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Guidelines and FAQs on SEDPI Joint Ventures

What are social enterprises?

SEDPI is a group of Social Enterprises who provides capacity building and financing to organizations, cooperatives, and microenterprises. SEDPI aims to become a pioneer in mobilizing social investments for microfinance institutions and social enterprises that economically empower the poor through financial education. Our social investments are specifically for social investors who would like to build and preserve their capital with modest returns and at the same time wants positive social impact. SEDPI particularly invests in social enterprises that follow the principles of socially responsible investment.

 

The principles of Socially Responsible Investment (SRI) are the following:

  • Must not cause environmental degradation
  • Must have positive social impact; must help uplift lives of marginalized sectors
  • Must have transparent and accountable governance
  • Must have financial returns that create value (not just financial value but also cultural values like preservation of heritage)

According to Economic Cooperation and Development, social enterprises are organizations that take different legal forms which are organized in an entrepreneurial spirit and which pursue environmental and economic goals. These are businesses that are not only built for profit but also help marginalized sectors such as the poor, LGBTQ, persons with disability, farmers, fisherfolks. At the same time, these businesses help preserve the environment and has positive financial returns.

The focus of social entrepreneurship is to solve social problems. Traditional businesses only look at profitability to satisfy market needs. On the other hand, social enterprises satisfy market needs while at the same time achieving a social agenda which is usually to uplift the livelihood of the poor and to protect the environment. Social enterprise always starts with a social problem that it wants to solve. Then, it applies entrepreneurial principles such as organizing, management, leading, planning, organizing, and marketing to manage social ventures that will implement social change. In other words, we are using business as a tool to achieve social change.

The objectives involve social, cultural, and environmental goals. We have a triple bottom line — people, planet, and profit. We aim to improve the quality of life of every human being. We also aim to achieve sustainability which means our gains will not only benefit the present but also the future generations.

The end goal of socially responsible investment is better management of risks to ensure sustainable long term returns.

When we talk about investments, we always have to start with a purpose. We must not  invest without a purpose in mind. We also must not invest just for the purpose of earning money. Let’s remember that money is only a tool in attaining what we want in life. We must think seriously first about what really is the purpose of our investment and then match that purpose with our goals. In SEDPI, we focus on the agricultural sector and renewable energy. We support social enterprises that are in the start-up to growth stages. We follow a social performance management system and we invest PhP 250,000 to PhP 25,000,000 to the selected organizations.

What is a joint venture?

Our mode of engagement for investments is through joint venture. Joint Venture is a business arrangement where two or more persons or organizations contribute money, property, or industry to a common fund. The collected money, along with our expertise, will be used to operate or participate in a business activity where we will share profits, risks, and losses. It is important to remember that in this scheme, we practice profit-sharing and risk-sharing. In other words, when we earn, we will share our earnings, but when we incur losses, all of us will also incur losses.

Our joint venture need not be registered with the Securities and Exchange Commissions (SEC) since the articles of incorporation of SEDPI is already registered with SEC. SEDPI’s registration allows us to enter in joint ventures which can exist for the term stated in the joint venture agreement. The joint venture will only cease when we agree that the partnership has already ended or when we have already achieved our goals for the joint venture. There’s no limitation in terms of the number of co-venturers except for foreign equity restrictions. Even the government can be a part of our joint venture.

How does the joint ventures of SEDPI work?

On cooperative investments:

SEDPI invests in cooperatives which are autonomous and registered, meaning, they are voluntarily formed and registered under the Cooperative Development Authority (CDA). These cooperatives have legal personality and their members have a common interest or purpose. They joined together to achieve social, economic, and cultural objectives.

Our formula in investing in cooperatives is simple: the investment must be predictable and consistent.

For a quick test to know if a cooperative is worthy of investment, the cooperative must satisfy the following conditions:

  • The cooperative must be in existence for at least ten (10) years.
  • The cooperative must have its own headquarters or office.
  • The cooperative must have at least 80 COOP-PESOS score. COOP-PESO is a scoring system for cooperatives made by the CDA. We in SEDPI do this scoring for cooperatives independently to see if the cooperatives we invest in are worthy of our investment.

If you are interested to know the different cooperatives that SEDPI promotes, you can go to Vince Rapusira messenger and type TOP COOP. You will receive instructions on how you will be able to access these cooperatives.

The financing company of SEDPI provides capital to organizations, cooperatives and microfinance institutions. This is done thru  joint ventures. For instance, a cooperative executes a joint venture contract with SEDPI. SEDPI will provide capital to the cooperative.  The cooperative will in turn provide loans to microenterprises who are usually small farmers and fisherfolks. When these loans get paid, the cooperative will repay SEDPI.

You can invest to these cooperatives thru SEDPI.

How does this work?

There are two (2) types of joint ventures. Cooperative investing through SEDPI cooperative joint ventures can be done thru (1) coop share capital and (2) coop working capital.

For the share capital, the investment can be done thru Sir Vince. This is because only an individual can be a capital shareholder of a cooperative. As a member of the cooperative, Sir Vince can buy share capital from the cooperative. A trust agreement will be executed between Sir Vince and SEDPI as a proof that Sir Vince invests in the cooperative with the money of SEDPI. After this, SEDPI now executes a joint venture agreement with the social investors.

For the coop share capital joint venture, the minimum contribution is PhP 10,000 and the maximun is PhP 500,000. SEDPI accepts contribution in multiples of PhP 10,000. There is no entry fee. The term is one year and payout is done annually. The payout is non-compounding. There is 3% exit fee if rendered before two years. If redeemed before two years, the payout will go to the virtual wallet and there will be no earnings when the payout already went to the wallet. The payout rate is variable. It ranges from 4% to 10% per annum with a 70 to 80% profit.

Another option is the coop working capital joint venture. The minimum contribution is also PhP 10,000 and the maximum is also PhP 500,000 per organization. There is also no entry fee. For the working capital joint venture,SEDPI only charges 3% service charge to the cooperative instead of interest. The service charge is where the income of social investors come from. For this joint venture, payout is done quarterly. This means that every quarter (every 3 months), you will receive a payout. The payout is also non-compounding since SEDPI wants the investors to actively participate. There is also 3% exit fee if rendered before two years. If redeemed before two years, the payout will also go to the virtual wallet and there will be no earnings when the payout already went to the wallet. The payout rate for this is fixed at 7% per annum. In this, SEDPI can directly execute the joint venture with the cooperative, no need for Sir Vince to act as capital shareholder.

The schedule of quarterly payments are March 31, June 30, September 30, and December 31. The posting date is 15 days after the payout. For instance, for March 31, the posting date is April 15. We usually send an e-mail blast on the posting date informing the investors that a payout is already made.

For the annual payouts, the cutoff is December 31 but the posting date is April 30  because it take some time before the audited financial statements of organizations come out. Only by then we will know how much the payout will be in terms of  dividends.

To summarize, SEDPI provides capital to cooperatives and cooperatives repay this capital to SEDPI. The cooperative will in turn provide loans to microenterprises who are usually microenterprises, small farmers and fisherfolks. As social investors, you can enter this system by executing a joint venture with SEDPI Social Enterprise Ventures. After that, the financing company thru SEDPI Social Enterprise Ventures will give you a proof of your social investment which is preferred share. From there, there will be profit and risk sharing between SEDPI Social Enterprise Ventures and social investors.

The organizations we can have a joint venture with are: SEDPI, BCS – Bansalan Cooperative Society, NICO – Nabunturan Integrated Cooperative, NSCC, PCCC, PMPC, SHSC, TC which is Tagum Coop, and then USPD Share Capital since USPD also has WC or working capital. If you are interested in these coop joint ventures, you can type COOP INVEST in Vince Rapisura facebook messenger to get more information. You will go thru the process instructed in the messenger then you will have to send an informed deposit still to the Vince Rapisura facebook messenger for us to know your joint venture contribution.

On social enterprise investments: Organic Options, Inc.

One of the organizations SEDPI invests in is the Organic Options Inc. (OOI). It is an organization that consolidates organic vegetables and sells it to supermarkets. It is now selling its products to around 70 stores and supermarkets in Metro Manila, South Luzon, and Pampanga. These include today’s biggest supermarkets such as SM Hypermarket, Shopwise Stores, Walter Mart, Robinsons, All Day, and Landers. What is unique about this organization is their products are 100% organic. At present, they are already in partnership with about 200 to 300 farmers in Luzon. The farmers benefit from OOI since the organization buys their produce at a higher price. Partner farmers of OOI currently earn about 12,000 to 18,000 per month. If you want to buy products of OOI, you have to look for brands such as Melendres (in Robinsons), Healthy You (in Mercado), and Vegie King (in Gaisano). Currently, OOI has sales of about 53 million.

When SEDPI and OOI entered into a financing agreement, the financing went to OOI’s working capital specifically the buildings they use. OOI is also currently building a bigger  warehouse facility to address the problem of inadequate storage which causes inefficiency and wastage. With a bigger and better facility, OOI will also be able to pack their vegetables better resulting to higher quality of products. They also plan to purchase more and bigger vehicles so they can pick up more vegetables from farmers and deliver it to more supermarkets.

OOI integrate farmers in their system to give them access to markets and also provide them trainings on organic farming. The organization has sister companies such as Earth Man who will visit the farmer’s farm to assess what type of crop must be planted and to know what will be the farmer’s production output for OOI. OOI also uses drip irrigation for their organic farming.

At present, OOI really needs to upgrade its storage facility. They are having a problem on storage which results to wastage. In the Philippines, 30-40% of farmers’ harvest go to waste because of the lack of adequate storage facility.

If you are interested to assist OOI, just type OOI in Vince Rapisura facebook messenger and you will receive information on how you an support Organic Options.

How can you support Organic Options through SEDPI Social Investments?

SEDPI provides capital to Organic Options Inc. (OOI) which OOI will repay. OOI also passes this capital to micro and small enterprises, in this case farmers, and the farmers will repay this capital to OOI in the form of organic vegetable products. OOI will then sell these products to supermarkets. The income from selling vegetables will be OOI’s source of repayment to SEDPI. In this system, we are able to support farmers through OOI. The OOI have a memorandum of agreement with farmers which says that the farmers’ produce will be forwarded to OOI as a repayment for the capital given to them by OOI, which they used for farming. To be able to do this, SEDPI and OOI formed a joint venture. Aside from the capital it gives, SEDPI assists OOI in terms of planning, financial projections, and market linkages.

Social investors can enter into a joint venture with another SEDPI entity which is SEDPI Social Enterprise Ventures. The common fund that will be collected from social investors will be invested as social investment to the financing company and the financing company of SEDPI will then form a joint venture with Organic Options. Then, as discussed earlier, OOI will now enter into a MOA with farmers and OOI will the farmers the capital for their farming. Farmers will then forward their produce to OOI as a form of repayment. This is how the capital moves from joint venture contribution to the financing company, to OOI, to the farmers. After that, the financing company thru SEDPI Social Enterprise Ventures will give you a proof of your social investment which is a preferred share. From there, there will be profit and risk sharing between SEDPI Social Enterprise Ventures and social investors.

For the share capital joint venture, the minimum contribution is PhP 10,000 and the maximun is PhP 500,000. SEDPI accepts contribution in multiples of PhP 10,000. There is no entry fee. The term is one year and payout is done annually. The payout is non compounding. There is 3% exit fee if rendered before two years. If redeemed before two years, the payout will go to the virtual wallet and there will be no earnings when the payout already went to the wallet. The payout rate is variable. It ranges from 4% to 10% per annum with a 70 to 80% profit.

Another option is the working capital joint ventures. In this, the minimum contribution is also PhP 10,000 and the maximum is also PhP 500,000 per organization. There is also no entry fee. The term is one year but the payout is done quarterly. This means that every quarter (every 3 months), you will receive a payout. The payout is non compounding. There is also 3% exit fee if rendered before two years. If redeemed before two years, the payout will also go to the virtual wallet and there will be no earnings when the payout already went to the wallet. The payout rate for this is fixed at 7% per annum. But for OOI, the payout rate is 10% per annum.

For the working capital joint venture, you have different options: ASKI, Nueva Segovia Consortium Cooperatives, Pantukan, USPD, PALC, Organic Options, Solar Solutions, Roots Collective, and Costales Farms. The schedule of quarterly payments are March 31, June 30, September 30, and December 31. The posting date is 15 days after the payout. For instance, for March 31, the posting date is April 15. We usually send an e-mail blast on the posting date informing the investors that a payout is already made.

For the annual payouts, the cutoff is December 31 but the posting date is April 30  because it take some time before the audited financial statements of organizations come out. Only by then we will know how much the payout will be in terms of  dividends.

If you are interested in these socially responsible investments (SRI), you can type SRI Options in Vince Rapisura facebook messenger to get more information.

On real estate investments:

SEDPI will be opening up a rental property joint venture. At present, SEDPI has a four storey building which has 14 units. Based on the appraisals done, the property currently has a value of PhP 16.5 Million. Half of this value (PhP 8.25 Million) will be opened up for joint venture contribution. So if you want to participate, you will be a co-owner of the property.

How will this investment look like?

Each unit costs PhP 100,000 for joint venture contribution. For example, we now have 8.2Million so that will make about 82 units of joint venture contribution.The minimum contribution PhP is 100,000 or 1 unit and the maximum contribution will be PhP 500,000 which is equivalent to 5 units.What happens after? The rental income will be shared by joint venturers based on the contributions. SEDPI will be the general joint venturer and the investors will be the limited joint venturers. SEDPI will be the general joint venturer since it will be the one managing the property and it willl be the one doing the decision making for the property. There will be a 15% property management fee which is a standard in terms of property management. For instance, each unit will be rented for PhP 10,000 each, PhP 1,500 from this will be set aside for management fee. For rental property, 7% of the gross income will automatically go to taxes. The estimated life of the property is 25 years.

Currently, there are 14 units which earn an annual rent of PhP1, 258,400. The property is located in Sampaloc with has high population density. It is near University of Santo Tomas and the Trabajo Market. It is also only 4 blocks away from Espanya Avenue. The occupancy rate is really high with about 95 to 98% occupancy per year.

From the PhP1, 258,400 income, 15% or around PhP 203,000 will go to management fees. Another 7% or PhP 80,824 will go to tax. This leaves us 78% or around PhP1,059,552 net income. This income will be shared among the joint venturers.

For example, you gave a joint venture contribution of PhP 100,000, this will be divided by the property value which is PhP 16.5 Million. Your percentage share from the total profit is 0.606%. This will be multiplied to the PhP 1,059,552.00 and that will give you around PhP 6,240. We will divide this now by your contribution which is PhP 100,000 and it will show you that your rate of return for a year is 6.42%. This rate of return is projected to increase to about 155% in 20 years.

As general joint venturer, SEDPI can buy back the contribution from you if you need it and the price will always be the same with the original price. But if you want to transfer the ownership of your contribution to another person, you are free to add to the original price.

If  you are interested to join this rental property venture, go to Vince Rapisura facebook  messenger and type MARZAN space 1. When you do this, you will be able to get information about the investment opportunity or the joint venture opportunity and SEDPI will also provide you additional materials explaining the agreement, terms and conditions, etc.

 Frequently Asked Questions (FAQs)

What are social investments in a nutshell?

Social investments are specifically for social investors who would like to build and preserve their capital with modest returns and at the same time wants positive social impact. SEDPI particularly invests in social enterprises that follow the principles of socially responsible investment.

The principles of Socially Responsible Investment (SRI) are the following:

  • Must not cause environmental degradation
  • Must have positive social impact; must help uplift lives of marginalized sectors
  • Must have transparent and accountable governance
  • Must have financial returns that create value (not just financial value but also cultural values like preservation of heritage)

 How to start with SEDPI Social Investments?

If you are interested in these socially responsible investments (SRI), you can type SRI Options in Vince Rapisura Facebook messenger to get more information. If you are interested in the coop joint ventures, you can type COOP INVEST in Vince Rapisura facebook messenger to get more information. After this, you will be doing the following steps:

  1. Attend our social investments training-online or classroom discussion.
  2. Create a Financial plan.
  3. Get to know our partner companies. (insert partner companies)
  4. Make an initial deposit/investment.
  5. Advice SEDPI of your deposit.
  6. Wait for the confirmation and digital certificate of shares.What will I be presented with to confirm my investment?

Joint venture certificate

 How and when can I withdraw dividends/investments?

You can withdraw anytime and any amount as many times as you like, but keep in mind that we have a holding period of 2 years to avoid 3% withdrawal charge. Some companies may release payouts every quarter or annual. These dividends would go directly to your SEDPI wallet and can be reinvested or withdrawn. We strongly advise investors to reinvest their dividends especially those that are still within the 2-year holding period to maximize your earnings. Otherwise it will remain in your SEDPI without earning. To make a withdrawal, please log in to your SEDPI account and request a withdrawal.

 How much interest can I earn with investment dividends?

Please see these projected dividends per company.

Are SEDPI social investments:

* a one-time deposit?
SEDPI investments can be a one-time deposit or staggered/scheduled deposit-it all depends on your investment appetite and capacity.

* can be initiated anytime?
Yes, as long as there are available joint ventures that social investors can participate in.

* allows to add fund to existing investment anytime?
Yes, as long as the selected joint venture is not fully funded.

Is the joint venture registered with the SEC?

SEDPI’s joint venture need not be registered with the Securities and Exchange Commissions (SEC) since it is a contractual joint venture. SEDPI’s articles of incorporation registration allows it to enter in joint ventures which can exist for the term stated in the joint venture agreement.

Is SEDPI an option for joint venture?

Yes, SEDPI is an option for joint venture. If you invest in SEDPI, it will be spread out immediately since investments in SEDPI are distributed to different organizations.

Is the investment tax-free?

If it is a cooperative investment and it is a share capital, it is tax-free. But for working capital and other investments, it will depend on your income bracket when you file your income tax returns with the tax authorities. We will give you your whole earnings and you will be the one to pay it.

Is the dividend taxable?

Dividend from cooperative share capital joint ventures are tax-free. But with our other joint ventures that are not cooperatives, there is a 10% withholding tax.

How much is the minimum amount to participate in the joint ventures?

The minimum contribution is PhP10,000 and the maximun is PhP500,000 for working capital and share capital joint ventures. We accept contribution in multiples of PhP10,000 for working capital and share capital joint ventures. The minimum contribution is PhP100,000 and the maximun is PhP500,000 for rental property joint ventures. We accept contribution in multiples of PhP100,000 for rental property joint ventures.

Is there an entry fee?

There is no entry fee.

Can we contribute more than PhP10,000 or PhP100,000 to the joint venture?

You can contribute more than PhP10,000 but it must always be in multiples of PhP10,000 for working capital and share capital joint ventures. You can contribute more than PhP100,000 but it must always be in multiples of PhP100,000 for rental property joint ventures.

Is there a maintaining balance for the virtual SEDPI wallet for joint venture investments?

None. Zero balance is okay.

How often should we contribute to joint venture investments?

There is no prescribed regularity. You can contribute as frequent as you want.

Is there a way we can track our joint venture contributions?

Yes. When you register through our system, you will receive an email that contains your user name and password to access our SEDPI SRI Online. You can use this to login and check your transactions. The website is https://vincerapisura.com/sedpi-socially-responsible-investment/.

Is there a guarantee for the joint ventures?

There are no guarantees provided. The joint venturers share in the risks, losses as well as the profit of the business activity.

Are the cooperatives covered by PDIC?

No. Only banks are covered by PDIC.

FAQs on SEDPI real estate joint venture

How many rental properties are there open for JV? Is it only the one in Sampaloc?

Right now, there are two rental properties – Marzan 1 and Maddela 1. Once Marzan 1 is fully subscribed, we will offer Maddela 1. There’s another rental property being constructed, Marzan 2, also located in Sampaloc. We hope to finish Marzan 2 by March 2020.

Other real estate opportunities in the pipeline are Rosario 1 (complete land purchase); and Veruela 1 and Bislig 1 undergoing completion of land purchase.

The Marzan 1 project location is catering to what type of renters?

Small working class families (3-4 members).

Are there still available units for rental property joint venture? Can I still join?

Out of the PhP8.2 million, only PhP1.5 million is available. We still have slots but we are not sure until when it is vacant. We’re projecting that before September ends, all slots will be filled.

If I am to invest Php 100,000 (the minimum requirement) how am I to transfer the said fund and invest?

The following are the bank accounts of SEDPI:

Account Name: SEDPI Development Finance, Inc.

Account Number: 004690059449

Bank: Banco de Oro Unibank

Address: 768 EDSA, Barangay Pinyahan, Quezon City, Philippines

SWIFT: BNORPHMM

Account name: SEDPI Development Finance Inc.

Account number: 3081115825

Bank: Bank of the Philippine Islands

Address: Katipunan Avenue, Quezon City

SWIFT: BNORPHMM

 Does this have a contract between SEDPI and I as the investor?  Is there a legal contract you give — and investors sign — when a person becomes a JV partner?

You can read the joint venture agreements here: https://vincerapisura.com/joint-venture-agreement/

As for the share in income, I believe this is released quarterly, may I ask how are we to receive the said shares?

These are paid in your SEDPI wallet.  We have an online platform for that. The website is https://vincerapisura.com/sedpi-socially-responsible-investment/.

 If I invest 100k will my profit share always be 0.606%?

Yes, since we will use 16.5M as property value all throughout.

 The % share of one investor (ex. 1.5% for 100K share), when is this being determined? In what cases will it increase or decrease?

It will not increase nor decrease since we will use the base PhP16.5 million value of the property throughout the joint venture term.

 Redemption amount is based on value of property with reference on property appraisal – can you expound on this?

 Will investors get a peek on how the investment is doing on a regular basis?

We will provide annual report on rental collections, property management and repairs/maintenance, if any.

 How much will be the minimum additional investment if I want to increase my investment in the JV rental property? For example, if I invest the initial 100K, can I reinvest the rental income derived from it back to JV rental property? Is the additional investment subject to entry fees?  

The rental property joint venture for Marzan 1 is in multiples of PhP100,000. Theoretically, you may reinvest but you have to add more to reach 100,000. You can also contribute more in the joint venture if the joint venture is not yet full funded. There are no entry fees.

In your projections, are the interest rates increasing? Is this an accurate observation?

The rates are not interest, these are projected returns based on rental revenue and joint venture contribution. Returns increase since the assumption is for rent to increase over time while the total joint venture contribution to the project remain the same. There is also a possibility that rates could decrease if tenants leave or are delayed in the their rental payments.

 What are the possible reasons for loss of profit in your JV scheme?

When all tenants don’t pay, no rental payout. Fire and other calamities – although we have insurance for this, there is a possibility that the insurance claim may not be able to cover all JV contributions.

Since it is said that we share risks as well, aside from the risk of loss (not enough rental income), what are other risks we might face?  Does this also mean that the original investment (Php 100,000.00) might be reduced?

The joint venture contribution is pegged to the value of the property. We anticipate the value of the building to be depleted in 25 years but the value of the land will appreciate and will probably be able to maintain the base value of the property. This could go either way – increase or decrease in value depending on market conditions after 25 years.

Since this is a contractual joint venture and does not have a distinct and separate entity from its owners, should there be a need to enter into loans, will we be liable individually as well or will our liability be only up to our investment?

The liability is limited only to the joint venture contribution.

If say, I decide to terminate after 3 years, will the full amount invested be deposited to my account?

Your contribution will be offered to SEDPI or other social investors. Once determined, the amount will be deposited to your account. Turnaround time usually takes 14 working days. There is no guarantee for redemption although in the past 16 years, SEDPI has never turned down requests for redemption.

Should I decide to exit after 10 years, does this mean that I can get back the initial investment of Php 100,000?

Yes, SEDPI will offer to redeem back the JV contribution. We have first right of refusal.

USEFUL RESOURCES

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How are articles on retirement

  1. 10 Commandments of retirement
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