State-owned Philippine Guarantee Corp. (PhilGuarantee) works with various accredited banks to mobilize private funds for lending to priority sectors like agriculture, housing and employment.
In an exclusive interview with Daily Tribune’s “Straight Talk” episode on Wednesday, 2 October, PhilGuarantee president and CEO Alberto Pascual, together with senior vice president Celso Gutierrez has shared the current initiatives undertaken by the government corporation to ensure efficient and secure guarantees to lending financial institutions.
Pascual said the agency applies guarantee cover to loan cooperatives, farmers’ associations, mirco, small and medium enterprises (MSMEs), and corporations particularly engaged in lending to the agricultural sector.
“We [PhilGuarantee] are supposed to mobilize private funds to lend to these priority sectors…Mobilize meaning to encourage banks and finance institutions to lend to these high-risk sectors and priority sectors of the government. Like in agriculture, not all banks are actively lending to agriculture,” he said.
He added that their current guarantee program could benefit the agriculture sector by guaranteeing up to 85 percent of the principal loans, such as rice and corn production; the said credit exposure could secure farmers during instances they cannot yet pay for damages caused by natural or agriculture-related disasters.
PhilGuarantee is currently working with local banks, ranging from rural, thrift, cooperative and commercial banks.
Pascual said their clients can approach them to assess whether these accredited banks are worth guaranteeing with the Bank of the Philippine Islands (BPI) among their biggest bank partners for the guarantee initiative.
“But our guarantee product is demand driven…We need our bank partners to have the same target sectors…[T]he bank has to agree that we will support this project,” he added.
According to Pascual, the only requirement is that interested guarantee applicants or clients must have an identified registered business, whether economic or agricultural, such as small to big businesses in the country.
In support of economic development
In terms of housing projects, PhilGuarantee has also taken the step by guaranteeing Pag-IBIG loans of up to P1.8 million, citing to add to the current program of the “Abot Kaya Pabahay Fund” intended for providing affordable housing to low-income households through financial contribution from private sectors.
The government corporation also has its regular housing guarantee program, which guarantees low-cost shelter projects of up to P4.9 million each and medium-cost housing at P6.6 million. Pascual added that the cost already includes the construction incentives they provide for the housing, suggesting a ‘multiplier effect’ to the overall amount.
PhilGuarantee currently works under two schemes; one is a portfolio guarantee scheme that is considered their bilateral agreement with a partnered bank in charge of paying the primary guarantee.
Another scheme is the individual guarantee scheme, which suggests a tripartite guarantee arrangement involving the borrower, the bank, and PhilGuarantee, mostly catered to medium to large enterprises.
PhilGuarantee is among the newly established agencies under Executive Order (EO) 58 Series of 2018, which aims to create a streamlined finance guarantee service system by merging agencies such as the Home Guaranty Corp. (HGC) and the Philippine Export-Import Credit Agency (Philexim).
Improve local systems
Under the EO, the guarantee agency is mandated to improve financing systems in the country tied to socio-economic developments in support of “trade and investments, exports, infrastructure, energy, tourism, agricultural business/modernization, housing, MSMEs and priority sectors of the economy.”
Pascual also shared that the agency is looking to guarantee local government bonds for rental housing projects with a potential 19-unit plan for the possible LGU partnership. He added that these contributions to housing projects have also reached Mindanao, with around seven to eight billion guarantees recorded for MSMEs in the region.
As mandated by the government, Pascual said that PhilGuarantee aims to provide guarantees to lenders, housing for Filipinos, and support small businesses and priority sectors, currently estimated at P250 billion.
“[W]e think we’re supporting the Philippine economic development,” he said, “Because that’s our mandate, any project that will support the economic development and employment, we can provide guarantee.”