Basic premises: Local Government Unit (LGU) Bonds

An Local government unit(LGU)  bond is an instrument bearing obligation issued by LGUs to finance operating or capital cost and special projects.  LGUs refer to provinces, cities and municipalities that are controlled by the Department of Interior and Local Government.

 LGU bonds are an opportunity to invest money on a revenue generating  project of the "issuer," the local government entity that issued the bond. In exchange, the local government entity promises to pay  a specified amount of interest, usually semiannually, and return of the principal   on a specified maturity date. Ercof is studying LGU bonds as an savings and investment option for OFWs, and which could be configured into a pooled  OFW Fund to develop their own hometown projects.

The Fund starts with the identification of income generating  hometown projects by OFW s, to benefit their barangay, municipal, provincial or regional groups and/or associations.

The projects will be studied thoroughly and presented  for  investment decision  through home town, city, municipality, provincial or regional groups or associations.  

 Participation in the various projects can be through:

• Ownership participation in the equity of the project;

• By lending to the projects or participation in local government bond issues and other financial instruments similar to loans;

• Project joint venture arrangements or corporations; and,

• Special purpose corporations, trust accounts and variants thereof.

The minimum project cost will be P50.0 million pesos to make the concept and managing the investments more efficient. It takes the same effort to develop and implement a project worth P1,000,000 and a project worth P50,000,000.

Individual participation in the projects can be as low as US$100 per OFW but individual participants/investors could  be joined together under one investor block.  

The consolidation of individual investments has major advantages such as:

• Forming investor blocks of a significant size gives  the OFW, influence over the projects, the term and conditions of the investment and the  over-all management of the project.
   

• It facilitates the eventual remittance of money or funds into the country, into the project or for participation in local government bonds issues and other project related financial instruments.

This section contains more detailed information on the workings of the bond, and its potential as an option for OFWs or OFW associations who desire to directly help their hometowns through the financing of urgently needed infrastructure projects which may accelerate local development.  This is work in progress.