THE HOUSE Banks and Financial Intermediaries Committee approved on Friday a bill seeking to expand the loan assistance program, rediscounting and other credit accommodation facilities of government financial institutions to help micro, small and medium enterprises (MSMEs) cope with the effects of the coronavirus disease 2019 (COVID-19).

House Bill 6795 or the Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) Act was filed by Quirino Rep. and House banks and financial intermediaries committee chair Junie E. Cua.

The bill directs the Philippine Guarantee Corp. (PGC) to expand its guarantee program for MSMEs by increasing the maximum loan guarantee coverage per borrower and reducing guarantee fees. To implement this, the measure mandates the government to increase its subscription to PGC’s authorized capital stock by an additional P20 billion.

The bill also directs the Development Bank of the Philippines (DBP) to expand its loan program for qualified MSMEs affected by COVID-19, provided that these enterprises are engaged in infrastructure, services and/or manufacturing businesses. DBP’s authorized capital stock will be expanded to P100 billion from P35 billion to accommodate capital infusion.

Land Bank of the Philippines (LANDBANK) is also mandated to expand its loan program to MSMEs engaged in the agribusiness value chain. Both DBP and LANDBANK are allowed to rediscount loans to eligible enterprises.

The proposed measure also authorizes the LANDBANK and DBP to create a special holding company to be named Accelerate Recovery to Intensify Solidarity and Equity (ARISE) to provide liquidity by being a “major player” in the financial and capital markets.

“For this purpose, the special holding company shall be authorized to invest or place funds in equity, execute convertible loans or purchase convertible bonds and/or other securities…as well as to incorporate subsidiaries,” part of the bill’s explanatory note read.

To ensure that funds are properly used, the bill imposes restrictions on companies to be invested in, requiring that the number of employees are not reduced by a certain level, limiting its ability to declare dividends, restricting the increase in salary and other benefits of the board officers and ensuring investments of LANDBANK and DBP are not diluted and time-bound with a definite “exit-mechanism,” among others.

Meanwhile, to ensure effective implementation, the bill grants tax exemption and reduced registration and transfer fees on the following qualified transactions: those relating to the loan assistance program, rediscounting and other programs of DBP and LANDBANK, including dation in payment (dacion en pago) by the borrower or by a third party; investment transactions of the special holding company and its subsidiaries; and sales or transfers of rediscounted loans/other credit accommodations, subject to a limited three-year entitlement period.

The bill also exempts any procurements of the PGC, LANDBANK, DBP and the special holding company from the procurement law for three years.

The special holding company will also be exempted from the government-owned and -controlled corporations (GOCC) Governance Act of 2011 and the Philippine Competition Act for three years.

The measure appropriates P55 billion to infuse additional capital to PGC (P5 billion), LANDBANK (P35 billion) and DBP (P15 billion).

“Enterprises, whether MSMEs or large enterprises, were heavily impacted by the disruption in travel and transport of goods and services as a result of the COVID-19 outbreak. These enterprises which belong to or operate in certain industries or sectors that are strategically important to economic recovery would require financial assistance in order to ensure their continued viability and, in turn, create a ripple effect to reverse the economic downturn,” Mr. Cua said in his explanatory note.

The measure will be transmitted to the House Defeat COVID-19 Committee for its consideration. Once approved, it will go to the plenary for debates. — Genshen L. Espedido

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