P2.1-B loan guarantees allow 10,000 MSMEs to survive

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The amount of bank loans of micro, small and medium enterprises (MSMEs) guaranteed by the Philippine Guarantee Corp. (PhilGuarantee) reached P2.1 billion as of June this year, allowing almost 10,000 COVID 19 pandemic-hit enterprises to continue their operations and retain jobs.

PhilGuarantee president-CEO Alberto Pascual said that with the state corporation’s MSME Credit Guarantee Program (MCGP) granting a 50-percent guarantee for working capital loans, the cumulative loan approvals of P2.01 billion over the January-to-June 2021 period mean that PhilGuarantee will guarantee or cover about P1 billion of this amount in the event that borrowers default.

“The private banks have shown continued support to MSMEs as shown by the increasing trend. While guarantees reached P1 billion in approvals, it is worthwhile to note that the outstanding balance of P897 million reflected as of June 30 is net of loans guaranteed, but already paid,” he said in his report to Finance Secretary and PhilGuarantee chairman Carlos Dominguez III.

Under the MGCP, PhilGuarantee also extends guarantees of up to 80 percent of the amount for term loans of up to seven years for capital expenditures.

The guaranteed loans of P2.01 billion represent an 866-percent increase from the P207 million pilot guarantee portfolio achieved at the launching of the MCGP in December 2020.

Pascual said that from only three banks participating in the MCGP at its launching, this number has since grown to 19 lending partners, which include 2 universal banks, 6 thrift banks and 11 rural banks.

“The participating banks have sustained their lending activities. A total of 9,180 SMEs (small and medium enterprises) in the essential wholesale and retail trade sector (i.e. agricultural products distribution, medical support and medicine distribution) were granted additional working capital for their businesses,” Pascual said.

He added that the “the manufacturing sector covering 1,332 SMEs, which is a critical industry to immediately generate jobs, were the second biggest sector supported by the guarantees.”

From the start of the MGCP’s implementation last year, the PhilGuarantee Governing Board chaired by Dominguez thus far approved a total of P37.7 billion in credit guarantee facilities to 34 banks.

The average loan size under the MGCP is less than P1 million, with the minimum loan amount set at P100,000, which can be availed mostly by micro businesses borrowing from thrift banks and rural banks.