Ateneo's MCBP says not all interest on loans canceled by Bayanihan law

The Microfinance Capacity Building Program (MCBP) of the Ateneo de Manila University on Thursday called on the government to review the implementing rules and regulations (IRR) of the Bayanihan to Heal as One Act, saying not all interests were canceled out in the guidelines.

The MCBP, in a position paper, noted that Republic Act 11469 placed a 30-day grace period for the payment of loans, but its IRR only mandates financial institutions to cancel only interest on interest, and not interests as a whole.

"The IRR provides that financial institutions are only mandated to cancel the additional interest that may be imposed due to late payment of the loan," the MCBP said.

"This is different from what the law really provides which mandates financial institutions to totally cancel the interest of the loan for the duration of the quarantine period," it explained.

President Rodrigo Duterte in March signed into law the Bayanihan to Heal as One Act, allowing him to exercise additional powers to curb the spread of the coronavirus disease 2019 (COVID-19).

"...all banks, quasi-banks, financing companies, lending companies, and other financial institutions, public and private, including the Government Service Insurance System, Social Security System and Pag-IBIG Fund, to implement a minimum of a thirty (30)-day grace period for the payment of all loans, including but not limited to salary, personal, housing, and motor vehicle loans, as well as credit card payments, falling due within the period of the enhanced Community Quarantine without incurring interests, penalties, fees, or other charges," the law reads.

The IRR for the 30-day mandatory grace period on loans was issued by the Department of Finance (DOF) last week.

"All Covered Institutions shall implement a 30-day grace period for all loans with principal and/or interest falling due within the ECQ Period without incurring interest on interest, penalties, fees and other charges," the IRR states.

According to MCBP, if the IRR will be implemented, only the interest on interest will be canceled, and not the whole interest of loans.

With this, it said microfinance institutions (MFIs) will still have to pay the interest on loans from commercial banks, even if they canceled the interest on the loans of their clients.

"With the current IRR, MFIs will bear the brunt of the cost of interest which may endanger their financial sustainability. There is also a good chance that this interest will be passed on eventually to microfinance clients who are already bearing the biggest impact of the pandemic," the MCBP said.

The MCBP is currently implemented by the Social Enterprise Development Partnerships Inc. (SEDPI), under the Development Studies of the School of Social Sciences of the Ateneo de Manila University.

The MCBP has since called on the concerned agencies of the government to review the IRR of RA 11469, specifically the revision of Section 3.01.

"We hope that this matter will be resolved soon. The spirit and purpose of the Bayanihan to Heal as One Act must be genuinely upheld. We call for the government to completely prohibit interest charging on loans during the enhanced community quarantine," it stated.

Sought for comment, Finance Assistant Secretary and spokesperson Antonio "Tony" Lambino II said that the IRR entails a 30-day grace period without interest on interest.

"The IRR gives a 30-day grace period for loan payments that fall due within the enhanced community quarantine, with no interest or any additional fees or penalties," he said in a mobile message.

"The interest accrued during the grace period can be amortized through the remaining life of the loan," he elaborated. — KBK/BM, GMA News