For over seven decades, Development Bank of the Philippines (DBP) has been the Philippines premier development financing institution, supporting inclusive growth and development in the country. As a development financial institution, DBP is ready to help address both the immediate and long-term needs of the economy. Global Banking & Finance Review spoke to DBP President and Chief Executive Officer Emmanuel G. Herbosa to find out what the bank is doing now to help the Philippines cope with pandemic and their plans for the future.

1. What is the mandate of the Development Bank of the Philippines?

“DBP is wholly-owned by the Republic of the Philippines and is classified as a development bank. Its primary objective is to provide medium and long-term credit facilities for the growth and expansion of the agricultural, industrial, and public utility sectors. Alongside its deposit-taking activities, the Bank fulfills its mandate in part through on-lending Official Development Assistance (ODA) funds provided by international development agencies, and by providing commercial loans to corporations and micro, small, and medium enterprises (MSMEs).

DBP has proven effective in managing public funds and channeling those funds into productive loans to four priority sectors – infrastructure and logistics, MSMEs, social services, and the environment. The Bank is particularly strong in providing term loan facilities to finance projects that help spur economic growth and contribute to national development. The Bank builds strategic partnerships with industry and businesses, financial institutions, local government units, national government agencies, and non-government organizations to fulfill its development mandate to be a catalyst for nation-building.

With more than seven decades of committed advocacy as the country’s premier development financing institution, DBP has further sharpened its development focus to be the Philippines’ Infrastructure Bank. With this enhanced mandate, DBP more aggressively supports infrastructure development towards inclusive growth and a more balanced regional development for the country.”

2. What does the “Best Corporate Bank Philippines 2020” award mean to DBP?

“It’s a very welcome affirmation of the standards that we have set for ourselves as development bankers, especially during this time of a global health emergency.

In terms of deposit performance during the first semester of 2020, DBP was the fastest growing bank (in growth rates and in absolute amount of increase) among its peers. This was due to our working hard in the present pandemic environment to service our clients’ deposit and loan requirements. Ninety percent of DBP branches remained open during the imposition of community quarantines to continue our service delivery to the transacting public. We did not just keep our branches open, our account officers remained engaged with their clients in servicing their banking transactions.

Through end-June, total deposits of DBP grew 37% year-on-year to reach US$13-Billion (PHP637-Billion) led by a 52% year-on-year increase in Term Deposits and a 20% growth in CASA. Deposits of our national accounts comprising of government-owned-and-controlled corporations (GOCCs) and large financial institutions (FIs), serviced by our team of Relationship Officers, increased by at least US$1-Billion (PHP50-Billion) from end 2019 to July 2020 and even more creditable is the 98% year-on-year growth in our private deposits that was achieved.

We are proud of the work we have done for these GOCCs and FIs amidst the pandemic as we provided to them the full range of banking services particularly for their deposits and transactions.

Of particular significance is the work we have done for the state pension fund for private employees, the Social Security System, which the Bank has assisted towards making their financial operations more efficient, such as their cash management from the physical deposit pick-up collection from their branches nationwide to their liquidity requirements in assisting the maturity profile and rates of return on their deposits to assisting them in their disbursements that they used to do via issuing of physical checks and deposit to their Members’ accounts. We have transformed this electronically via our PESONet channel; they just send us the instructions and we electronically disburse their Pensions, Loans and other Member Benefits (e.g., maternity and other medical needs) to their Members’ bank accounts or through our Fintech partners (e.g., Paymaya) and other cash disbursement outlets. We have performed these services as well for our other Corporate clients.”

3. What role is DBP expected to play to help the Philippines cope with, or bounce back, from the pandemic?

“DBP is poised to play a more catalytic role in the socio-economic recovery efforts for the Philippines. As a development financial institution, DBP is ready to help address both the immediate and long-term needs of the economy. We will continue to act with urgency in terms of investments focused on helping critical sectors of the economy in view of the negative impact of the pandemic on businesses, employment, and livelihood. Needless to say, it is important for DBP to provide additional financing to said sectors, be it working capital and loans to stay afloat during the pandemic.

In sustaining its development lending mandate, DBP will continue to expand and enhance its credit programs to further ease access to funds and promote an environment ripe for development intervention in hard-to-reach segments and areas.

Further stepping up to the challenge, DBP will continue to work closely with other government agencies, and the private sector, to meet the demands resulting from the pandemic. The goal is to find ways to boost the economy for a systemic impact on target sectors. This may involve reviving the capital market, keeping businesses solvent and operational, financing innovations to solve crisis-related problems, and even enabling the distribution of financial aid to the most vulnerable sectors of the economy.”

4. What has DBP accomplished to help the Philippines meet the challenges arising from this pandemic?     

“DBP continues to support the National Government in the fight against the pandemic in the country, ensuring the availability and accessibility of financial services nationwide particularly for adversely hit industries like construction, manufacturing, health care/ hospitals, education, transport and storage, among others.

To assist these businesses, the Bank granted payment moratorium of up to six months under its Rehabilitation Support Program on Severe Events or DBP RESPONSE. The moratorium is the Bank’s response to the National Government’s call to financial institutions for temporary credit relief to the pandemic businesses as mandated by Republic Act 11469 or the Bayanihan to Heal as One Act or Bayanihan I.

Under the Bank’s DBP RESPONSE Program, loan payment moratorium was extended to 726 borrower-accounts with outstanding principal balance (OPB) of US$2.80-Billion  (PHP134.94-Billion) or deferred amount of US$436.51-Million (PHP21.04-Billion) combined principal and interest. Also under the DBP RESPONSE, 19 borrowers were granted loan approval for new projects in the cumulative amount of US$86-Million (PHP4.147-Billion) while six borrowers were granted loan restructuring amounting to US$3.5-Million (PHP169.79-Million). We are also implementing a continued moratorium on the repayment of salary loans involving 52,490 government employees.

The Bank has also continued processing and approving applications for loans.  As of September 2020, we have processed loan releases for 1,025 enterprises, excluding 965 rollovers, in the amount of US$3.03-Billion, excluding US$7.24-Billion rollovers. While we have continued the processing of loan releases for supported industries and enterprises, we have continued as well as the processing of remittances and other financial transactions to ensure the continuous flow of goods in the country.

Further during the pandemic, DBP was also involved in the release of cash aid. The Bank assisted in the disbursement of cash assistance under the Philippine Department of Agriculture’s Rice Farmers Financial Assistance program where PHP1.48-Billion (US$21.7-Million) subsidies were distributed by the Bank through its cash pay-out partners, M Lhuillier and PayMaya, to 297,000 farmers. The Bank also facilitated the release of social amelioration funds under the Small Business Wage Subsidy program, where PHP50-Billion (US$1.03-Billion) was distributed by the Social Security System to 3.4 million employees of MSMEs who were left unemployed during the successive community quarantines, through DBP to their bank accounts and again through its cash pay-out partners.

DBP likewise encouraged investments in the National Government’s “Progreso Bonds” or the Retail Treasury Bonds Tranche 24, a five-year government-issued debt security to augment government funds for projects related to pandemic response.”

5. Last year, you issued DBP ASEAN Sustainability Bonds. Can you tell us a little more about this issuance?

“As a development financing institution, DBP has always been at the forefront of sustainable development and environmental protection.  The DBP Sustainability bonds issuance last year affirmed our commitment to continue supporting initiatives that have an impact not only on communities but also on our environment.

We successfully raised PHP18.125-Billion or roughly US$362.5-Million from that initial tranche of our programmed PHP50-Billion or US$1.0-Billion Bond Programme. The initial tranche was aimed at financing environmental and social projects eligible under our Sustainability Finance Framework. Proceeds from the bonds have been exclusively used to fund projects that contribute to economic inclusion; environmental objectives such as climate change mitigation and adaptation, natural resource conservation, and pollution control and prevention; as well as projects that directly address or mitigate a specific social issues. In particular, 83% of the proceeds were allocated to fifteen projects in sustainable and renewable energy under the Bank’s FUSED Program, while the rest was roughly split between projects for water supply and health care under DBP’s WATER and SHIELD Programs. That bond issuance did not only provide for a sound investment but also provided an opportunity for direct investing in nation building.”

6. We understand that DBP will be undertaking its second issuance of DBP Bonds. Why are you issuing these bonds now?

“Even before the onset of the pandemic, the Bank already planned to raise additional funds from our Bond Programme to augment our funding requirements as the Bank pushes to lend more to our priority sectors. Now with the current crisis, there is an even greater call for DBP to increase our funding base to be ready to provide much needed financing to those affected by the pandemic and for recovery efforts especially for those hit by recent natural calamities. We also believe our Bonds can be considered a safe-haven for those looking to invest during these uncertain times.

The net proceeds of the second issuance of DBP Sustainability Bonds will be used and/or allocated by the Bank to finance and/or refinance DBP’s loans to customers or its own operating activities including those in Eligible Green and Social Categories as defined in DBP’s Sustainable Financing Framework: (a) Eligible Green Categories –(i) Renewable energy, (ii) Green buildings, (iii) Clean transportation, (iv) Energy efficiency, (v) Pollution prevention and control, (vi) Sustainable water management, (vii) Eco-efficient and/or circular economy adapted products, production technologies and processes and (viii) Terrestrial and aquatic biodiversity conservation; (ix) Climate change adaptation and (b) Eligible Social Categories –(i) Affordable basic infrastructure, (ii) Access to essential services, (iii) Employment generation, (iv) Affordable housing, and (v) Socioeconomic advancement and empowerment and (vi) Food Security.

Proceeds of the fund-raising activity will further enable us to support and spearhead projects in line with the sustainability development goals and allow us to reach a wider network of stakeholders especially in the countryside. It will also take DBP “one step closer” to its target of becoming a PHP1-Trillion (US$20.8-Billion) bank by 2022.”

7. What can we look forward to from DBP in the coming years?

“Looking ahead, DBP‘s post-pandemic interventions will be carried out through programs supportive of recovery and expansion as well as new investments to stimulate economic activity. These programs will continue to channel growth in the four priority thrusts of DBP, which are infrastructure and logistics, environment, social services, and micro, small and medium enterprises.

The policy and regulatory framework for the Philippines’ recovery is in place. A national recovery and rehabilitation strategy has already been signed into law by the National Government to address and provide for the funding needs of distressed economic sectors.

This pandemic has given us at DBP a new perspective on how our development work can still be done, and done well, despite the challenges. We stand always ready with our programs of assistance and initiatives to support the requirements of the different sectors — in consonance with the thrusts of the National Government — from boosting their readiness to pursue growth and competitiveness opportunities to reinforcing their resilience as they embark to restart, rebuild and recover from this pandemic.”