Weighing In
I HAVE always worked at the development side of things. Development is defined here as that area where investments, whether in money, time and effort, result in improving opportunities for areas and peoples who need it the most. I have worked in both houses of Congress, the Girl Scouts of the Philippines, the Board of Investments, UP, DoLE and the Civil Service Commission. As one of my colorful friends would say: "aba, kinarir mo na ang gobyerno" (you have made a career of government!). This is why being at the Development Bank of the Philippines has been a cause for ribbing from friends. I have been asked if I already renounced poverty. Or, if being in Makati has caused me to shift shopping habits from 168 to 6750. The fact is that at DBP, I have shifted from the implementing end to the financing end of development. And while I struggle to understand the arcane (to me, anyway) language of banking, DBP colleagues sometimes get visibly, well, amused with ignorance and bias resulting from many years in the service of development. Today, a year after I assumed at DBP, one thing is even clearer: Development pays.DBP has had its history of behest loans. One year ago, my transfer to the bank was met with a chorus of "now, I can borrow" from friends whose credit ratings are woefully similar to mine. Prospective "behestors," you will agree. A monthly salary of P41,000 does not inspire too much confidence and a housing loan from Land Bank required that I mortgage my 350 sq.m piece of land and the house that will be built on it with automatic deduction from my retirement account. If I had borrowed from DBP — and they would have called that DOSRI now — I might have had an even harder time. The fact is, with all the financial scandals in the past decade, international and local regulations have tightened and borrowing has become more difficult. But precisely because of this, more creative ways have to be found to fund development without getting into trouble with the rest of the world.
One interesting frontier is the local government sector (LGU) Development is local even if planning is done at the national level. Local governments can now loan against their internal revenue allotments to fund continuing projects such as electrification, water systems, schoolbuildings and hospitals. Some have gone as far as float bonds to finance housing. And the good news is that for the most part, LGUs pay. A progressive LGU can finance development as if it were a corporation and do the development infrastructure and programs that in the past would have waited for actual cash in the coffers before they could even get started. They are also learning more prudential management of resources and working at acquiring financial skills. All of this would not have happened without a Local Government Code which Senator Pimentel and President Cory then championed. Our total exposure to local governments is P12.5 billion. And this amount is growing everyday.
But what are you doing to fortify micro, small and medium enterprises, asked a legislator friend. What are you doing to help future taipans? I asked the question myself when I just got in. The problem is, because we have a limited branch network, we have had to use microfinance institutions to extend our reach. When these micro-finance institutions retail the money borrowed from us, nowhere is it said that the money came from DBP. And so the misimpression remains that we are not in the business of lending to small borrowers. Our total exposure to MSMEs is P16.2 billion. We also have a factoring facility where small entrepreneurs who are unable to immediately collect from the people they supply to may get their moneys from the DBP Instant Working Capital Facility. This stands at P1.8 billion for 2006 alone.
The roll-on, roll-off (also known as RORO) links the Philippines through a nautical highway that facilitates cheaper movement of goods backed up by cold chain that ensures longer shelf-life for local products. The total bill for this, thus far, is P4.7 billion. There is also a network of forests, 25 in all, meant to prevent desertification and soil erosion and mitigate environmental damage resulting from ignorance and bad practices. All told, there are 6,000 hectares of reforested land at a cost of P112.9 million to the bank.
In the end, all of these come with a price. The interest from banking transactions alone would not be enough for financing development. This is where good treasury operations can spell the difference between being a good development bank and just another bank. Interbank loans, treasury accounts and investment in bonds and unquoted debt securities provide the wherewithal for pursuing development activities. And in the past year alone, this added up to P54 billion. Hence, despite all the developmental loans and projects of DBP, it was able to generate gross revenues of P18.3 billion and register the highest and record-breaking net income after tax of P3.7 billion in 2006.
Because we all know that development pays in the long run, government banks in particular must work doubly hard to ensure that what it gets from its prudent operations goes back to the 84 million Filipinos who constitute its primary stockholders.
