Financial Literacy CampaignFinancial Literacy Campaign

The Philippine Consulate GeneralThe Philippine Consulate GeneralJeddahJeddah

Kingdom of Saudi ArabiaKingdom of Saudi Arabia24 April 200924 April 2009

InvocationInvocation

National AnthemNational Anthem

Welcome RemarksWelcome Remarks

Consul General Ezzedin H. TagoConsul General Ezzedin H. TagoPhilippine Consulate GeneralPhilippine Consulate General

JeddahJeddah

Audio Visual PresentationAudio Visual Presentation

Paghahanda Sa KinabukasanPaghahanda Sa Kinabukasan

The BSP’s The BSP’s Financial Learning Financial Learning Campaign (FLC)Campaign (FLC)

DEPUTY GOVERNOR DIWA C. GUINIGUNDODEPUTY GOVERNOR DIWA C. GUINIGUNDO

2222--25 April 200925 April 2009

Kingdom of Saudi ArabiaKingdom of Saudi Arabia

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OutlineOutline

I.I. ImportanceImportance ofof RemittancesRemittances

II.II. SignificanceSignificance ofof FinancialFinancial PlanningPlanning

III.III. TypesTypes ofof FinancialFinancial InstrumentsInstruments

IV.IV. Source of Financing for Business Source of Financing for Business

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Importance ofImportance ofRemittances Remittances

Benefits of RemittancesBenefits of Remittances

•• Promote economic activity through higher Promote economic activity through higher consumption consumption

•• Generate employmentGenerate employment

•• Increase foreign exchange supplyIncrease foreign exchange supply

•• Contribute to savingsContribute to savings

•• Provide Provide additional funds for the governmentadditional funds for the government

Remittances can be harnessed for investments, in theform of:

� human resource capital investments through education and

health care for beneficiaries;

� physical capital investments through acquisition of real

properties, including land purchases and home construction;

� financial capital investments through savings in bonds and

other financial instruments; and

� investments in business ventures such as in small- and

micro- enterprises (SMEs).

1111

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Significance ofSignificance ofFinancial PlanningFinancial Planning

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ImportanceImportance

1.1. ToTo savesave forfor thethe futurefuture

2.2. ToTo acquireacquire protectionprotection againstagainst unforeseenunforeseenuntowarduntoward eventsevents

3.3. ToTo achieveachieve financialfinancial independenceindependence

FINANCIAL PLANNINGFINANCIAL PLANNING

Three STEPS to achievingThree STEPS to achievingFINANCIAL FREEDOMFINANCIAL FREEDOM

11PlanPlan

22SaveSave

33InvestInvest

SettingSetting--up Family Goalsup Family GoalsFamily goals are usually centered on the following:

a. Education

b. Housing

c. Health

d. Retirement

e. Protection against unforeseen events

YOUR FINANCIAL PLANYOUR FINANCIAL PLAN

IMMEDIATELYIMMEDIATELY

Graduation FundGraduation Fundfor Child 1for Child 1

(P 50K)(P 50K)

2 years2 years

Build DreamBuild DreamHouseHouse

(P 3 Mn.)(P 3 Mn.)

10 years10 years

Funds forFunds forBusinessBusiness

UndertakingUndertaking(P 100K)(P 100K)

TIMELINETIMELINE

LIFE LIFE GOALSGOALS RetirementRetirement

FundFund(P 3 (P 3 MnMn.).)

20 years20 years

� Create a timeline on when you want it to happen

� Specify amount needed

Why Families are not able to SaveWhy Families are not able to Save

a. Dependency on family member working overseas

b. Luxurious lifestyle

c. Other family issues that drain resources

� Early marriage� Family break-up� Lack of interest in school� Personal problems, vices

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FINANCIAL PLANNINGFINANCIAL PLANNING

Income Income –– Expense = Expense = Savings Savings

Income Income –– Savings = Savings = ExpenseExpense

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April 2009April 2009

IncomeIncome

Target Savings Target Savings xxxxxx

ExpensesExpenses

FoodFood

School AllowanceSchool Allowance

Electricity Electricity

WaterWater

TransportationTransportation

ClothingClothing

EntertainmentEntertainment

OthersOthers

Can be used for:Can be used for:

1.1. Tuition feesTuition fees

2.2. HousingHousing3.3. InvestmentsInvestments4.4. Business Business

ventureventure

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Types of Financial Types of Financial InstrumentsInstruments

PESO REMITTANCEPESO REMITTANCE

CONSUMPTIONCONSUMPTION SAVINGSSAVINGS SMEs/MICROFINANCESMEs/MICROFINANCE

Bank instruments (TD/SD/Bank instruments (TD/SD/

Mutual funds/UITF)Mutual funds/UITF)

Savings in CooperativesSavings in Cooperatives

TD/SDTD/SD

Treasury instrumentsTreasury instruments

TT--bills, RTBs, Tbills, RTBs, T--notesnotes Stock MarketStock Market

Insurance (life, nonInsurance (life, non--life,life,

Education, pension)Education, pension) Real EstateReal Estate

OthersOthers

AgriAgri--businessbusiness

Retail businessRetail business

Lending businessLending business

OthersOthers

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1.1. Savings DepositSavings Deposit

2.2. Time Deposit Time Deposit

3.3. TreasuryTreasury--bills bills

4.4. Retail treasury bonds (RTBs) Retail treasury bonds (RTBs)

5.5. LongLong--term Negotiable term Negotiable Certificates of Deposit Certificates of Deposit (LTNCD) (LTNCD)

LOWER YIELD BUT LOWER YIELD BUT GUARANTEED RETURN GUARANTEED RETURN

OF PRINCIPALOF PRINCIPAL

HIGHER YIELD BUT NO HIGHER YIELD BUT NO GUARANTEED RETURN OF GUARANTEED RETURN OF

PRINCIPALPRINCIPAL

1.1. MutualMutual FundsFunds

2.2. UnitUnit InvestmentInvestment TrustTrustFundsFunds (UITFs)(UITFs)

3.3. StocksStocks

4.4. InsuranceInsurance

RTBs TBills UITFs Mutual Funds

Variable Insurance

Who May Buy

Individual

Institutional

Where to Buy

GSEDs GSEDs Banks •Brokers

•Banks

•Ins.

agents

Insurance

cos.

Minimum Investment

P5,000 P100,000 P10,000 P1,000 ---

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INVESTMENT INSTRUMENTS

As of February 6, 2009

RTBs TBills UITFs Mutual Funds

Insurance

Yield Fixed-

rate

coupons

Zero

coupon

NAVPU NAVPS NAVPU

Guaranteed Return of Principal

Yes Yes No No No

Tax Feature 20% 20% 20% --- ---

Holding Period

3 and 5

years

91-, 82-,

364- days5 to 365

days

--- ---

INVESTMENT INSTRUMENTS

RETAIL TREASURY BONDSRETAIL TREASURY BONDS

P30,000P30,000(investment)(investment)

x 5.875%x 5.875%(coupon rate p.a.)(coupon rate p.a.)

x 5 yearsx 5 years = = P8,812.50P8,812.50(total income)(total income)

AfterAfter--tax Income:tax Income:

Example: 5Example: 5--year RTB with 5.875% coupon rateyear RTB with 5.875% coupon rate

P8,812.50P8,812.50(total income)(total income)

-- P1,762.50 P1,762.50 */*/

(20% tax)(20% tax)

= = P7,050.00P7,050.00

*/ Credited quarterly

RETAIL TREASURY BONDSRETAIL TREASURY BONDS

Quarterly Coupon:Quarterly Coupon:

÷÷ 2020(# of quarters in 5 years)(# of quarters in 5 years)

= = P352.50P352.50/quarter/quarter

Return on Investment:Return on Investment:

= = P352.50P352.50 (proceeds per quarter)(proceeds per quarter) x x 100100P30,000P30,000 (initial)(initial)

P7,050.00P7,050.00(after(after--tax income)tax income)

= = 1.18% 1.18% per quarter for a 5per quarter for a 5--year RTB, year RTB, 5.875% coupon rate5.875% coupon rate

TREASURY BILLSTREASURY BILLS

Selling PriceSelling PriceFormula: Formula: SP = PP + [(PP) (SP = PP + [(PP) (ii) (h/360)]) (h/360)]ii = (SP = (SP –– PP) / PP x (360/h)PP) / PP x (360/h)

Where,Where,SP: selling priceSP: selling pricePP: purchase price PP: purchase price */*/

ii : yield for holding period: yield for holding periodh : holding period h : holding period

*/*/ Calculated based on present value formulaCalculated based on present value formula

TREASURY BILLSTREASURY BILLS

= = P18,005.25P18,005.25(discount/interest (discount/interest

earned)earned)

AfterAfter--tax Interest Earned:tax Interest Earned:

Example: 91Example: 91--day Tday T--bill at 13% yieldbill at 13% yield

P18,005.25P18,005.25(discount/interest earned)(discount/interest earned)

-- P3,601.05P3,601.05(20% tax)(20% tax)

= = P14,404.20P14,404.20

-- P981,994.75P981,994.75(selling price)(selling price)

P1,000,000.00P1,000,000.00(investment)(investment)

TREASURY BILLSTREASURY BILLS

Return on Investment:Return on Investment:

= = P1,014,404.20P1,014,404.20 (proceeds)(proceeds) –– P1,000,000 P1,000,000 (initial)(initial) x x 100100P1,000,000P1,000,000 (initial)(initial)

= = 1.44% 1.44% for a 91for a 91--day Tday T--bill, 45bill, 45--day holding period, 13% yieldday holding period, 13% yield

UNIT INVESTMENT TRUST FUNDUNIT INVESTMENT TRUST FUND

= 86,365.71= 86,365.71(units of participation)(units of participation)

Example: 30Example: 30--day UITFday UITF

÷÷ 1.1578671.157867(NAVPU)(NAVPU)

P100,000.00P100,000.00(initial investment on (initial investment on

Feb. 20, 2009)Feb. 20, 2009)

1.18671.1867(NAVPU)(NAVPU)

x 86,365.71x 86,365.71(units of participation)(units of participation)

P102,490.19 =P102,490.19 =(proceeds on investment (proceeds on investment

on March 22, 2009)on March 22, 2009)

Return on Investment:Return on Investment:

= = P102,490.19P102,490.19 (proceeds)(proceeds) –– P100,000P100,000 (initial)(initial) x 100x 100P100,000P100,000 (initial)(initial)

= = 2.49% 2.49% for a 30for a 30--day UITFday UITF

UNIT INVESTMENT TRUST FUNDUNIT INVESTMENT TRUST FUND

MUTUAL FUNDMUTUAL FUND

= 81,030.71= 81,030.71(shares)(shares)

Example: 60Example: 60--day Mutual Fundday Mutual Fund

÷÷ 1.23411.2341(NAVPS)(NAVPS)

P100,000.00P100,000.00(initial investment on (initial investment on

Feb. 20, 2009)Feb. 20, 2009)

1.26261.2626(NAVPS)(NAVPS)

x 81,030.71x 81,030.71(shares)(shares)

P102,309.37 =P102,309.37 =(proceeds on investment (proceeds on investment

on April 21, 2009)on April 21, 2009)

MUTUAL FUNDMUTUAL FUND

Return on Investment:Return on Investment:

= = P102,309.37P102,309.37 (proceeds)(proceeds) –– P100,000 P100,000 (initial)(initial) x x 100100P100,000P100,000 (initial)(initial)

= = 2.31% 2.31% for a 60for a 60--day MFday MF

MUTUAL FUNDSMUTUAL FUNDS

TypesTypesMedium to Medium to High RiskHigh Risk Low RiskLow Risk

Bond Funds (Fixed)

Money Market Funds

Equity (Stock Funds)

Balanced Funds

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= 12,500= 12,500(units of participation)(units of participation)

Example: OneExample: One--year Variable Insurance with a P750,0 00 face amountyear Variable Insurance with a P750,000 face amount

÷÷ 1.89241.8924(NAVPU)(NAVPU)

P23,655.00P23,655.00(regular annual premium (regular annual premium

payment on Jan. 10, payment on Jan. 10, 2009)2009)

1.98741.9874(NAVPU)(NAVPU)

x 12,500x 12,500(units of participation) (units of participation)

P24,842.50 =P24,842.50 =(proceeds on investment (proceeds on investment

on Jan. 10, 2010)on Jan. 10, 2010)

VARIABLE INSURANCE / INVESTMENT VARIABLE INSURANCE / INVESTMENT LINKED INSURANCELINKED INSURANCE

Return on Investment:Return on Investment:

= = P24,842.50P24,842.50 (proceeds)(proceeds) –– P23,655P23,655 (initial)(initial) x 100x 100P23,655P23,655 (initial)(initial)

= = 5.02% 5.02% for a onefor a one--year Variable Insurance year Variable Insurance */*/

*/ */ Income could cover for future premiums Income could cover for future premiums

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SSource of ource of FFinancing inancing for for BBusiness usiness

MICROFINANCE 101MICROFINANCE 101Broad range of financial services such as deposits, loans, payment services, money transfers and insurance products offered to the poor and low-income households for their small enterprises.

Unique Characteristics:• Open to small savers or micro-borrowers• Approval and disbursement of loans are fast • Individual borrowers can avail of loans • Grant of loans based on the borrowers’ and household’s expected project cash flow

• Small loans ranging from as low as P2,000-P5,000 to a maximum of P150,000 (collateral-free)

• Unsecured and short-term loans

BanksBanksNo. of No. of BanksBanks

Micro Loans PortfolioMicro Loans Portfolio Savings Savings Component Component (in millions)(in millions)Amount Amount

(in millions)(in millions)No. of No. of

BorrowersBorrowers

Microfinance Oriented Banks

Rural Banks 5 724.10 128,494 445.76Thrift Banks* 4 192.93 57,780 57.95

TOTAL 9 917.02 186,274 503.70

“Regular” Banks with Microfinance Operations

Rural Banks 167 4,046.63 580,532 1,073.99

Cooperative Banks 25 913.28 88,198 167.34

Thrift Banks 19 342.53 10,170 4.04

TOTAL 211 5,302.44 678,900 1,245.37

TOTAL 220 6,219.46 865,174 1,749.07

SNAPSHOT OF MICROFINANCE IN THE BANKING SECTOR SNAPSHOT OF MICROFINANCE IN THE BANKING SECTOR (As of 31 December 2008)(As of 31 December 2008)

CREDIT SURETY FUND PROGRAMCREDIT SURETY FUND PROGRAM

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• Allows MSMEs who are members of a cooperative to gain access to credit from banks in the absence of acceptable hard collaterals.

• MSMEs defined (under Small and Medium Enterprise Development Council Resolution No. 01 Series of 2003 dated 16 January 2003)

By Asset Size:Micro : Up to Php 3,000,000Small : Php 3,000,001 -- Php 15,000,000Medium : Php 15,000,001 -- Php 100,000,000Large : above Php 100,000,000

Based on the number of employees:Micro : 1 -- 9 EmployeesSmall : 10 -- 99 Employees Medium : 100 -- 199 EmployeesLarge : More than 200 Employees

CREDIT SURETY FUND PROGRAMCREDIT SURETY FUND PROGRAM

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• A multi-sectoral program composed of:

- Creation of a trust fund that will serve as security for the loans:(1) national government through the Industrial Guaranty and Loan Fund (IGLF)(2) the local government led by the Provincial Governor(3) MSMEs under the cooperatives

- Provision of loans:(4) participating banks

- Provision of rediscounting for up to 80% for the MSME loans(5) Bangko Sentral ng Pilipinas (BSP)

CREDIT SURETY FUND PROGRAMCREDIT SURETY FUND PROGRAM

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• Granting of Loans:

- Managed and administered at the provincial level to be more responsive to the credit needs of the MSMEs in each province.

- Loans to be approved by the CSF Oversight Committee

- Loanable amount: depends on the evaluated project loan proposal

- Interest rate: 8-12% per annum

- Additional fee: guarantee fee of 2-5% of the loan

- In case of borrower default, CSF will cover the debt while cooperatives will run after their members.

- Banks that extend loans secured by the CSF can rediscount up to 80% of such loans with the BSP.

CREDIT SURETY FUND PROGRAMCREDIT SURETY FUND PROGRAM

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• Participating Banks:

- Allied Bank- United Coconut Planters Bank- Land Bank of the Philippines- Development Bank of the Philippines- BPI Family Bank- Rural and cooperative banks with rediscounting line with the BSP

CREDIT SURETY FUND PROGRAMCREDIT SURETY FUND PROGRAM

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• Provinces that launched the program:- Cavite- Aurora- Bohol

• Provinces to replicate the program:- Davao City- Davao del Sur- Cotabato- Batangas- Bulacan- Laguna- Quezon- Mindoro

The Financial Learning Campaign is a flagship program of the BSP to promote Financial Planning, Savings and Investments

PERANG PADALA, BIGYAN PERANG PADALA, BIGYAN NG HALAGA,NG HALAGA,

TIPIRIN, PALAGUIN AT TIPIRIN, PALAGUIN AT PAGYAMANIN,PAGYAMANIN,

PARA MAGANDA PARA MAGANDA KINABUKASAN NATINKINABUKASAN NATIN !!

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Website:Website: www.bsp.gov.phwww.bsp.gov.ph

EE--mail:mail: bspmail@bsp.gov.phbspmail@bsp.gov.ph

Audio Visual PresentationAudio Visual Presentation

EntrepinoyEntrepinoy

Remittance & Investment Remittance & Investment Protection TipsProtection Tips

Dottie M. BernasDottie M. BernasBank Officer IIIBank Officer III

Bangko Sentral ng PilipinasBangko Sentral ng Pilipinas

Open ForumOpen Forum

Rosabel B. GuerreroRosabel B. GuerreroDeputy DirectorDeputy Director

Bangko Sentral ng PilipinasBangko Sentral ng Pilipinas

Closing RemarksClosing Remarks

Juanita D. AmatongJuanita D. AmatongMonetary Board MemberMonetary Board MemberBangko Sentral ng PilipinasBangko Sentral ng Pilipinas

Thank YouThank You