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P42.3-B credit guarantees available for pandemic-hit MSMEs

The Philippine Guarantee Corp. (PhilGuarantee) has made available P42.3 billion in credit guarantee facilities for pandemic-hit micro, small and medium enterprises (MSMEs), of which P3.6 billion is expected to benefit an initial batch of 6,000 borrowers by year end. 

PhilGuarantee president-CEO Alberto Pascual said he expects another P20 billion to be accessed by the middle or towards the end of 2021 covering about 40,000 MSMEs. 

In an emailed report to Finance Secretary Carlos Dominguez III, Pascual said that banks have now been extending more loans to micro and small businesses, following the launching of this program, unlike before when lenders would only prioritize the needs of their existing MSME clients. 

According to Pascual, 50 percent of this multibillion-peso loan amount now available to MSMEs is guaranteed under the program, which is higher than Thailand’s offer of 30 percent guarantee to its small and medium-sized businesses. 

“Just like in Thailand, the freed up reserves or extra liquidity of banks were not used to lend to MSMEs. But now we are seeing banks becoming active again and some in fact have been pre-clearing with us bigger loans for new projects,” Pascual said. 

PhilGuarantee has so far accredited 8 universal banks, 1 commercial bank, 6 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 informed Dominguez, who chairs the governing board of PhilGuarantee. 

“This is the first time PhilGuarantee is providing guarantee coverage for MSMEs,” Pascual said.

Among the banks that have signed up guarantee agreements with PhilGuarantee are the Bank of the Philippine Islands (BPI), Union Bank of the Philippines (UnionBank), Malayan Bank (MB), Bangko Kabayan (BK) and the New Rural Bank of San Leonardo (NRBSL).

“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,” Pascual said.

Pascual said 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 1 to 5 years with a 50 percent guarantee, and up to 7 years for term loans with the guarantee covering up to 80 percent of the loan amount.

According to Pascual, PhilGuarantee mirrors the terms of the loan that banks will grant to MSMEs.

“On a case-to-case basis, we can extend the guarantee up to 10 years depending on the banks’ risk appetite,” Pascual added. 

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 said 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,” Pascual said.

Pascual said that with PhilGuarantee’s unimpaired capital of P23 billion, its current guarantee capacity at 15 times is P345 billion.  

PhilGuarantee’s outstanding guarantees dropped from P207 billion at year end-2019 to only about P170 billion as of September 2020, but have recently seen an increase in the number of housing and SME applications for guarantee, he added. 

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