Banks have lending programs designed to assist Filipino micro, small, and medium enterprises (MSMEs) that have been affected by COVID-19, reminded panelists in the Department of Trade and Industry-Export Marketing Bureau’s bank credit assistance webinar.
“In good times, MSMEs have been the backbone of the economy,” said Rustico Noli D. Cruz, vice-president at the Development Bank of the Philippines (DBP) and head of its Program Development and Management I Department. “In bad times, give MSMEs more credit than they deserve—support and provide safety nets for them.”
Government initiatives have been enacted to support this backbone threatening to be crushed by COVID-19. Among them are the I-RESCUE Lending Program of the Land Bank of the Philippines (LBP) and the RESPONSE (REhabilitation Support Program ON Severe Events) Program of DBP.
I-RESCUE is a lending program that aims to provide additional funds and loan restructuring under more flexible terms and conditions to eligible SMEs, cooperatives (co-ops), and microfinance institutions (MFIs).
The interest rate for the Rehabilitation Credit Program for SMEs is 5% per annum fixed for 3 years. The penalty rate is 24% per annum with a flexible mode of payment. The interest rate for the Rehabilitation Credit Programs for Cooperatives and MFIs is the same. The penalty rate for co-ops, however, is 3% per annum with a 180-calendar day grace period. For MFIs, it’s 24% per annum with a 60-calendar day grace period.
The Rehabilitation through Loan Restructuring program has an interest rate similar to the above programs. Penalty is waived.
Applications are evaluated based on product viability and the 5Cs (character of borrower, capacity, capital, collateral, and conditions of market), said Generoso David, assistant vice-president and head of LBP’s Program Management Department 2. Borrowers are also entitled to other types of LBP assistance such as training. “We have a lot of lending programs for SMEs. These two are the most crucial for those coping with COVID-19,” he said.
The availability period for I-RESCUE is up to December 31 this year.
RESPONSE likewise provides funding assistance to support MSME growth recovery and competitiveness. Eligible borrowers are public and private institutions.
Up to 95% of the actual need is provided. The interest rate is fixed for 5 years; fees and other charges are waived. Loan deferment and loan restructuring are available for existing buyers. All projects are eligible except for those in the bank’s negative list (such as illegal activities).
Mr. Cruz shared that DBP has newly approved loans of P1.04 billion. It also has a payment moratorium of up to six months to 726 borrowers totaling P21.04 billion.
He remarked, however, that the bank welcomes Republic Act No. 11494, or the Bayanihan to Recover as One Act (Bayanihan II), because its resources are not inexhaustible. The said Act expands financial assistance packages to distressed sectors and small businesses. “We are rationalizing lending programs to maximize how to help the needs of priority sectors,” he said.
Forty-five working days is the standard processing time for loan approval for both LBP and DBP. Expect a shorter wait for smaller loans and less complex projects.
While LBP considers farmers and fisherfolk its high-valued borrowers, the bank also has programs that benefit other sectors, such as education.
Its ACADEME Lending program, for instance, offers loans to schools at minimal interest rates. It also allows schools to give loans to students to discourage dropouts. Its I-STUDY program, meanwhile, targets students directly through its study now, pay later scheme.
Another program—geared toward inventors with startups—is the iTECH lending program. “This is for inventors who would like to commercialize their invention. If we provide funding to commercialize these ventures and (we could use their inventions), it would be a great help to the country,” said Mr. David.
Both Mr. David and Mr. Cruz added that their respective banks are amending some of their lending programs in order to allow eligible MSMEs to borrow money sans collateral.
“We’re coming up with guidelines for collateral. It depends on the assessment of a project,” said DBP’s Mr. Cruz. “We offer loans without collateral if viability is high, in compliance with the Bayanihan law.” — Patricia B. Mirasol