State guarantor backs P37.5B MSME loans

State-owned Philippine Guarantee Corp. (PhilGuarantee) said it approved as of June 30 a total of P37.5 billion in credit guarantees for loans of micro-, small-scale and medium-scale enterprises (MSMEs) granted by 22 accredited banks.

PhilGuarantee also announced in a statement on Thursday that it 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.

It also said its MSME credit-guarantee program has been “well-received” by accredited banks that are lending to MSMEs since the special facility was approved in April.

The special credit guarantee program aims to support P120 billion in working capital loans to be granted by banks to its MSME borrowers that were adversely affected by government’s lockdown against the spread of Covid-19.

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.

PhilGuarantee said loans released by banks beginning March 16 this year are eligible for guarantee.

Guarantee premium for this program has been reduced while origination fees are waived up to December 2020.

Of the initial batch of accredited banks for MCGP, 11 are universal and commercial banks, six are thrift banks and five are rural banks. An additional batch of about 10 banks has pending applications for accreditation.

For the housing guarantee portfolio, PhilGuarantee has a total of P158.7 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 P5.2 billion in approved guarantee lines for 27 partner banks.

The PhilGuarantee Governing Board also recently approved to guarantee housing loans that were restructured by accredited financial institutions on or before the end of this year in a bid to provide affordable amortization to housing borrowers.

According to Advisory 6 released by PhilGuarantee dated June 30, the guarantee coverage is being offered as part of key assistance measures to affected sectors of the lockdowns.

The restructured loans for guarantee coverage shall be accepted subject to certain terms and conditions.

The original loan should be in current status as of March 16, 2020, and the loan principal of the restructured account shall not exceed the ending balance of the loan as of March 16 plus capitalized interest during the community quarantine period.

The restructured tenor or term of the loan must also not exceed 25 years and the restructured monthly amortization shall not be higher than the original monthly amortization.

Further, it is suggested that the interest rates for restructured accounts is the same or lower than the rate of the original loan. The loan-to-collateral ratio must also not exceed 90 percent for socialized or low-cost housing, 80 percent for medium-cost housing and 70 percent for open housing.

The enrollment of the restructured loans shall not be subject to additional premium fee of 0.25 percent as required by the existing contract of guarantee.

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