Gov’t guarantees P37.5B in bank loans to SMEs

In its bid to make available loans to small businesses badly hit by the COVID-19 crisis, the state-run Philippine Guarantee Corp. (Philguarantee) has green-lit P37.5 billion in credit guarantees as of end-June.

Philguarantee said the total credit guarantee facilities it approved during the second quarter covered 22 accredited banks serving micro, small and medium enterprise (MSME) borrowers.

“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 March 16 are eligible for guarantee,” Philguarantee said.

“The initial batch of accredited banks for MCGP is composed of 11 universal and commercial banks, six thrift banks and five rural banks. An additional batch of about 10 banks have pending applications for accreditation,” Philguarantee added, but it did not identify these lenders.

It was last April when Philguarantee’s governing board rolled out the P120-billion MCGP so banks can lend capital loans to MSMEs struggling amid the COVID-19 pandemic.

Finance Secretary Carlos G. Dominguez III, who chairs Philguarantee, earlier said the MCGP was expected to benefit about 12,000 MSMEs.

Under the program, Philguarantee will insure banks’ potential losses from MSME lending via a 50:50 credit risk-sharing arrangement.

“Guarantee premium for this program has been reduced while origination fees are waived up to December 2020,” Philguarantee said.

Covered MSMEs will be charged an annual guarantee fee equivalent to 1 percent of the guaranteed loan amount.

“In the next few months, [Philguarantee] expects a substantial increase in guarantee applications as banks reportedly have already completed the review of their MSME loan portfolios,” it said, adding that credit assessments of individual MSME borrowers were 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’.

Besides the MCGP, Philguarantee also provided P158.7 billion in housing guarantees to 77 lenders—12 universal and commercial banks, 21 thrift banks, as well as 44 rural banks.

Another P5.2 billion in agriculture guarantee lines were made available by Philguarantee to 27 banks.