MANILA, Philippines - The Home Development Mutual Fund (Pag-IBIG) is planning to increase its membership contribution rate to further improve the agency’s financial capability and meet the demands of members for more loans and benefits.
Pag-IBIG Fund chief executive officer Jaime Fabiana said they are considering increasing the membership loan also because of the members’ growing demands for housing and short-term loans.
“Increasing our contribution rates will allow members to borrow bigger loan amounts and support the higher loan packages under Pag-IBIG’s housing finance program, while still ensuring the long-term stability of the Fund,” Fabiana said.
With the signing of Republic Act 9679 or the HDMF Law of 2009, the Pag-IBIG Board of Trustees is empowered to set the members’ contribution rate.
“Compared with other government institutions like the SSS, the GSIS and PhilHealth which have adjusted their rates several times in the past 23 years, the Fund has retained the same contribution rates since 1986,” Fabiana said. “At present, Pag-IBIG members contribute two percent of their monthly earnings, with the Fund Salary ceiling pegged at P5,000. In effect, members, whether earning P5,000 or P50,000 per month, contributes only P100 monthly.”
Fabiana said that the Fund is currently undertaking consultations on the proposed increase in contribution rates with various employee and employer groups. Initial response to the plan, particularly from employees, has been favorable.
He explained that the planned increase in the contribution rates would rationalize the Fund’s savings scheme, such that members with higher income will have to save more.
However, Fabiana said that those who belong to the lower income bracket would not be adversely affected by the adjustment in rates.
With the current rates, a member who contributes only P100 a month will be able to withdraw around P78,000 after 20 years. This is composed of P24,000 in his personal savings, P24,000 in employer counterpart contributions, and the rest representing accumulated dividends his money earned during the 20-year period.
A member who doubles his monthly contributions will be able to save up to P160,000 after 20 years. Triple his contributions and the member stands to grow his money to P240,000.
Fabiana also pointed out that higher contributions would mean greater benefits for its nearly 7.4-million members throughout the country.
While a contribution of P100 entitles a member to a P500,000 housing loan, increasing his Pag-IBIG contributions to P200 a month allows him to borrow up to P900,000. A P300 monthly contribution increases a member’s housing loan entitlement to P1.3 million.
Similarly, an increase in one’s contribution would mean higher short-term loan as loans granted under the program are savings-based. Hence, the more a member saves, the bigger he is entitled to borrow.
According to Fabiana, the Fund’s housing loan disbursements have been growing consistently for the last eight years.
He reported that for the first seven months of the year alone, housing loan approvals have reached P25.3 billion, up by 36 percent from the P18.5 billion level for the same period in 2008. Following this trend, he said the Fund is expecting its housing loan takeouts to reach over P45 billion by yearend despite the effects of the global financial crisis. This is the highest level the Fund has registered in years.
Along with the recorded consistent growth in housing takeouts, the Fund is also expecting more demands for its affordable housing loans, which could reach as high as P60 billion by 2010.
“On a daily basis, Pag-IBIG is able to assist almost 300 members in acquiring or building their own houses,” Fabiana said. The Fund lends out about P160 million in housing loans everyday, he added.
Short-term loans similarly posted significant increases annually, providing immediate financial aid to over a million Pag-IBIG members. Daily, close to 8,000 Pag-IBIG members benefit from the Fund’s short-term loan program, receiving an average of P18,000 in loans each.
In 2007, the Fund lent out P26.5 billion in multi-purpose loans (MPL). The following year, P33.3 billion in MPLs was granted to members, or 26 percent more than the releases in 2007. As of July 2009, Pag-IBIG has already approved P22.4 billion MPLs. The Fund is projecting total loans under the program to reach P37 billion by yearend.