Tuesday, March 30, 2010

What might be better than Bank Time Deposits

As you might know from reading my Blog, I managed to get enough income from my life Savings, suitably deposited in Banks offering High Interest Rates, here in the Philippines.

My first Deposit was in March 2005, and just Php100,000.00 to 'test; if it worked and did pay the 20%pa tax free (as such 5 Year Savings Plans were/are exempt the 20% Withholding Tax)
. On my return from UK to celebrate my 50th Birthday with Family, and sort out my Private Pensions, I discovered Php1,666.67 had been paid into my Bank Account for the previous 2 months. This encouraged me to increase my Deposits, place Joint Accounts with my wife and step-daughter, and them to place Single accounts in their own names also.

We went on to repeat this, at another 4 banks, so our 'exposure' was quite high, but the risk was relatively low, as such Deposits (up to Php250,000 back then, but Php500,000 wef 1st June 2010) were Insured by the PDIC.

The PDIC had a good track record of announcing Claims Acceptance in 9 x working days or less from handover of a closed Bank, by the Monetary Board.

When the Monetary Board issued Closure Resolutions for 12 Banks in December 2008, it was not until March 2009, that the PDIC took Claims submissions for Deposits >Php100K.

From March 2009 to the end of that Year, the PDIC only managed to process and pay, just 12 of our Claims after 3-4 months then nothing for rest of that year! In 2010 we saw another 29 x Claim payments from the PDIC, but we still have 8 claims outstanding.

Whilst I have placed some funds into GreenBank, earning 6.4% Nett on Quarterly basis, I also took out a loan with them as we needed funds to pay off bills and credit cards. I also needed to risk some on Investments paying higher than 8%pa Gross.

I willl not give any details of such investment that I made, in case anyone construes this to be investment advice, something I am not qualified to give as not a licensed Financial Adviser.

I lost money on the Legacy Consolidated Plans Inc - Pre-Need Pension Plans, and still waiting to see if BP22 Estafa Court Case becomes reality. Considering several Syndicated Estafa Cases have been issued against Celso G De Los Angeles Jr, and he still not in Jail, but rather some luxury Condominium near St. Lukes Hospital, the likelihood of true Justice in the Philippines, seems remote.

Will a new Government bring about change - I hope so , but doubt it?

I am currently earning 4%pm by lending funds to a local Family Business, that imports Sugar and Rice, from Thailand and Malaysia mainly.

A Permit/License is required from the National Food Authority (NFA), to legally import Rice to the Philippines. These are not easy to obtain, but more have been issued by the NFA, Cebu in addition to those by NFA Head Office.

Getting such Permit/License requires contacts and contracts with Rice Traders in Thailand/ Malasia/ Korea, where Rice is available wholesale, much cheaper than in the Philippines.

To ease the Rice Shortage caused by last years Typhoons, and now the drought of El Nido, the Government is allowing Rice Imports to be Duty Free, to make the Rice market price as low as possible, whist this shortage persists.

Considering this Family Business, was only importing 10 Containers per month in October 2009, and now I am told it is up to 40 containers per month, you can see that this companies profits must have increased more than 4 fold (more like 6 fold, if Rice and Sugar prices have increased by 50% in that period also).

I/we are being rewarded in a profit sharing, for helping having made such increase possible with the lending of cash funds to this family business company.

Why would such a business pay 4% per month, when there must be cheaper business loans from Banks?

Good Question, and the simple answer is they wouldn't!

Unless that is such Business Loan would take several months to set up and potential profits being lost in the meantime, especially with the increase in Sugar prices towards the end of 2009 and the start of 2010. Now we have the Rice shortage giving new opportunities for profits from cheaper Rice Imports,. if you have the contacts with the Rice Traders in the likes of Malaysia and Thailand, and can secure such contract to supply. Many are being told they have to wait until 2011. The 'NFA' wont issue a Rice Import License/Permit, if you unable to deliver.

This Family Business has increased their Capitalization with the SEC to Php50M, so is a size-able company, that should be able to secure higher business loans now. I have seen the SEC Certificate, so know it has been issued recently.

Inquire with a Bank like LandBank or GreenBank, about such Business Loans - what are the requirements, how big can the loan be, and how long before such funds can be released?

I am not soliciting investments into this company, so no need to give any more information, on my investments, the 1st of which matures in June, and others July, so full 12 months we would have been receiving 3%pm for. This increased by an additional 1%pm recently, as they desperately wanted funding to pay for the extra containers (meaning additional profits). This is for a minimum of 2 months but only short term - 6 months maximum. It takes 2 months to receive a return on such a 'loan' to this company, since they have to pay out for the Rice and Sugar etc to the Trader, pay for the shipping, the clearance charges, any applicable Customs Duty and Excise Taxes, delivery Costs to the end buyers, and with most 'clients' who buy the imported Rice and Sugar etc, they get 1 months credit terms, so 2 months for this business to make profits, and offer a share of such to those 'lenders' who helped make it possible.

Even if 20% Tax is to be paid, it still better than Bank Time Deposits, although there is Risk factor however.

Those who know I lost money on that 'V8 Motorcycles and Parts Dealer' Scam, of Catherine L. Soronio, will be no doubt wondering if this is any different?

Well it is not anything to do with Catherine L. Soronio, for a start. It is a genuine Family Business that has a reputation to uphold, for it's clients that they do Business with. Any Public announcement of Checks issued by the CEO of this family business, are bouncing, will seriously damage the reputation she has built up based on integrity, honesty and trust.

This is something Soronio never established and seemingly did not care about her reputation. Perhaps she will start caring if/when an Arrest Warrant ever gets issued, by Cebu Courts, for 'Syndicated Estafa', as this is non-bailable offense. We submitted to Cebu Court in May 2009, and still no Court Case has been issued (or lowered to lesser charge).