Improvements in gov’t financing programs urged

The Social Housing Finance Corp. (SHFC) should undertake measures to further improve a government financing program and enable more organized informal settler families (ISFs) to purchase land, according to state think tank Philippine Institute for Development Studies.

A PIDS policy note authored by Marife M. Ballesteros, Tatum P. Ramos, and Jasmine E. Magtibay pointed out that the SHFC has set a number of qualifications and requirements for the ISFs that tend to prevent the poor from becoming beneficiaries of the Community Mortgage Program (CMP).

“(The CMP) is focused on land tenure and failed to lead communities to transform into better neighborhoods. Necessary actions must therefore be undertaken to improve the program,” said the note entitled, “Is the Community Mortgage Program pro poor?”

“The SHFC should be proactive in the identification of ISF communities. This would require the SHFC to map out the location of ISFs and the areas where poverty rate is highest. This should be done to improve the prioritization of areas and the targeting of ISF communities,” it stated.

For the poor

Established in 1988, the CMP is being administered by the SHFC, a wholly owned subsidiary of the National Home Mortgage Finance Corp.

The goal under this program was for the poor or the near-poor ISFs, which have no access to housing loans from private banks, to be able to borrow through the program, according to the policy note.

The government has allocated at least P12.78 billion for its implementation under the Republic Act (RA) No. 7835 of 1994. An additional P20 billion has been provided through the ISF Housing Program of 2014–2017 intended for the High-Density Housing Program projects of the SHFC.

According to the note, several studies consider the CMP as an innovative housing program most responsive to the needs of the low-income sector.

It provides ISFs with affordable financing through which they can secure tenure on the land they wish to occupy or they currently occupy.

It explained that loans are granted to community associations (CAs), where ISFs must belong to enjoy the benefits of the program.

More specifically, the CMP implements a gradual financing strategy from land acquisition, site development to house improvement. CAs with good repayment performance can apply for additional loans for site development and home improvement.

“This strategy has allowed ISFs to access loans based on their present financial capacities. The program likewise grants the payment of housing loan on a fixed interest rate of 6 percent annually for 25 years. This interest rate is not risk based and remains constant for the 25-year tenure of the loan,” the policy note explained.

The sustainability of this program, however, remains in question, it said.

“For instance, 52 percent of the CMP accounts at the member beneficiary (MB) level are already past due as of February 2015. Of these accounts, 61 percent can already be considered dormant, i.e., accounts that are past due for more than three years. Given the government’s significant subsidy to the CMP, it is crucial to assess whether the program is really targeting the interests of the poor and their communities,” the authors pointed out.

Processes, requirements

For one, the PIDS note stated that an assessment of the CMP guidelines and processes showed that the poor can be excluded from the program due to a number of reasons.

These include the equity requirement for amounts exceeding the maximum loanable amount per beneficiary; the CAs’ rule on member inclusion and exclusion; and the rule on beneficiary substitution after loan takeout.

“Equity requirements tend to push the poor or those with volatile income away from the program. More often, the poor households exclude themselves from communities that access CMP loans because they are unable to raise the equity,” the note stated.

The SHFC, the note stated, “does not target specific ISF communities or households. Instead, targets are set based on a minimum takeout value for each year. Moreover, SHFC rarely interacts with ISF communities.

Should there be any interaction, it is limited to the background investigation on CAs with loan applications.”

Further, the note claimed that many CMP communities “remain blighted, lack basic services, and are not integrated into the city’s road network.”

Recommendations

To better achieve the goals set out for the CMP, the PIDS policy note thus stressed the need to address several issues.

One of these would be the exclusion of poor ISFs due to the equity requirements of the CMP, which was bound to increase as urban land prices increase. This condition, the note stated, requires the agency to design and implement an income- based subsidy scheme to enable access of the poor to community projects.

“Overall, the CMP has addressed only one aspect of adequate shelter, which is securing land tenure. The expected transformation of CMP communities into safe and habitable communities did not happen in some of the CMP projects,” the note stated.

“Nevertheless, it can already be said that the focus of the program on financing and land ownership and the neglect of subdivision planning and city level planning as well as community development have created difficulties in site improvements in the later stage and resulted in blighted conditions,” it further explained.

The note added: “the CMP is intended to produce better housing communities for the poor and disadvantaged sector with financing as a tool to achieve this objective. This development objective should be the heart of the program. A transformative approach will have multiplier effects in terms of funding and will effectively contribute to increase affordable housing because better CMP communities will also be able to provide shelter to other lower-income households through rental arrangements.”