Shelter is one of the basic requirements of human needs. For the ordinary Filipino, owning a house provides a sense of economic security and dignity in society. In the rural areas, particularly agricultural workers, low-income earners and even some families of overseas Filipino workers, owning a house would give them some sort of “pride,” seeing their little hard-earned money invested in something that appreciates in value over time.

However, it is a given fact that owning a house is costly. An average house of about 100 square meters in areas goes for a total contract price of around P5 million, including land. Apart from owning, even some home improvements would also involve certain expenses. Several contractors might quote P20,000 per square meter to include labor and materials from plan to turnover of a house. An average house would cost around P12,000 per square meter using materials of lesser quality.

With this scenario, a typical Filipino residing in a rural area and earns a little might perceive the opportunity of owning or improving a home bleak. This is where housing loans step in.

While bigger banks offer concrete housing loans, not all low-income earners can access these services as these are often for people who already have a steady source of income. Rural banks, on the other hand, extend housing microfinance that offers small, incremental loans that fit with the way poor people build or improve their houses, progressively over time. This emanated from the Bangko Sentral ng Pilipinas (BSP) Circular 678 for micro-housing financing.

Apart from the support rural banks receive from the regulators, government-controlled corporations such as the Home Guaranty Corp. (HGC) have made it possible for an improved housing loan system for underprivileged Filipinos, giving them more opportunities to finance their own homes. The HGC, which is under the supervision of the Housing and Urban Development Coordinating Council (HUDCC) and chaired by Vice President Jejomar Binay, supports homeownership among Filipinos by uplifting financial institutions to lend to individual homebuyers and housing developers.

The HGC, through its two latest programs—the Guaranty Program to the Countryside through Rural Banks and the Guaranty Program for Microfinance and Small Loans for Home Improvement—extends guaranty lines to financial institutions, and secures investments for home-lending programs with the goal of encouraging financial institutions (such as rural banks) to lend more for housing.

Under HGC Guaranty Programs, the government guarantees the payment of the institution’s obligations. The same is also beneficial for both the banks and the borrowers, as the latter could avail up to 90 percent of the appraisal value of collateral property while the former are exempted from the BSP capital reserve requirement for HGC-guaranteed loans. It also freed up banks from administrative burden if a loan evades.

The expansion of HGC guaranty programs to the countryside is an ongoing initiative that started in 2011. Orientations and briefings about the HGC guaranty were conducted to rural banks in different parts of the country. By the end of 2012, HGC was able to reach 237 rural banks form 15 provincial federations in nine regions, namely: National Capital Region, Regions 1 to 4A, Region 5, Regions 7 to 8, and Region 13.

From this extensive marketing campaign, rural bank clients increased from two in 2011, 12 in 2012, and 18 in 2013. Seven of these rural banks are actively enrolling, while the rest are in the process of consolidating their accounts for enrollment.

On September 26, HGC and the Rural Bankers Association of the Philippines had a Partnership Ceremony at the Coconut Palace in Roxas Boulevard, Manila. Certificate of Partnerships were awarded to 17 partner rural banks, which include: 1st Macro Bank, AMA Rural Bank, Banco Alabang, Bank of Makati, Cantilan Bank Inc., Lipa Rural Bank Inc., Mount Carmel Rural Bank Inc., Rang-ay Bank, Rural Bank of Cauayan, Rural Bank of Guinobatan, Rural Bank of Mabitac (Laguna) Inc., Rural Bank of Pagbilao, Rural Bank of Porac (Pampanga) Inc., Rural Bank of Rosario (La Union), Rural Bank of San Jose (Camarines Sur) Inc., Rural Bank of Tanza (Cavite) Inc. and Zambales Rural Bank.

From hence, rural banks may grant a housing loan system with a more adequate and appropriate risk management measure, in which people among rural communities can conveniently access without taking financial risk on their part.