MANILA, Philippines — Government financial institutions Land Bank of the Philippines (Landbank) and Development Bank of the Philippines (DBP) have already approved the guidelines for the grant of interest rate subsidies to local government units (LGUs).
In a phone interview, Landbank vice president for Corporate Affairs Vivian Cañonero said the bank’s board of directors has already finalized the rules and procedures for the interest rate subsidy program as mandated under the Bayanihan to Recover as One Act.
“The LGUs are already made aware of the guidelines by our lending centers,” Cañonero said.
Similarly, DBP first vice president for corporate affairs Zandro Carlos Sison, in an email, said it has circulated the internal guidelines for the program among its lending offices nationwide.
Under Republic Act 11494 or the Bayanihan 2 Law, Landbank and DBP were allotted P1 billion each to provide interest rate subsidy for new and existing loans secured by the LGUs.
This aims to provide relief to local governments and to support their respective recovery efforts, following the damage caused by the coronavirus pandemic and the lockdown imposed in different parts of the country.
The Department of Finance (DOF) had approved the key features of the program early in November, after which Landbank and DBP formulated the guidelines and procedures.
According to Cañonero, the Landbank board has agreed to provide interest rate subsidy for loans that would be used to fund LGUs’ COVID-19 recovery efforts.
“They can either use it for permanent working capital, like purchase of agricultural produce. They can also use it for acquisition of equipment and construction of facilities and other projects of the LGU which will provide basic and support services on social welfare and health care,” she said.
She said interest rate for loans would be fixed at an interest rate of four percent until Dec. 31, 2022, of which two percent would be subsidized by the government.
However, Cañonero said the availment of the subsidy would be capped for every LGU-borrower.
“Availment of the interest subsidy by the LGUs will be on a first-come first served basis, with a maximum allocation of P10 million for provinces and cities and P5 million for municipalities,” she said.
Nevertheless, the Landbank official said LGUs are free to borrow as much as they can, depending on their net borrowing capacity, as certified by the Bureau of Local Government Finance
She said LGUs also have the option to avail a one-year or two year subsidy until 2022. After this period, interest rates of loans will be subject to repricing.
Cañonero said the P1 billion allocated for Landbank is enough to cover P50 billion in total loans from LGUs.