S ite Development an d Distribution o f S ecure Tenure Component or P art A o f t he P roject. Private banks and NGOs qualified as MFIs, are el igible to take on the role of providing housing microfinance loans to deserving poor clients under the Shelter Finance to Low-Income Communities or Part B of the Project. The envisioned linkage between Parts A and B under the Project will materialize if the target private sector groups participate in either one or both of the project components. Forging PPPs as an approach t o l ow-income ho using de velopment has be en an essential project design feature of DPUCSP from the outset. After five years of program implementation, there are growing indications that local governments and private sector developers specialized in socialized housing look at the PPP modality of DPUCSP as a viable al ternative t o sc aling up low-income an d pro -poor housing w ith the LGUs contributing available land for development.

Image 17: 2nd TWG Workshop on on Accelerated Pro-Poor Housing through Rights-Based Secure Tenure Arrangements, held in Punta de Fabian, Baras, Rizal.


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5.6 Policy Impacts of the Advisory TA The A dvisory T A con tributed si gnificantly t o policy g ains designed to accelerate the delivery of sustainable pro-poor housing in the Philippines. The approval by BSP of the housing m icrofinance pr oduct manual an d its sub sequent i ssuance o f M emorandum Circular No. M-2008-015 was evidence of formal recognition by the Philippine banking system of housing microfinance as a pro-poor product which is similar but different from microenterprise f inance. It lib eralized collateral i nstruments, al lowing ba nks to lend to the eligible poor for housing microfinance not just against freehold titles which tended to be costly but also against usufruct, long-term leases and other rights-based variants. The omnibus guidelines on the proclamation of land for socialized housing streamlined and i mproved the process for asse ssing the eligibility of pu blic land f or socialized housing. This has paved the way f or more public land to be identified as sui table for socialized ho using. The primer on land con version he lped t o di sseminate clearer policies and guidelines on the conversion of agricultural land for socialized housing. The d raft Executive Order (EO) on ―Accelerating the Distribution of Secure Tenure to Qualified S ocialized H ousing B eneficiaries Through The U se o f R ights-Based S ecure Tenure I nstruments Under the N ational S helter Program‖ institutionalized l inks an d working arr angements among con cerned agencies for t he ad option of r ights-based approaches and registration of land use rights instruments. As a result o f e fforts funded un der t he A dvisory T A, t here is greater awareness an d interest among private sector developers of DPUCSP, a pioneering attempt by HUDCC and DBP to finance PPPs in socialized housing. A m ore de tailed asse ssment o f t he po licy i mpacts o f the A dvisory T A an d t heir performance indicators is in Appendix 29.


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6. CAPACITY BUILDING ACTIVITIES

As part of the Advisory TA, the Consultants were also tasked to conduct a training and learning ex change program comprising on -the-job t raining, w orkshops, and conferences. Topics co vered at the na tional l evel i ncluded proj ect design and management, ho using finance, l and management, an d shelter planning. A t t he regional level, workshops focusing on housing microfinance, participatory community action planning, sl um upgrading an d new si te development f or the po or, sub project development and implementation, environmental impact assessment, and city shelter strategies were designed and conducted. Appendix 30 summarizes the courses and conferences conducted to date as part o f t he DPUCSP C apacity B uilding P rogram. Volume 2 of this r eport presents all t he t emplates developed b y t he C onsultants to assist D BP an d HUDCC i n project implementation an d for use i n the t raining an d learning exchange program. The cap acity bu ilding activ ities under t he A dvisory T A ha d several i mpacts. They include: (i) t he i mproved an d upgraded t echnical sk ills o f pa rticipating officers from HUDCC, DB P, L GUs, and MFIs in community actio n planning, pro ject preparat ion, environmental i mpact a ssessment, an d procurement i n accordance w ith DPUCSP policies and guidelines; (ii) developed and well-understood electronic templates or e-tools to facilitate the preparation and implementation of pro-poor housing projects; (iii) institutionalized l inks an d working ar rangements among con cerned agencies for t he adoption o f r ights-based ap proaches an d registration of la nd use r ights i nstruments; (iv) m ore inclusionary ho using finance w hich allows ba nks and m icrofinance institutions to accept rights-based instruments from the poor as col lateral substitutes; (v) g reater ap preciation by D PUCSP pa rticipants of good practices in sustai nable urban upgrading; ( vi) e nhanced sy stem of monitoring t he s tatus o f D PUCSP subprojects for reporting and decision-making, report prepara tion, and accessing of project documents electronically; and (vii) e asily accessible and use r friendly e-tools for pro-poor housing subproject preparation and implementation. Appendix 31 details t he i mpacts o f the ca pacity bu ilding activ ities conducted. Appendix 32 provides the procurement guidelines manual developed for the LGUs.

6.1 Housing Microfinance Forum To build the cap acity of pu blic an d private sector groups for developing an d implementing sustainable pro -poor ho using, a National Fo rum on H ousing Microfinance w as organized t hrough the col laborative efforts o f H UDCC, D BP, an d Microfinance Council of the Philippines, Inc. (MCPI), and ADB. The forum which was held on 18 March 2005 ai med t o look a t some o f t he critical i ssues r elated t o the emerging p ractice o f ho using microfinance an d provide a venue t o learn from be st practices led by an exp erienced an d r ecognized leader in m icrofinance, housing finance, and urban development, Franck Daphnis. The forum brought together a variety of actors in housing microfinance, primarily the MFIs from both t he non-banking an d banking s ectors. They w ere joined by representatives from credit cooperatives, housing NGOs and developers, key shelter agencies and other government agencies, the Bangko Sentral ng Pilipinas, and NGOs with an urban poverty focus. Both HUDCC and DBP were well represented. The host institution, ADB, had high level participants.


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6.2 Knowledge Management and Appraisal Tools

Two key knowledge management tools and a H OA appraisal tool were developed by the Consultants jointly with HUDCC and DBP under the Advisory TA. 6.2.1 The DPUCSP Website The DPUCSP website was envisioned to be an important information and marketing tool for the Project‘s marketing and advocacy activities. The main f unction of the website w as to en able target audiences t o ea sily and prom ptly download required information about DPUCSP, including the project description and objectives; available financing facilities; eligibility and sel ection cr iteria for LGUs and othe r private sector proponents; and v arious proj ect development templates. In particular, t he w ebsite aimed to (i) create a searchable database that offered LGUs, private developers, and MFIs access to information an d application templates on ho w t hey c an pa rticipate under D PUCSP; ( ii) i nform t arget audiences o f m ajor m ilestones an d project accomplishments t hrough news and f eature articles, and ( iii) prese nt the l atest developments on t he policy f ront pa rticularly t hose that un derscore r ights-based instruments and a m ore i nclusionary housing finance. Appendix 33 shows t he DPUCSP website and its main features. 6.2.2 The DPUCSP PPMS In early S eptember 20 06, the serv ices of a P roject P erformance Monitoring S ystem (PPMS) Specialist, assisted by a systems programmer, to work with the Consultants, HUDCC and DBP t o design and develop an integrated da tabase and results-based, project management tool─to be called the DPUCSP Project Performance Monitoring System or D -PPMS. The D PUCSP P roject D esign and Monitoring Fra mework provided the st arting po int from which the design and structure of t he D -PPMS was based as well as the reporting requirements of the ADB and the Government. Several op tions were considered in choosing the most appropriate and cost-efficient programming software by which the D-PPMS can be computerized. Given the financial concerns raised by H UDCC an d DBP, i t was agreed that M icrosoft Access w ill be used. Microsoft Access is already part of the Microsoft Office software so there will be no need to purchase additional and expensive l icenses for a back-end database like Lotus Notes. Moreover, Microsoft Access employs a common programming language used by many programmers thus it will be relatively easy for the MIS staff of HUDCC and DBP to maintain the system. Based on the discussions, it was the consensus that the D-PPMS should provide the following:

Quick access to various electronically stored technical and field reports as well as k nowledge management tools t hat i ncludes e-templates r egularly used during the cou rse of t he proj ect, i .e., the CAP, MAP, En vironmental Management P lan ( EMP), Le tters o f I ntent, F easibility S tudy f or LGUs and NGOs, briefing and presentation materials;

Tracks project progress and areas requiring DBP and HUDCC action(s);


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Figure 4. The D-PPMS Main Menu

Facilitates and streamlines proj ect r eporting and the decision-making of DBP and HUDCC sen ior management, A DB, an d government ov ersight ag encies such as NEDA and DOF;

Communicates esse ntial i nformation to stakeholders, pa rticularly t he r egional offices of HUDCC and DBP; and

Establishes q uantifiable, r esults-based, t ime-bound t argets and m easurable

indicators.

The design o f the various st ructures of the r eporting i nput and output forms an d templates required by the ADB, HUDCC, and NEDA for Part A were finalized following a DP UCSP-PPMS Workshop conducted by t he Consultants on 15 N ovember 20 06 with the D-PPMS TWG. As requested by HUDCC, the D-PPMS was designed in such a way t hat al lows use rs t o input the da ta only on ce. The da ta then l inked an d integrated t o othe r pi eces of i nformation in a n umber o f w ays by t he c omputerized system. Data is entered during the course of the daily work routine and is automatically

integrated into progress reports and other monitoring and i nformation sharing m echanisms o f the D-PPMS.

The D -PPMS di splays g raphical action icon bu ttons d esigned for each of t he co mponents of the Project (Figure 4 ). The use rs a re easily able to navigate and work on various forms or view spe cific aggregated reports at the click of a button. D ifferent i cons w ere designed t o he lp differentiate visually the various kinds of reports or output f orms g enerated by D-PPMS. Users are also able to input contact information of stakeholders, profiles of pro ject prop onents, an d store reports in the pu blications

sections (i.e., P roject R eports an d Documents M odule an d the K nowledge Management Tools Module) of the database.

Volume 3 of this report discusses in detail the PPMS for DPUCSP.18 6.2.3 The HOA Appraisal Tool In addition, the Consultants assisted in drafting a rating system for HOAs using four indicators with the acronym “HOME” in December 2008. The proposed system was to be discussed an d finalized aft er a w orkshop w ith DBP, H UDCC, and othe r

18 Under the supplementary TA entitled, “e-Tools for Community-Focused Urban Poverty Reduction,” the Consultants converted the PPMS

of DPUCSP to a web-based application using MS SQL Express, a downloadable free software, which no longer required the VPN technology previously used to access the system. In contrast to the Microsoft Access which was originally used to program the PPMS and which can only accommodate two to four concurrent users, MS SQL Express had the ability to accommodate about 300 concurrent users. This TA is further discussed in Section 6.3 of this report.


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interested a gencies like t he S ocialized H ousing Fi nance C orporation (SHFC).19 A copy of the draft HOME indicators scoring sheet is attached as Appendix 34.

6.3 Supplementary Technical Assistance

6.3.1 PPPs for Sustainable Low-Income Housing

Under the A dvisory TA, t he C onsultants succe ssfully assi sted H UDCC an d DBP in leveraging additional technical assistance to continue supporting the implementation of DPUCSP. Through ADB‘s Regional Technical Assistance (RETA) 6421 on Sustainable Urban Development in Asia, the study entitled ―Philippines: Fi nancing Public-Private Partnerships for Sustainable Low-Income Housing‖ was conducted from April 2008 to March 2009. The objective of the study was to assist HUDCC and DBP in piloting and assessing the effectiveness of proposed financing partnerships between LGUs, private sector d evelopers, and l ocal communities as r epresented by their HOAs, within t he context o f DPUCSP. T hese public-private partnerships ( PPPs) were being pu rsued more actively by HUDCC and DBP in the l ight of findings that many Philippine LGUs have l imited net bo rrowing capacity. They were also less inclined t o bo rrow for pro-poor and low-income housing at the scale warranted by demand when they have other priority investment areas to consider such as the provision of physical, economic, and social i nfrastructure. Consequently, forging P PPs as an ap proach t o social ho using development became a pivotal project design feature of DPUCSP The st udy prov ed i nstrumental i n helping t o develop t he l argest, si ngle subproject approved by HUDCC, DBP, an d ADB f or DPUCSP f inancing. The P amayanang Maliksi Subproject demonstrated a PPP modality and structure involving the grant of rights by the LGU (Cavite Province) to a private sector developer/proponent (R-II). The Cavite Province tapped R -II B uilders to design, finance, an d develop i ts 53 -hectare property into a mass housing project for its eligible informal dwellers and low-salaried government and private sector employees. The approved DPUCSP subloan to finance the subproject was P400 million (US$8.5 million), about 23.5% of the total estimated subproject cost of P1.7 billion (US$36.2 million). About 4,800 families were expected to benefit from the subproject.20

19 SHFC, a wholly-owned subsidiary of the National Home Mortgage Corporation, is the lead government agency to undertake financing of

social housing programs that cater to the formal and informal sectors in the low-income bracket.

20 For more on this topic, see “Financing Public-Private Partnerships for Sustainable Low-Income Housing: Final Report.” ADB Regional TA 6421: Sustainable Urban Development in Asia, GHK International, May 2009.

Image 18: Model house single detached type the Pamayanang Maliksi subproject by R-II Builders and Province of Cavite

Image 19: Photo of entrance gate at the Pamayanang Maliksi in Cavite

Image 20: A row house in Pamayanag Maliksi subproject in Cavite


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6.3.2 e-Tools for Pro-poor Housing

Another supplementary TA accessed was the ―Philippines: e -Tools f or Community

Focused U rban P overty Reduction i n t he Philippines‖ which was financed by the Republic of Korea e-Asia and Knowledge Partnership Fund. The TA was linked to the implementation of DPUCSP and had three major components:

Output 1: e-tools for pro-poor urban upgrading, where more cost-effective access

to secu re t enure, affordable she lter, and ba sic infrastructure for selected urban poor communities w ill be ach ieved through e -tools t hat w ill be use d to develop community-focused urban upgrading subprojects under DPUCSP;

Output 2 : e -tools for su stainable shelter an d microenterprise finance, w here ICT

applications t o en hance the de livery of pro -poor housing and m icroenterprise finance will be used by DPUCSP‘s participating MFIs to accelerate the on lending of housing-related and microenterprise loans to urban poor households comprising the targeted communities; and

Output 3: ICT ap plications f or sector strengthening an d project management,

where relevant applications to strengthen the capacity of HUDCC, DBP, and the LGUs to formulate and implement pro-poor housing, basic services, and housing and microenterprise finance subprojects as part of the Government‘s urban poverty reduction program will be developed.

Under the first T A com ponent, e -Tools and t emplates accessible i n t he D-PPMS

database w ere use d t o facilitate t he de velopment o f 15 t o 20 co mmunity-focused urban up grading sub projects un der D PUCSP. T he e -Tools and t emplates were primarily designed to help the targeted communities express their need for affordable shelter and basic urban services, conduct their community action plans, and engage consultations w ith H UDCC, DBP, l ocal g overnments, N GOs, an d other concerned groups. In early A ugust 20 09, t hese e-tools a nd t emplates w ere uploaded to the DPUCSP website as an alternative option for ICT kiosks established under the TA to facilitate socioeconomic surv eys, community a ction pl anning for urban up grading, feasibility st udy prepar ation, procurement, co ntract management, an d community estate management.

In the seco nd TA com ponent, e -Tools for sustainable she lter and m icroenterprise

finance, D PUCSP pa rticipating MFIs will use t he ICT ap plications for enhancing t he delivery of pro -poor housing and m icroenterprise f inance in order to i ncrease the onlending o f ho using-related and m icroenterprise l oans t o urban poor households consisting of the targeted communities. E-tools were designed to help MFIs assess the urban poor households‘ demand for DPUCSP‘s loan products and their affordability and w illingness to pa y; assist i n preparing t he D PUCSP sub project p roposals an d subloan ap plications; and enable them t o more e fficiently ac cess an d analyze information for be tter de cision-making, operations m anagement, and produc t development. E lectronic t emplates for housing m icrofinance m arket st udies, microfinance av ailment pl ans, financial an d affordability i mplications of D PUCSP, housing and microenterprise loans, and the cost o f loan administration w ill be made accessible to the MFIs through the DPUCSP website.

With the e-Tools developed under the first two components, the geographic scope and

the con current nu mber of D-PPMS users i ncreased to i nclude t hose a ccessing the system from t he 12 kiosks–with three users pe r k iosk–situated i n different l ocations nationwide. I n addition, the content of the D-PPMS had to expand to include the e-


FINAL REPORT


tools developed under the TA. Thus, under the third component of the supplementary TA, the C onsultants a greed with HUDCC, D BP, and ADB t hat the D -PPMS will b e converted t o a web-based ap plication using MS S QL Express, a downloadable free software, which no longer required the VPN technology previously used to access the system. Under the TA, access to the DPPMS and the e-Tools developed under the TA was facilitated with the conversion of the system to a web-based application, enabling users t o access the sy stem through the i nternet v ia the D PUCSP website (www.dpucsp.com). In con trast to the M icrosoft A ccess, w hich cou ld only accommodate two to f our concurrent use rs, MS S QL Express had the ab ility t o accommodate about 300 concurrent users.

The web-enabled D-PPMS performs the same functions as the MS Access version of

the D -PPMS, l ike automatically ag gregating a nd g enerating r eports for the use r, depending on t he sel ected r eport. N ew f eatures an d enhancements to t he sy stem were added, which included: (i) reprogramming of the DPUCSP templates into editable PDF forms, w here the user w ere ab le t o complete the f orms i nstantly; ( ii) ab ility t o export al l r eports i n different formats such as Microsoft Word, Microsoft E xcel, P DF format, Crystal report, and rich-text format; (iii) storing electronic copies of reports and templates in the users‘ local hard drive or any external storage device for data archiving; an d (iv) de velopment o f ad ditional m odules such as the S -Curve an d t he Engineering Accomplishment Report.21

6.4 Case Studies

In response t o the request of H UDCC an d DBP t o document l essons learned from some subprojects, the Consultants prepared two case studies, one o n t he Butuan subproject w hich is 10 0% complete in terms o f ph ysical works, the se cond on t he housing microfinance program o f E nterprise B ank, I nc. (see Appendix 35 and Appendix 36).

21 For more on this topic, see “e-Tools for Community-Focused Urban Poverty Reduction: Third Progress Report,” GHK International,

December 2009.

Image 21: Exterior Plan for the ICT Kiosk to be Operated by ASKI in Cabanatuan City

Image 22: Interior layout of ICT Kiosk at the Enterprise Bank, Inc. in Davao City

Image 23: ICT Kiosk located the Province of Pangasinan


FINAL REPORT


7. CONCLUSIONS AND THE WAY FORWARD

7.1 Summary and Conclusions

The Advisory TA st rategy, related activ ities, resultant accomplishments, and impacts were discussed in various sections of this report. The TA objectives of (i) strengthening the sy stems within the D BP, H UDCC, LGUs, and MFIs; ( ii) activ ating community participation i n onsite upgrading an d new ho using prov ision; and (iii) d esigning financing f acilities that w ill provide access t o she lter improvements and livelihood opportunities for t he ur ban poor, see m t o have been achieved at varying l evels. Similarly, the operational and policy issues which constrained project implementation, and con sequently, the l oan di sbursement pace were analyzed i n Section 3 of t his report. This ov erall ass essment o f t he A dvisory T A combi ned with the analysis of DPUCSP implementation leads to the following conclusions about the Project: The l ow l evel of w illingness an d capabilities of the LGUs to participate i n t he

project w as greatly i nfluenced by t heir ne t bo rrowing cap acity, prio ritization of infrastructure subprojects over pro-poor housing and local po litics, the amount o f local resources and revenues available, the strength of local institutions particularly those a ffecting housing, and t heir access to l and w ith cl ear and un encumbered titles.

The presence o f co mpetitive financing facilities offered by another government financial institution ( GFI), spe cifically since i t act ed as the majority of t he LGUs‘ IRA depository bank, and the Municipal Development Finance Office with its grant component, affected the decision-making of LGUs.

The executing agency for the Parts A and B financing facilities of the Project is a

GFI, governed by the regulatory supervision of the BSP, and therefore mandated to operate with utmost concern for credit risk and capital adequacy. The evaluation and approval of propos ed D PUCSP sub loans were too focused on the ea rly retirement of DBP‘s exposure, thereby, relying on early exit mechanisms such as the funding commitment line of Pag-IBIG. In the case of Pamayanang Maliksi, the biggest DPUCSP subproject, and Passi C ity, t he project benefited on ly t he Pag-IBIG members. For Angeles and Butuan Cities, the subloans were retired through advance payments o f t he LGUs t o m eet the l oan tenor ap proved by the D BP without regard for the terms of payment given to the beneficiary-clients.

The majority of the LGUs also showed preference for employees‘ housing. This

gave the local officials the ability to fully repay a subloan within their term of three years through take-out of their employees‘ individual housing loans by Pag-IBIG. Again, in these instances, the primary beneficiaries were the Pag-IBIG members.

The urban po or households be longing to t he informal income sec tor were not provided access t o ho me financing. Even with t he TA support given to t he subproject proponents─LGU, private sector developer or HOA, and the prospective partner MFI─the disparities in the eligibility and selection cr iteria for the relending and onlending of the housing, housing improvement, and microenterprise subloans under Part B barred the establishment of a viable take-out system for the long term financing of subloans to the informal households.


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The executing agency for Part B had limited wholesale capability and thus could not upscale housing microfinance to MFIs with small scale operations. Instead of relending t he D PUCSP f unds to the M FIs directly on a cash ad vance basis, it opted for the reimbursement scheme which, while ensuring subloan repayment by the MFIs, stifled their ability to expand their housing microfinance portfolio.

Liquidity in t he microfinance sector and the abundance o f l ower-cost f unds from other funding agencies, even within the DBP microfinance un it, likewise de terred availment from the DPUCSP financing facilities.

Competitive lending r ates prov ed t o be on e of t he g reatest obstacles to the f ull availment of DPUCSP financing. Private sector-led subprojects which were initially processed for DPUCSP ended up drawing funds from the DBP corporate financing window which was priced at prevailing market rate and lower by approximately 2.5 to 3.0 basis po ints a gainst the D PUCSP l ending rate. E ven t he sub sidiary l oan offered t o P ag-IBIG to f inance developmental l oans of soci alized housing developers failed due to the relatively higher rate that must be charged by DBP for DPUCSP. With the ob vious r eluctance of D BP t o lend long-term an d their eagerness for DPUCSP subloans to be repaid early through the Pag-IBIG takeout, DPUCSP, which was d esigned t o be a l ong-term f inancing f acility, became a source for short-term to medium-term funds, easily comparable and often passed over for the seemingly cheaper commercial loans from private banks.

The internal policies of DBP on reorganization and early retirement also hindered DPUCSP, specifically at the branch level, since each instance of reorganization or retirement meant the dissipation of project knowledge which was already acquired through the Advisory TA. Meanwhile, HUDCC‘s resources continued to be severely constrained and t heir regional presence even contracted w ith the merging o f regional offices.

7.2 Forging Ahead

Despite the difficulties encountered, t here is no room f or turning back. T he g ap between the de mand and sup ply f or a ffordable ho using an d ba sic ser vices in the Philippines‘ urban sector will simply widen if nothing is do ne. T he i nvestment requirements w ill be come even m ore massive i f t he u rban housing p roblem is l eft unattended. Toward this end, the DPUCSP experience suggests the following:

Building on the policy gains. DPUCSP with support from the Advisory TA paved

the way f or the recognition of housing microfinance in the Philippines by no less than the B SP an d the r est of the ba nking s ector. Th e housing microfinance memorandum circular of BSP has authorized the use of rights-based instruments as col lateral substitutes for housing m icrofinance loans. Rural banks with USAID technical support have in fact begun to lend for housing microfinance. HUDCC and DBP, through the Advisory TA, worked with all concerned agencies to harmonize rights-based instruments with a dr aft executive order and i mplementing rules already i n place. T he momentum achieved f rom these policy r eforms m ust be supported. These po licy g ains must no t be forgotten. H UDCC ne eds continued technical support in its efforts to move the housing microfinance and rights-based secure tenure policy agenda forward.

Getting the i nstitutional str ucture right. DBP ha s succe ssfully st imulated

interest in PPPs for low-income housing. But its current financing arrangements for PPPs exclude the informal sector households which constitute the vast majority of


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those in need of DPUCSP financing. The DPUCSP experience and other relevant experience, local or international, must be s trategically asse ssed t o find the appropriate institutional an d financing arr angements t hat c an reach ou t to t he various segments of the urban poor, including those belonging to the lower income deciles. The answer may not just be DBP, which may have found its niche in PPPs for low-income housing. To service the needs of the poorer segment of the urban sector, a different or new financing institution and structure may have to be set up.

Overcoming the capacity deficiencies. The capacity constraints of LGUs, MFIs, HOAs, ev en H UDCC are overwhelming. They can not be ad dressed by t he conventional cap acity b uilding ap proach. Cost-effective m eans of delivering pro-poor housing m ust be prom oted. The use o f i nformation and communications technology (ICT) offers a lot of promise in t his direction. Harnessing the lessons learned from the e-Tools Supplementary TA is essential. More ICT applications to strengthen the shelter sector, i n the a reas o f pl anning, p roject an d pro gram preparation an d management, procu rement of ci vil works an d services, environmental asse ssment, financial an d economic ap praisals, con struction supervision, an d housing finance, amon g ot hers, must be de veloped an d disseminated. M odels f or enabling v arious forms o f e ffective and sustainable private sector participation are another approach to consider.

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