House panel OKs bill expanding state-run banks’ aid schemes for MSMEs

The House banks and financial intermediaries panel on Tuesday approved a bill increasing the capital of state-run bank Development Bank of the Philippines (DBP) and creating a special holding company in order to expand government aid schemes to micro, small and medium enterprises (MSMEs) affected by the COVID-19 pandemic.

This is provided under the consolidated version of House Bill 1 or the Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) bill, which provides a P100-billion capital stock to DBP, to be divided into one billion common shares with a value of P100 per share, which will be fully subscribed by the national government.

This P100 billion is an increase from the existing P35 billion capital stock of the DBP.

Likewise, the GUIDE bill authorizes the President "to approve the increase in capitalization of DBP upon the recommendation of the DBP Board and the concurrence of the Finance Secretary, up to such an amount as may be necessary to attain objectives of this charter."

Special holding company

In addition, the GUIDE bill authorizes government banking institutions DBP and Land Bank of the Philippines (LBP) to invest in, or enter into a joint venture agreement to incorporate a special holding company (SHC).

The SHC's purpose will be to ensure that strategically important companies (SICs) will remain solvent or are earning more than their liabilities, as well as rehabilitate SICs affected by the COVID-19 pandemic.

The bill defines SIC as "investee companies that are nationally significant," or those with high economic returns or high employment potential, and are engaged in strategically important industries or sectors including agriculture, construction, education, food industry, healthcare, infrastructure,  low-cost  and socialized housing, manufacturing, power and energy, product distributor/retailer, services, tourism and hospitality, transportation and logistics, and water and sanitation.

These SICs must show proof of temporary solvency problems due to the pandemic, financial soundness prior to the pandemic, and credible and sound financial rehabilitation plan.

On the other hand, equity participation in the SHC may be offered to, and held by, qualified private sector investors,  including multilateral companies and  lending institutions, as may be determined by the LandBank and DBP, provided that majority ownership of the total outstanding capital stock in the SHC will be held by the LandBank and DBP until such time that they have recovered or will be able to recover their investment in the SHC.

The GUIDE bill also mandates that DBP and LandBank expand their loan assistance program to MSMEs engaged in infrastructure, the service industry, and/or manufacturing business, as well as grant loans to local government units (LGUs) subject to existing rules and regulations.

Further, the GUIDE bill requires DBP and LandBank to rediscount loans and credit accommodations subject to applicable prudential standards and regulations of government agencies. — BM, GMA News