PHILGUARANTEE Approves Php 37 Billion MSME Credit Guarantee for 22 Accredited Banks
State-owned Philippine Guarantee Corporation (PHILGUARANTEE) has approved a total of PhP37.5 Billion in credit guarantee facilities for 22 accredited banks, as of June 30, 2020. This is in line with the Agency’s key assistance role of encouraging the banking sector to continue lending to the Micro, Small and Medium Enterprise (MSME) sector under the government’s economic recovery program due to the COVID-19 pandemic.
Since the approval of the special facility, the MSME Credit Guarantee Program (MCGP) has been well-received by accredited banks that are lending to MSMEs. Loans released by the banks beginning 16 March 2020 are eligible for guarantee. The initial batch of accredited banks for MCGP is composed of 11 universal and commercial banks, 6 thrift banks, and 5 rural banks. An additional batch of about 10 banks have pending applications for accreditation.
In April 2020, the PHILGUARANTEE Governing Board approved the special credit guarantee program to support PhP120 Billion in working capital loans to be granted by the banks to its MSME borrowers that were adversely affected by the pandemic. The program provides for a 50:50 credit risk sharing arrangement whereby PHILGUARANTEE guarantees lending banks against the losses they will incur in lending to MSMEs. Guarantee premium for this program has been reduced while origination fees are waived up to December 2020.
While direct loans by other government financial institutions can immediately be implemented with its target micro and small enterprises (MSEs), PHILGUARANTEE’s special credit guarantee program involves a much larger market – the MSMEs. In the next few months, the Corporation expects a substantial increase in guarantee applications as banks reportedly have already completed the review of their MSME loan portfolios. Credit assessments of individual MSME borrowers are now being undertaken including the evaluation of revised business plans to determine the amount of working capital loan the MSMEs will require under the new normal.
For the housing guarantee portfolio, PHILGUARANTEE has a total of PhP158.7 Billion in approved guarantee lines for 77 partner banks composed of 12 universal and commercial banks, 21 thrift banks, and 44 rural banks. On the other hand, the agriculture guarantee portfolio has PhP5.2 Billion in approved guarantee lines for 27 partner banks.
The above activities of the Corporation that are benefitting the MSME sectors as well as the housing and agriculture sectors are also in line with the institutional thrust of corporate social responsibility through the relevant guarantee programs that redound to socio-economic impact and multiplier effects.