STATE-RUN Philippine Guarantee Corp. (Philguarantee) approved P42.3 billion worth of credit guarantee facilities to cover loans taken out by micro, small and medium enterprises (MSMEs) from banks, easing their access to credit during the economic crisis.

“The P42 billion approved facilities for banks are all new, and still part of a program launched earlier,” Philguarantee President and CEO Alberto E. Pascual said in a text message Thursday.

Citing a report from Philguarantee, the Department of Finance said in a statement Thursday that 6,000 borrowers are expected to apply for P3.6 billion worth of loan guarantees by year’s end, while 40,000 more are likely to avail of a combined P20 billion towards the end of 2021.

So far, Philguarantee has accredited eight universal banks, one commercial bank, six thrift banks and 10 rural banks for its MSME guarantee facility. It is also currently reviewing the applications of 16 more banks.

“This is the first time Philguarantee is providing guarantee coverage for MSMEs,” Mr. Pascual was quoted in the statement.

Providing state-backed loan guarantee is part of the government’s relief package to the private sector, allowing banks to lend more to MSMEs, a sector hit hard by the pandemic. With the need for working capital to survive the crisis mounting, small businesses are typically deemed by banks to be bad credit risks.

In June, Philguarantee approved a credit guarantee scheme valued at P120 billion to provide 50% guarantee cover on loans to MSMEs by banks.

Loans covered under the program range from P100,000 to P1 million, with micro enterprises making up a large portion of the borrowers and most of them seeking credit from rural banks, according to the statement.

Up to P50 million worth of loans per bank can be guaranteed under the program with a guarantee fee of 1% per annum.

The program offers terms for working capital loans of between one to five years with 50% guarantee cover; and up to seven years at 80% cover.

Mr. Pascual said “on a case-to-case basis, (Philguarantee) can extend the guarantee up to 10 years depending on the banks’ risk appetite.”

He said the agency will offer more guarantee cover for small-, medium-sized and large companies once the Budget department releases the P5 billion in additional equity it is due to receive under Republic Act No. 11494 or the Bayanihan to Recover as One Act (Bayanihan II).

The upcoming facility will cover bigger loans needed by such firms, up to P300 million per borrower.

“We can leverage the P5 billion in additional equity 15 times. This will allow an extra guarantee capacity of P75 billion,” he said.

Mr. Pascual said banks are now more willing to lend to the sector after the agency launched the program early this year.

“Just like in Thailand, the freed-up reserves or extra liquidity of banks was 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,” he said.

Philguarantee has P23 billion worth of unimpaired capital, bringing its potential guarantee capacity to P345 billion, assuming leverage of 15 times.

Its outstanding guarantees declined 17% to P170 billion at the end of September from P207 billion at the end of 2019.

Mr. Pascual said the agency expects this to increase when the applications of guarantee cover for housing and SME loans are approved. — Beatrice M. Laforga

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