MANILA, Philippines – Financial institutions should introduce more retail investment products to catch migrating funds from special deposit accounts (SDA), the country’s chief economic planner said.
Socioeconomic Planning Secretary Arsenio M. Balisacan said money parked in SDAs, estimated to amount to over P1.8 trillion, should be enticed to more productive investments similar to retail Treasury bills (RTBs).
Balisacan likewise said that migrating investments in SDAs should be invested in agriculture, tourism and manufacturing activities to address poverty, employment and productivity.
“What we want to put in place are instruments that are attractive for small savers, such as retail Treasury bills (RTBs),” he said on the sidelines of a Management Association of the Philippines (MAP) meeting yesterday.
Balisacan, who is also director general of the National Economic and Development Authority (NEDA), said government wants banks and non-bank financial institutions to introduce retail products such as mutual funds.
“We are getting all the actors to introduce market products that are retail in nature,” he added.
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The Bangko Sentral ng Pilipinas (BSP) has reduced the interest rate on SDAs from 3.5 percent to just three percent, in what is deemed as a slow process of re-injecting liquidity in the system.
The regulator wants banks to re-lend money for productive activities.
For economic activities, NEDA wants the money invested in the agriculture, tourism, manufacturing, and the services sectors. These sectors can generate larger employment activities and further stimulate inclusive growth.
Meanwhile, introducing or re-introducing retail investment products can increase earning opportunities for the less affluent segments of society.
The minimum initial investment amount to RTBs are P5,000. The more popular time deposits accept minimum investments of over P10,000.
However, mutual funds and unit investment trust funds (UITFs) have the potential to earn more than RTBs and time deposits.
UITFs are managed by trust offers of banks, mutual funds are managed by non-bank fund managers.
There are UITFs and mutual funds that accept a minimum initial investment amount of P5,000 on the average. But there are some funds, which drop as low as P2,000 minimum initial investment amount.
RTBs are fixed income products that offer lower interest earnings rate within a fixed period.
The various types of UITFs and mutual funds allow small investors greater flexibility of investment choices with less risk exposure as funds are pooled in nature.