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Need for Financial Literacy & Innovation in PH

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Need for Financial Literacy & Financial Innovation in the Philippines

/ Bank spreads are too high, investment options are too limited; the country is awash in cash, with improving credit rating /


AIA Group plans to invest more in PH
AIA is the parent of PhilamLife, and they want to step up expansion in PH, to tap the relatively low insurance penetration in the country... requiring them to invest further in technology and product innovation.
AIA Group president Mark Tucker say PH is still "a very important market for us". since the protection gap in the market is still very huge.

"The opportunities in the Philippines are unlimited... nowhere in the world have we invested like this....

The opportunity for growth here remains very, very significant."

The insurance penetration has crawled to a growth of less than two percent. in a span of seven years, In 2015, the contribution of the industry to the Philippines GDP grew to 1.74 percent, rising from a little over one percent in 2008... In order to take advantage of the low penetration rate, PhilAm will have to come up with innovations across all its products...

. . .In 2015, the co saw its income soaring to P 5 billion, the highest profit recorded for all the insurance companies in the country, Yesterday, was the launch of PhilAm's newest and most modern facility 'Genesis' within the Citibank Center in Makati. This 800 sqm non-traditonal workspace is open to Philam Life's financial advisors earning more than a million (pesos?) per year, or those who belong to the the Million Dollar Roundtable Club.


We continue to seek innovation across all technology and across products and on the product side, we've introduced the whole basis of health and wellness... Genesis is about the latest in technology, the latest in workspace... to insure our people continue to be the best, the most professional

As of now, the company has 7,000 financial advisors, and only 300 are part of the MDRC

(front page of today's Manila Bulletin)
I had a long chat in a coffee shop with a former financial manager about how the PH is now awash with cash, and people really do not know what to do with it - so they keep buying condos... Meantime, the banks gouge the borrowers, charging 5-6% for mortgage loans, and paying 0-1.5% for deposits


Innovation may come through INSURANCE PROVIDERS like

BPI - Philam : Products: https://www.bpi-philam.com/en/our-products.html
Philam Vitality : FAQ's : Bonuses for Non-smoker clients : https://www.philamvitality.com/vmp-ph/partners/mmc_stop_smoking

How Philam Vitality Works

Philam Vitality is the science-backed wellness programme that works with you to make real change to your health. Get the knowledge, tools and motivation you need to do well on your journey towards healthy living so that you get more out of life and enjoy the rewards, whilst being protected against risk.

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Regus Office is inside Philam Tower

Manila Philamlife Makati 18/F, Philamlife Tower, 8767 Paseo de Roxas, Makati City Metro, Manila, 1226

The virtual office in Philamlife Makati, Manila is located in a 46-storey tower which has a granite, steel and aluminum façade. It is home to many multinational companies and within walking distance of the Philippine Stock Exchange, major banking institutions, leading corporations and prestigious hotels. The virtual office is in the heart of Makati's central business district, has its own exclusive business club at penthouse level, and is ideally situated close to the airport. Metro Manila is the Philippines' major technology park, financial, commercial and economical hub and is often referred to as the financial capital of the Philippines.

The virtual office is close to Ayala Avenue, which is often called the Wall Street of the Philippines.

> http://www.regus.com.ph/locations/virtual-office/manila-philamlife-makati

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(it is getting easier to set up a business in the Philippines, or so they say)

More Manufacturing, and better Ease of Business coming in PH

Unlike other SEA countries, PH is less export-driven with only 34 percent of GDP from 1993-2013 coming from exports

FDI / Foreign Direct Investment in 2013 / source Business Mirror, pg B4: 4/22/2016

Country---- : US$ Mn's--- - Electr.Cost
Singapore : $ 64 billion  :
Indonesia- : $ 19 billion  :
Malaysia-- : $ 12 billion  : 12 cents, Kuala Lumpur
Thailand-- : $ 7.4 billion  : 11 cents, Bangkok
Philippines: $900 million: 25 cents, Manila
Hong Kong: ------------------- : 19 cents
China, mainland ------------ :  7 cents

Oxford Economic estimates 5.5 percent annual growth from 2013 to 2030, as trends like the relocation of manufacturing from higher wage China to Philiipines and Vietnam continue.

In addition to being a low wage country, PH also has a 100 million population on consumers, with many entering the middle class.

+ Average wages are now $3,344, or double the value of ten years ago.
+ There has been industrial peace under the Aquino administration
+ the old twin drawbacks of high energy prices, and relatively high taxes are being addressed (though slowly), and corruption is diminishing

PH wants to improve its ease of doing business. It has already dropped from the #148 position (higher is harder), to #103rd, and is now aiming to make it into the best 1/2, at position # 63 or better, by the end of 2016

To open a new business, there were:
+ in 2015, 16 steps, that could be completed in 29 days
+ in 2016, this was reduced to six steps in 8 days, and the aim is for:
+ in 2017, three steps in three days

Tax assessments and payments are also being simplified, including through the use of online payments

(from Business Mirror, Apr. 22. 2016)

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Signs of Financial health


Int'l Reserves


In US $ - rapid growth

End 2005 : $ 18.494 bn
End 2010 : $ 62.373 bn
End 2013 : $ 83.831 bn
End 2014 : $ 79.541 bn : GDP:
J. : $ 80.717 billion
F. : $ 80.837 billion :
M : $ 80.459 billion :
A : $ 80.850 billion : XXX% GDP
M : $ 80.859 billion : XXX% GDP
> http://www.gov.ph/2015/06/05/gir-inches-up-to-us80-86-billion/



  • The graph above shows the bank reserve ratio requirement among the Asian central banks. With 18 percent reserve ratio, and consequently lower loan-to-deposit ratio in the Philippines, the potential easing in monetary policy, such as further reserve ratio reduction, can help bank loan growth, which should bode well for both banking and housing markets.
  • Any slowdown in China’s trend growth and capex accumulation should lower the prices of commodities and capital equipment globally, giving a boon to India.
  • The seasonal pattern of monetary liquidity increases in Russia has been skewed toward the last months of the year—when balance of the budget funds are appropriated – thus setting a stage for a New Year equity rally.

> http://www.usfunds.com/investor-library/investor-alert/chinae28099s-pyramid-of-power/#.VxqOynp7XIU

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(in response to:

I Understand: "the under-insured market and the bank spreads, but why are these two relevant to each other, in the sense that there is something that can be done to extract profit?"

I posted this):

It is pretty simple:

+ Loans are too expensive

+ Deposit rates are too low

I say this because the banks spreads are double (or more) what they are in Hong Kong. An efficient lender ( a bank or insurance company) ought to be able to make a fortune here. I think other institutions can innovate to find ways to drive the spreads lower, and gain a customer base, while making good money.

Exactly how, requires more knowledge of the market than I have now.
But an idea might be to: Lend money to Mortgage borrowers at slightly under 5% interest, but under tighter Loan-to-Value criteria than the most risky loans, to keep the risk down, and then securitize those loans, and offer an investment product at say 2-3% interest to OFW's and other cash rich investors.

That's just the outline of something that requires more fleshing out.

in addition to THAT obvious opportunity, there are many more opportunities for innovation, as the article about AIA / FilAm suggested.

One idea might be to study the market, come up with some ideas, and then approach FIlAm about job opportunities. In the prime of my financial career, I might have done something like that. Filam is said to be the market leader, and the "most profitable insurance co in the Philippines"

All of this info was in my original post, but maybe this helps to elucidate it.

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MORE ...

Research ideas for looking into Lending in PH...

+ Default rate would be interesting
+ Even more interesting would be a grid, showing default rate versus original Loan to Value.

I suspect that L to V below 75% is much lower risk than above 75%. Below 70%, lower still. If you offer cheaper loans, you should have tighter criteria, There may be a sweet spot

+ I have been told that mortgage lending is a very profitable business
+ Some research into the legal issues of Loan Securitization may be required.

Second stop, after google search, might be talking to law firms, who might want to get into this business. (ie drafting documents for loan securitizations)

For a disrupter, the "bad deal" consumers are getting, means the market is ripe for innovation. You need to work with someone outside the monopoly, like a new bank entering the market, or an insurance company, that wants to compete with banks. Sir Richard Branson's Virgin Group was an example of a company that likes to disrupt the market by offering consumers a better deal. I do not know if AIA has that sort of culture, or who else might.

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Asia Pacific Real Estate in 2016:


New REIT Markets: China, the Philippines, India, and Indonesia
The more interesting developments in the Asian REIT industry this year center on continuing efforts to introduce REIT infrastructure in various new markets around the region. In particular, China saw the emergence of a handful of “proto
-type REITs” at the end of 2014 and the beginning of 2015.
These amount to a trial balloon for real estate securitizations. However, there is so far no sign of a regulatory framework in which a wider REIT industry might evolve in China and, according to one interviewee, “nobody has a date within the next two years for a REIT framework to be legislated.” In particular, there is no indication that the government is set to introduce or even discuss the issue of tax neutrality, without which REITs will be unable to offer a competitive yield.
On top of that, so far China’s prototype REITs do not even own their own properties—instead, they have access only to income streams generated by rents within a given portfolio of assets. As a result, the China prototype REITs are purely yield-
driven plays, which may prove a tough sell in a market where cap rates have been compressed to “ridiculous” levels and investors are more focused on capital gains than on dividends or defensive investments anyway.
The Philippines, meanwhile, is more advanced in its pursuit of a finalized REIT regulatory structure, having introduced a code some six years ago. The stumbling block, however, remains the vexed issue of tax neutrality, which the current
government has been reluctant to introduce. With an election coming up, one Philippines-based investor said the next administration may be more amenable to changing the implementing guidelines so as to reduce taxes on initial transfers of
assets into funds, and abolish the requirement to sell two-thirds of assets within three years. “If [those are] modified,” he said, “we’re going to have a vehicle that will interest a lot of people.”
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  • 3 weeks later...

Automating Remittances via Mobile phones

PIL / PERTH, AUSTRALIA > http://pepltd.com.au/
Peppermint Innovation Ltd (ASX:PIL) ... update / Last: A$0.019
An Australian mobile banking, payments and remittance technology platform focused on providing vital access to banking services for millions of people not currently linked to traditional banks, today releases its Quarterly Cash flow report for the period ended 31 March 2016.
Key highlights and updates
1. Commercial launch:
The commercial launch of the MyWeps mobile payments and remittances application, which is to be promoted via direct marketing by leading multi-level marketing company 1Bro Global Inc. who have a large agent and business center network across the Philippines, was announced on the 4th of April 2016. MyWeps is the first application of its kind to be launched specifically for multi-level marketing and allows established agent networks to launch their own mobile-based micro business simply from a smart phone.
2. Preparing for future growth:
The appointment of experienced company Chief Financial Officer Michael van Uffelen who with experience in the Philippines is building the accounting procedures and protocols required to manage the financial monitoring and reporting in the Philippines and Australia as the business develops. Along with experienced programmer Matt Cahill - now managing and working closely with the technical team on the development of the platform – Peppermint is putting in place important building blocks to cope with the expansion of the use of its platform.
3. International expansion:
Signing a Memorandum of Understanding with an emerging Bangladesh payments platform, 24Nme, opening up the possibility of international expansion
/ 2 / Peppermint takes on strategic investor

Perth-based tech company Peppermint Innovation have gained a key strategic partner after making an equity placement for $1 million at $0.02 a share.
The 2c placement, which was done at double the last traded price for Peppermint shares, caused the company’s stock to jump by up to 60% yesterday, touching 1.6c a share before selling back to 1.4c.

The financial technology player said on Monday th The financial technology player said on Monday that the placement deal was executed with Australian-based Smidge Digital Unit Trust, which subscribes for minority positions in innovative fintech and enterprise data analytics companies.

Smidge claim that their unit holders are “significant influencers” in Asian markets that are capable of assisting Peppermint to get to market in those countries. In addition to the $1 million placement, the deal also includes an option to place a further $1 million at a 25 per cent premium to the five-day volume weighted average share price within 60 days from the first placement.


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  • 2 years later...

" Need for Financial LITERACY" - added to the Thread title

Basic Facts, PH
Population : 105 Million
Income, GNI: $ 3,580 per capita (=$xx)
Labor force: 69.6 Million (xx%)
Average Age: 24 years
GDP Growth : 6.9% p.a. +2.7% inflation = 9.6% Nominal

Increased Financial Literacy is needed to sustain PH economic growth
+ 4% Life Insurance, market penetration
+ 0.7% of Filipinos invest in the stock market
+ 5.7 Million units, Housing Backlog (tax breaks for affordable housing?)
+ 14% of Filipinos have bank accounts
+  5% of Filipinos own a credit card
+ 16.3% underemployment rates, at Jan.2017, lowest since 2006
+  6.6% Unemployment rate, Jan.2017, with rising labor force

> (source): Leechiu Property Consultants, July 2018

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PROPERTY Demand Drivers
 - need better decisions & more finance... Liquid secondhand market?
+ URBAN Population growth, 48.6% of Filipinos. 56%,2030 >66%,2050
+ More BPO jobs in urban areas
+ 10M OFW's investing in Real Estate with >50% of remittances property-related
+ Housing backlog needs addressing; Demand for Dormitories is rising

?: With limited finance for secondhand buyers, how to monetize equity?

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52.8 million Filipinos don't have bank accounts

They say they don’t have enough money for that, according to a Bangko Sentral ng Pilipinas survey


MANILA, Philippines – Only about 15.8 million Filipino adults own bank accounts, according to the latest financial inclusion survey conducted by the Bangko Sentral ng Pilipinas (BSP).

A much bigger number of adults – 52.8 million – don’t have bank accounts, with 60% of them saying they don’t have enough money for that.

The central bank, which has increased efforts in pursuing financial inclusion, measures this by the number of people who save, receive salaries, pay bills, and send or receive remittance through financial accounts accounts.

The survey defines adults as those 15 years old and above.

The BSP’s 2017 Financial Inclusion Survey showed that the 15.8 million account owners represent 22.6% of the total adult population – a slight increase from the 22% in the first FIS survey in 2015.

Twenty-one percent of non-account holders say they don’t see the need for it, while 18% can’t produce the documents required to open an account; 10% say the cost of high; 9 % don’t have knowledge about opening accounts; 8% are jobless; and 8% lack of awareness.

Other findings of the 2017 FIS are:

  • Only 1.3% have electronic money (e-money) accounts
  • Filipino adults with savings increased to 48% in 2017 from 43% in 2015.
  • There have been less incidence of borrowing – 22% in 2017 from 47% in 2015.
  • Women are twice likely to have financial accounts than men, although slightly more men than women have bank and e-money accounts.
  • Financial accounts are largely utilized to save money. Only 18% of account owners use their accounts to receive salary; 12% to send or receive money; and 6% to receive pension.
  • 9 out of 10 account holders have payment transactions, and 60% of them pay in cash.
  • Most remittance transactions are done over the counter; 93% of them send money, while 83% receive them, through agents.

> https://www.rappler.com/business/207091-number-filipino-adults-who-have-bank-accounts

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CASH FLOW vs CAPITAL GAINS Focus & when is Gearing Good?

A note received by email from M-

"This might be an interesting article/ numbers to go through in one of your meet-ups as part of your financial literacy message.
I think you would probably have to change the numbers and interest rates tailored to Manila and the message might be the opposite of what this article suggests, or maybe not, depending on the cash-flow situation."

Cash is liquid money and is absolutely essential when you finance real estate. Cash is much easier to use if something goes wrong, whereas equity is completely useless. You’d have to sell your asset if you ever need the money quickly, and that is not always the choice that someone needs to make if an event occurs.

Value vs. Financing

The value of a residential property will go up or down regardless if you have a mortgage on the property. Value is completely out of your control in residential real estate because it’s usually based on someone’s opinion instead of cash flow (like commercial real estate). This is an important point when investing. Since mortgage money is the cheapest money that you’ll ever borrow, why not finance as much as possible?

If the numbers don’t work for the smallest down payment possible, move on to the next property. Remember, a good investment property is one that cash flows to your liking, not one with “equity.” That is to say that the income generated by the property is greater than the expenses of the property.

The EXAMPLE (in the article) is too simplistic!
He fails to analyze Rental Income vs Interest Rate, ie the expected "Yield Pick-up"

Let's do that:
 -----------------------:   - Cousin A : - Cousin B :
Purchase Price:    $250,000  :   $250,000 :
Rental Income :  $1500/mo  : $1500/mo :
Rental Yield---- :       5.00%     :    5.00%   : > Net After-tax Rental yield
Interest Rate--- :      3.75%     :    4.00%   : > Adjusted for all fees, penalties (?)
Yield pickup---- :      1.25%     :    1.00%   : > the Cash Flow benefit from borrowing
That 1%-1.25% is a nice decent positive Yield Pick-up!
Obviously, it only makes good cash-flow-sense to borrow if  there is a positive "Yield pick-up"

- Because Net after-tax rental returns are above the Interest Rate being paid.
it will not make sense to borrow. If Rental yields are below Rates. Any borrowing will reduce Cash Flow.
(Also,  Rental yields may not necessarily  STAY above Interest Rates, particularly when rates shoot up.)

This Difference (Net AT Yield - Effective interest Rates) needs to be evaluated when one looks at investing.
In fact: Even when it is nicely positive, higher gearing may also leave the property owner with a smaller
margin for error, voids, and other surprises.

The guy who repays the loan more quickly, will have less cash for other ventures, such as buying other
properties or investing in the stock market, or cash for a rainy day.  The article pointed this out.

On the other hand, maybe by repaying the loan more quickly, he will make it easier to obtain another,
perhaps even cheaper loan on his next property venture, This enhanced credit rating will often accrue
to someone who retires in full a loan, or pays it down quickly. If gearing is too high, there may be no flexibiity

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  • 10 months later...

"Known for their frugality and tendency to stockpile cash for the future,

the members of Generation Z are actually more informed about investing... than Millennials" 

Interesting idea

MORE HERE - in two articles (scroll down):

8 hours ago - Known for their frugality and tendency to stockpile cash for the future, the members of Generation Z are actually more informed about investing ...

/ 2 /

8 hours ago - Boosting Filipinos' financial literacy, one program at a time BSP, in partnership with BDO Foundation, the corporate social responsibility arm of ...

> xx

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  • 4 weeks later...


Tips from a guy who managed to live in Manhattan on a $40,000 salary and still max out his 401(k) contributions

Dogen offer some tips anybody looking to reach financial independence at a young age could use.

1) Live in a crap box — Do you really need a large spread to be happy? Can you not be comfortable in smaller, shared spaces? “There is no reason why you shouldn’t continue living like a college student until you can save at least 30% of your income, if not 50% of your income,” Dogen says.

2) Work so much you don’t have time to spend money — Nose to the grindstone.That’s what your competition in other countries is doing, Dogen says. He added that “there is so much to soak in that if you’re working 40 hours a week or less before the age of 40, you’re leaving a lot on the table.”

3) Don’t confuse yourself with someone else — “If you only work 40 hours a week, how can you compare your salary to someone working 60 hours a week? If you are 30 years old, how can you compare your net worth to someone who is 45 years old? If you dropped out of college, it’s not rational to compare yourself to someone with a graduate degree.” You get the idea. Set realistic targets for yourself and don’t get all FOMO-y.

> More: https://www.marketwatch.com/story/tips-from-a-guy-who-managed-to-live-in-manhattan-on-a-40000-salary-and-still-max-out-his-401k-contributions-2018-11-12

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  • 5 months later...

+ Get out of Debt
+ Buy a Home
+ Retirement



> from a presentation : https://assets.ctfassets.net/20580h26mi6y/hQ8V66VcVHdjFsz49d2aE/fb132ef8827029c3e3f22aa5d4e2c86c/Mogo_Investor_Deck_Q3_FINAL2019_.pdf

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  • 4 weeks later...

A Good Idea: FAMILY LENDING ... is often a Win, Win!

(But it won't be, if family borrowers disrespect "fair treatment" of older or better-off family members)

Suppose you are 30 years old, just got married, and want to buy a house for P1 million. Your bank is willing to grant you a mortgage loan for P800,000 or 80% of the purchase price of the house at an effective interest rate of 12% per annum, but you need a 20% down payment of P200,000.

On the other hand, your elder sister has some savings placed in time certificates of deposit and she can get only about 4% per annum if the deposit is rolled over.

With a little creativity and some straight thinking, these two circumstances can be turned into a family loan and both parties can benefit from the deal.

...the financial system provides price information that helps coordinate decentralized decision making in the economy. Knowledge of market interest rates should allow transactions within families in a manner that will benefit all members.

Family loans are exemplary ways of showing that in a functional financial system, we will all be better off. Competition in the financial system should reduce the cost of intermediation. And one such way is by eliminating it altogether as in family loans.

However, family loans rarely happen especially in the Philippine setting. I’ve been surveying my MBA and undergraduate students in Finance on whether they practice this. Rare is the situation where a positive reply is given. When family loans are accommodated they are generally on a pay when able basis and are tempered to a minimum. No interest is charged and the lender loses on the time value of money alone. Finally, the lender will accommodate just enough in anticipation of non-repayment.

Because of the lack of appreciation of the benefits of this system among kin, siblings and close relatives are considered poor credit risk, despite all the love and familiarity we can factor in the relationship. Parents who lend to children, sisters to brothers, cousins, etc. find it difficult to collect from each other. They view it as a grant with option to collect. Add Filipino characteristics like hiya, utang-na-loob and pakikisama, and the family loan is doomed even before it starts...

We can all benefit from family loans. One might want to introduce a third-party arbiter, maybe a financial adviser, who should be independent, between the family borrowers and lenders. The transaction must be treated as an arm’s length business deal. The objective must be a win-win arrangement for the parties.

> FINEX Folio (Benel Lagua): 28 Feb. 2020 : https://www.bworldonline.com/family-lending/

Benel D. Lagua was recently EVP and Chief Development Officer at the Development Bank of the Philippines. He is also a part-time lecturer at both Ateneo and DLSU. He is an active member of FINEX and is an advocate for innovations in SME Finance. Feedback and comments are welcome at


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