P42-B credit guarantee opened for MSMEs
By Mayvelin U. Caraballo – November 13, 2020 (The Manila Times)
More than P42 billion in credit guarantee facilities for pandemic-hit small businesses have been made available by state-run Philippine Guarantee Corp. (PhilGuarantee), according to the Department of Finance (DoF).
In a statement on Thursday, the Finance department said that the P42.3 billion in credit guarantees for micro, small and medium enterprises (MSMEs), P3.6 billion is expected to benefit an initial batch of 6,000 borrowers by yearend.
“We are now processing thousands of MSME loan guarantee applications. We expect availments to reach P3.6 billion up to year end with about 6,000 borrowers and about P20 billion towards the end of next year covering about 40,000 MSMEs,” PhilGuarantee President and Chief Executive Officer Alberto Pascual was quoted as saying in a report to Finance Secretary Carlos Dominguez 3rd.
He added that the average loan size under the guarantee program is less than P1 million, with the minimum loan amount set at P100,000 and availed of mostly by micro enterprises borrowing from rural banks.
Under the guarantee program, the maximum term for working capital loans is one to five years with a 50-percent guarantee, and up to seven years for term loans with the guarantee covering up to 80 percent of the loan amount.
Pascual explained that PhilGuarantee mirrors the terms of the loan that banks will grant to for small firms.
“On a case-to-case basis, we can extend the guarantee up to 10 years depending on the banks’ risk appetite,” he said.
The maximum loan amount that can be guaranteed under the program is P50 million with a guarantee fee of only 1.0 percent per annum.
Pascual added that PhilGuarantee plans to start guaranteeing loans of small and medium-sized and large enterprises of up to P300 million with the P5-billion additional equity it will receive under the Bayanihan to Recover as One Act (Bayanihan 2).
“We can leverage the P5 billion additional equity 15 times. This will allow an extra guarantee capacity of P75 billion,” he said.
Pascual also mentioned that with PhilGuarantee’s unimpaired capital of P23 billion, its current guarantee capacity at 15 times is P345 billion.
The DoF said PhilGuarantee has so far accredited eight universal banks, one commercial bank, six thrift banks and 10 rural banks for its guarantee facilities for MSMEs.
The applications for accreditation of another 16 banks are also being processed to further expand the reach of the guarantee program for MSMEs, Pascual also informed Dominguez, who chairs the governing board of PhilGuarantee.
“This is the first time PhilGuarantee is providing guarantee coverage for MSMEs,” he added.
The Finance department noted that banks that have signed up guarantee agreements with PhilGuarantee are Bank of the Philippine Islands, Union Bank of the Philippines, Malayan Bank, Bangko Kabayan and the New Rural Bank of San Leonardo.