PHILGUARANTEE opens Credit Guarantee Facility for COVID-19-affected MSMEs

As part of its assistance measures, the Philippine Guarantee Corporation
(PHILGUARANTEE) has made available a credit guarantee facility to support the government’s recovery program to “bounce back” the economy that is reeling the effects of the global COVID-19 pandemic, President and CEO Alberto Pascual announced yesterday.

Pascual said the PHILGUARANTEE Governing Board, chaired by Finance
Secretary Carlos G. Dominguez III, approved an MSME Credit Guarantee Program to support P120-Billion in working capital loans to micro, small and medium enterprises (MSMEs) facing economic difficulties as a result of the crisis.

Under the MSME Credit Guarantee Program guidelines, eligible borrowers are those MSMEs affected by the COVID-19 pandemic, while eligible lenders are those universal, commercial, thrift and rural banks, as well as other financial institutions supervised by the Bangko Sentral ng Pilipinas (BSP). The BSP previously announced through its Circular No. 1083, s. 2020 that MSME loans granted after March 15, 2020 are considered as alternative compliance to BSP reserve requirements.

Secretary Dominguez said the credit guarantee program “will provide small
businesses easier access to bank financing, which tends to contract during crisis periods,” adding that the guarantees extended by the government will help improve the cash position of small businesses to enable them to pay for fixed costs such as wages, rental, amortizations and interest payments.

“Thus, we need to assist small businesses by extending guarantees for their loans. For now, the goal is to cover some P120 billion in loans with a 50 percent guarantee. This would cost government around P60 billion,” Dominguez said.

Earlier on, the government’s economic managers laid out a P1.4 trillion socio economic strategy anchored on four pillars: emergency support for vulnerable groups; resources to fight COVID-19; fiscal and monetary actions; and an economic recovery plan. The P120-Billion credit guarantee mechanism is part of the emergency support for vulnerable groups, representing 0.6% of the country’s GDP.

MSMEs comprise more than 90 per cent of businesses in the Philippines, and it is expected to benefit from the facility.

“The program is intended to support those businesses who are facing economic difficulties as a result of the crisis. The guarantee program will also complement access to lending as it encourages more banks to provide assistance loans to MSMEs,” said the PHILGUARANTEE chief.

Pascual also explained that the program is a quick action relief measure aimed at jumpstarting the business with much needed working capital to be obtained from the banks, adding that the agency has also waived its customary origination fees in consideration of the crisis.

“We would like to contribute to this economic recovery by participating in this rebuilding effort of the MSMEs,” said Pascual. “We do not know how long the crisis will linger but at this early juncture, we are already setting up assistance measures to push the banks to lend and in the process, alleviate their plight,” he further said.

Since the beginning of the Enhanced Community Quarantine on March 16,
PHILGUARANTEE had been issuing advisories to its clients, partners and the public, implementing various assistance measures to the housing and agriculture-based sectors such as waiver of penalties, moratorium on amortization payments, extension of guarantee lines, and no additional interest and penalties for restructured loans.

On April 15, the agency’s Governing Board also approved the reduction of
guarantee fee from 1 per cent to 0.5 per cent and increased the guarantee coverage from 85 per cent to 90 per cent for partner lending institutions of the Agriculture Guarantee Fund Pool (AGFP), which will run until July 15, 2020.

PHILGUARANTEE is the principal agency for State Guarantee Finance of the
Philippines. The institution is the result of the merger of Philippine guarantee programs and agencies – Home Guaranty Corporation, AGFP, Industrial Guarantee and Loan Fund and the guarantee operations of the Small Business Corporation – into the Philippine Export-Import Credit Agency, being the surviving entity, pursuant to Executive Order No. 58, s. 2018 by President Rodrigo R. Duterte.