Housing is one of the biggest problems of Philippine society,
and Negros Occidental is not an exception. A lack of monetary
resources for initiating a low cost housing program confronted
the municipal government of Victorias, Negros Occidental.
To answer its fiscal needs, Victorias floated bonds
for a housing project in the country, the first municipality
in the country to do so. An instrument of indebtedness sold
as IOUs to investors, a bond is an effective way of sourcing
finances because its interest rate was lower than the bank’s.
For the municipality of Victorias, it took 18 months to
float the bonds in July 1994.
The floatation of the municipal bond was enthusiastically
received by the private sector. Investors were encouraged
to use idle funds and to present alternatives in mobilizing
resources to finance the local government’s housing
projects.
The P8 million target was raised as soon as the bonds
were floated. Even after this amount was met, many investors
were still looking for the availability of the bonds. The
bonds were seen as worthwhile investments, because they
were insured by the Home Insurance and Guaranty Corporation,
which also acted as the financial adviser of Victorias.
Other players included the provincial government, which
provided the project equity of P5 million; the Negros Economic
Development Foundation, which acted as developer; and the
Philippine National Bank, which acted as the trustee bank.
The first and second phase of the housing construction
were completed and occupied by the beneficiaries. In light
of this success, Victorias is planning to float bonds for
the construction of its public market.
