Revisiting Pag-Ibig Fund | Inquirer Opinion

Revisiting Pag-Ibig Fund

The Pag-Ibig Fund is 35 years old. There is merit in looking at its beginnings and finding lessons from its experience to be able to push capital formation by the working class today: the evolving middle class from overseas Filipinos.

Overseas Filipino workers (OFWs) have kept the economy afloat and growing. They can sustain the economy’s development by funding, through programs like Pag-Ibig, agroindustrial-based and infrastructure initiatives.


In 1978, Presidential Decree No. 1530 created Home Development Mutual Fund (HDMF). National Home Mortgage and Finance Corp. (NHMFC) already had its own Shelter Savings System patterned after the Cell Savings System of Australia, but sensing a law that carried mandatory contributory savings between employee and employer, we at NHMFC decided to take on the challenge and implement the decree.

Malaysia, Singapore models


We sought local experts on provident funds and looked for fund models here and abroad, like the Employees Provident Fund (EPF) of Malaysia, the Central Provident Fund (CPF) of Singapore and the Bausparkassen of Germany, which was a product of Hitler’s regime.

In our search, we also learned there were other funds in Brazil as well as economic moorings that dated back to the Great Depression in the United States (1929 to 1939) and as recent as the edict of Deng Xiaoping (1978 to 1999) to arbitrarily increase the incomes of people.

Fund’s intent

HDMF, called Pag-Ibig Fund that stands for Pagtutulungan sa Kinabukasan: Ikaw, Bangko, Industriya at Gobyerno, was meant to be a national provident fund or a savings fund for people, emphasizing savings and not housing.

In two months Pag-Ibig Fund was established, with the first month devoted to working closely with the CPF of Singapore and the EPF of Malaysia, copying their systems and even their forms.

We had wanted to tie up the people’s fund with the progress of our nation—for our people to get a just share in our nation’s growth by using their savings as an economic tool to wean them from dependence on social doles.

We had wanted the fund to serve as an economic equalizer, so that returns to capital are matched by a just return to labor, hoping that all sectors—government, employers, labor, academe and the economic sector—will conspire to make this happen. But it was not to be.


Singapore’s Lee Kuan Yew said he did not believe in the efficacy of the trickle-down effect of a growing economy. True, government has an obligation to ensure a healthy return to capital, but it also has the duty to determine a just return to labor.

Franklin Delano Roosevelt

That same thinking was evident in Germany’s Bausparkassen, where government initiated a policy of doubling, tripling or even quadrupling the savings of the people with public funds. In the United States, President Franklin Delano Roosevelt, admitting after his electoral victory that American productivity and economics were strong, declared that labor was not adequately compensated for their contributed gains. This became the linchpin of his strategy to lift America from the Great Depression.

In more contemporary history was the edict of Deng Xiaoping, as a prelude to China’s economic miracle, introducing an increase in the incomes of farmers by 100 percent, with a matching increase of 60 percent in industrial workers’ income.

State-sponsored income policies became the hallmark of great economies, be it democratic or totalitarian.

Opposition to fund


The full potential of Pag-Ibig Fund, big as it was, could not be advocated in 1980 as it met with raised eyebrows. The labor sector thought the required employee contribution was oppressive.

The Social Security System (SSS) and the Government Service Insurance System (GSIS) believed it was only duplicating their functions. The employer sector has consistently been against any further contribution to labor. The academic sector decried Pag-Ibig Fund as another exaction by an unjust regime. The financial, monetary and fiscal sectors thought it was none of our business to be dabbling in savings.

With a mandate that was not clear, a political will that was not there and all sectors seemingly against the fund, Pag-Ibig Fund was born.



PD 1530 dated June 11, 1978, created HDMF and in

March 1979, the implementation and administration of the newly created fund were assigned to NHMFC.

The SSS and GSIS did not take kindly to starting a national provident or savings fund as it   may intrude into their main concern—social security.

In a meeting, the then SSS administrator said we were so audacious to even start the fund. He predicted the fund would last no longer than six months. In June 1979, HDMF was implemented under Executive Order No. 538. That was 35 years ago.

With a meager budget made available to the Shelter Savings Group (SSG) of NHMFC, it was decided to study Singapore’s CPF as a model.

Marilou Adea, vice president for SSG, accompanied by Norma Salud and Emily Abinoja formed the team to study the CPF of Singapore. Singapore’s CPF, together with the city-state’s Housing Development Board, shared much with the SSG team.

The SSG was supported by Actuaries Enrique Zalamea and Leo Tan; Advertising Agency J. Romero & Associates that coined the acronym Pag-Ibig Fund, designed the logo and the communication strategy; Kapisanan ng mga Broadkasters ng Pilipinas, for spreading   HDMF’s message nationwide; the Technology Resource Center, for the initial use of its computer facilities; and most importantly, the Development Bank of the Philippines that provided the initial mortgage lending facilities for members.

HDMF, being launched under martial law, met resistance from the general public. The dissent manifested in employee-employer forums around the country. NHMFC formed a speakers’ bureau to counter the strong

anti-Pag-Ibig Fund movement. A pleasant surprise was the almost solitary advocacy by Dr. Bernardo M. Villegas of Center for Research and Communication to give HDMF, Pag-Ibig Fund, a fighting chance.

Beyond savings

On a long-term perspective, HDMF is more than a savings and housing loan system. It is a total workers’ fund—a cooperative, self-reliant strategy that stresses the dignity of labor. Pooled savings are part of the capital formation system that a country needs. HDMF has provided a long-term anti-inflationary fund, a capital formation scheme that can contribute to economic development.

Both Singapore’s CPF and Malaysia’s EPF have become major sources of public finance, providing a sizeable percentage of the domestic financing requirement for national development programs, like mass transit systems, infrastructure and housing.

On Dec. 14, 1980, PD 1752 was promulgated. HDMF was part of the team that helped the Cabinet, which had legislative powers then, headed by the late Minister Vicente Paterno, craft this decree with two distinct features:

  • Mandatory coverage at 1-3 percent of contributions of no more than P3,000 per month salary base
  • Establishing HDMF as a mutual fund owned by its members, with government merely as the trustee and guarantor of the fund



By 1985, HDMF had P5.4 billion in members’ savings; P6.3 billion worth of housing loans availed by 85,169 members; P472.8 million in provident loans for 550,274 members; P65.4 million in provident benefits paid to 50,627 members; and a total membership base of 2,098,977 (private and government employees).

In 1986, Florencio B. Orendain, then chief executive officer of Pag-Ibig Fund, said in his parting letter to the members:

“Pag-Ibig Fund is a long-term savings system established to provide for the future of the members and their beneficiaries. It is a national provident system owned by the workers—a purely private fund with the government serving as both trustee and guarantor.

“Pag-Ibig is anchored on the pooling of small amounts of money intended to generate long-term funds which can effectively answer the financing requirements of specific sectoral needs, such as housing.

“True to its commitment to be ‘of the workers’ and ‘for the workers,’ Pag-Ibig Fund serves as a vehicle for the expression of the will of its members—a voice that can be strong and vigilant to influence policy directions of government on labor relations, income and wage policies.

“As we leave the fund that we have managed to the best of our capabilities, Pag-Ibig’s commitment to serve you—its members shall live on. After all, you are the fund’s owners and masters.

“The fund exists to serve you. Its future should be decided by you.”

Model for people’s fund

Based on an internal report of Pag-Ibig Fund, total assets stood at P367 billion as of Oct. 31. Its membership has reached more than   14 million. Housing loans number over 900,000, or some 6.5 percent of members using the fund. It has the capacity to lend P10 billion a year for new housing loans, roughly 10,000 units.

Members earn yields on contributions at premium rates over comparable savings instruments.

What if Pag-Ibig Fund could be a different kind of fund? It could become a financial tool that enables people to invest in mass rapid transit systems, in seaports and airports, in roads and bridges, in power generation, in agriculture, industry and commerce, and in education and healthcare.


Without detracting from the growth of Pag-Ibig as a housing fund, it makes sense to review what such a fund could be, if indeed it gets into the mainstream of economic planning and financial strategizing.

Pag-Ibig Fund should be proud of what it has done to the Philippine housing sector, but it should be prouder if what it can do to housing, it can do to other bigger sectors—a dream come true, with people always being part of a growing economy, with inclusive growth not left to chance or to market forces alone. The past 35 years have proven that Pag-Ibig has what it takes to become an even bigger fund.

(Florencio B. Orendain is the founding CEO and Marilou O. Adea, the second CEO of Pag-Ibig Fund.)

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