Credit guarantee program for MSMEs to be extended until September

MANILA, Philippines — State-run Philippine Guarantee Corp. (PhilGuarantee) will extend until September its credit guarantee program for micro, small, and medium enterprises (MSMEs) to encourage banks to sustain lending to small businesses affected by the pandemic.

In a report to the Department of Finance, PhilGuarantee president and CEO Alberto Pascual said the firm has broadened its support to MSMES, manufacturing, housing, and agriculture with over P655 billion in credit guarantee lines opened last year.

Out of these guarantee lines, P180.67 billion in loans were guaranteed by the state agency, eight percent above its target of P167.21 billion for last year.

The MSME Credit Guarantee Program (MCGP), launched at the height of lockdowns last year, accounted for P37.73 billion of the credit  guarantees green-lit in 2020.

Guarantees under this program were extended to 34 banks nationwide serving MSMEs.

“The program will be extended until September this year to provide continuing support to affected MSMEs via available access to working capital loans under credit-risk sharing arrangements with accredited banks,”  Pascual said.

As of December 2020, a total of 2,943 new MSME beneficiaries have so far been served under this program with guarantees provided to loans totaling P175.1 million.

The program aims to cover loans taken out by as many as 12,000 small businesses.

More business loans are expected to have been covered as of January this year, said the agency.

PhilGuarantee rolled out the credit guarantee program for small businesses in the second quarter of 2020 when the main island of Luzon was still under the strict lockdown.

Under the program, P120 billion in working capital loans for MSMEs will be covered with a 50 percent guarantee, costing the government around P60 billion.

This is meant to provide small business easier access to bank financing – which tends to contract during crises – and improve their cash flow.

In turn, this will enable them to pay for fixed costs such as wages, rental, amortizations, and interest payments.