Monday, April 16, 2007

Worked Example showing what's possible.

Worked Example

Showing what could be achieved using certain Rural Bank Products in the Philippines
NB: This is for illustrative purposes only, it is not suggested it is followed, without taking independent financial advice.

Suggest having a 'balanced investment Portfolio' and perhaps never invest more than you can afford to lose?

See Spreadsheet for detail.

Here we see how a Family (couple with 2 children), could invest up to Php2M, in just one Rural Bank, and stay within the PDIC insured Deposit limits (Php250K per depositor):-

Rural Bank 1

This shows the 6 Year 'Hybrid' CTD/SSD product, which not only gives 20%pa Rate, with Interest credited Monthly (Tax Free), but offers 20% Advance Interest (from months 61-72). This effectively lowers the cash investment required by 25%, but does mean no Interest in the 6th Year. However in the unlikely event of the Bank getting closed by the Philippine Monetary Board, and handed over to the PDIC for liquidation, all Interest received to that time is retained. Any future interest will be lost whilst the claim is processed by the PDIC, and ones Deposit returned.

This could be repeated at a 2nd Rural Bank if required?

This example shows potential additional Deposits at another Rural Bank, but this time using the
5 Year Time Deposit (CTD/SSD) product.

Rural Bank 3

This could be repeated at a 4th Rural Bank if required?

SUMMARY (if options for additional Rural Banks taken up for consideration):-
Investment (consideration)............... Php7,200,000
DEPOSIT Total (Returned after 5 Years)..... Php4,000,000
Total (Returned after 6 Years)..... Php4,000,000
Interest Received (per month) ...............................................Php133,333

Depending on your Finances, circumstances, and Investment Portfolio diversity, if having additional funds for Rural Bank Time Deposit consideration, one could consider an additional Rural Bank, but utilising it’s monthly Interest re-invested to a 6th Rural Bank, perhaps?

Additional Deposit consideration, providing re-investment to help protect Capital against Inflation:-

You will note here, only half the possible Deposits have been placed. One could double ones Investment in this Rural Bank, if funds and investment plans permit, potentially, and still remain within PDIC insured Deposit limits?

Using just the Deposits shown above in this illustration however, produces additional income of Php16,666.67 a month. If this is kept in a Savings Account, after 6 months it will be at least Php100K. This is typically the minimum Deposit for a 5 Year Time Deposit.

3 Year Time Deposits may also be available (also paying 20%pa potentially, but one has to be aware such 20% Rates might not be available at the end of the 3 Year Term?).

Rural Bank 6

The revised totals would thus become:-

CASH Investment (consideration)....................Php8,000,000
Total (Returned after 5 Years)..........Php4,000,000
DEPOSIT Total (Returned after 6 Years)..........Php5,000,000
DEPOSIT Total (Returned by end of Year 10)...Php1,000,000
CAPITAL TOTALPhp10,000,000
TOTAL Interest Received pm (after Year 5) = ...........................Php166,667

This is just an illustration of what a Family (couple with 2 children), could consider as an Investment, into 5 Year CTD & 6 Year 'Hybrid' Time Deposits of certain Rural Banks in the Philippines.
Anyone considering such, should conduct their own research to make sure the products, rates, minimum deposits, and PDIC insurance Deposit limits are met.

Decide if the Reward v Risk is acceptable - seek Independent Financial Advice, if required.

This illustration can be scaled down, but the PDIC insured limits have been met with this example in Rural Banks 1, 2, 3, 4.

Rural Bank 5 investments could be increased with another 4 x Deposits of Php200K, which utilising the 'Hybrid' Advance 20% Interest, increases Total Deposit by additional Php1M.
This is turn can be re-invested in Rural Bank 6, which still has scope for additional Php1M Deposit through careful selection of deposit amount and depositor to stay within PDIC limit of Php250K per Depositor (Single Account) + Php250K limit shared (Joint Account) Depositors total.


boostah said...

Looks like your blogging from experience, you make something so complacated very simple and easy to understand. Thanks again for sharing all your info.

Brit in Cebu said...

If anyone does not believe a Family of Four can have 8 x Php250K Deposits, fully covered by PDIC, then I suggest you contact the


Trunkline (02) 841-4000 loc 4631-4632
DAB Direct/FAX (02) 841-4637
E-mail :

You call also write or visit us at:

Depositors Assistance Bureau
6/F SSS Bldg.,.
Ayala Ave.,
Makati City

Hearing the answer from them will convince you far better than me?