MB clears $150-M loan from ADB

The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) has approved a $150-million loan from the Asian Development Bank (ADB) to fund the country’s microfinance development program.

The BSP said the loan would be disbursed through government financial institutions and other conduit banks for relending to small enterprises.

BSP Governor Amando M. Tetangco Jr. said the loan carries a 15-year maturity period including a five-year grace period.

According to Tetangco, the loan will also carry an interest rate of six month LIBOR (London Inter-Bank Offered Rate) plus 60 basis points.

The loan is intended to spur micro-businesses in the countryside by providing inexpensive funding designed for micro-lending. "This is a program loan basically for capacity-building," said Tetangco.

The ADB said its lending program in the Philippines is being focused on reducing poverty and promoting human development and economic growth, according to its Country Strategy and Program (CSP) update for 2004-2006.

The lending program for the three-year period amounts to 15 loans totaling $712 million. Projects planned will tackle health, education, water, microfinance, small and medium enterprises, irrigation, agrarian reform, energy, transport, environment, and governance.

"The lending pipeline for the next three years has been designed with some flexibility to take into account emerging priorities that may arise after the May 2004 elections," said Tom Crouch, country director at ADB’s Philippines Country Office.

The Philippines is ADB’s fifth largest borrower, accounting for eight percent of cumulative lending. However, the bank said weaknesses in implementation of some projects have caused lower-than-expected levels of disbursement in recent years.

The BSP, for its part, has been trying to promote microfinancing, encouraging banks to lend to small borrowers in exchange for a number of perks including the lifting of restrictions on bank branching if the new branch would cater to microfinance lending.

This developed as the BSP warned that the success of the government’s microfinance program is starting to get polluted by unscrupulous and delinquent borrowers.

The BSP’s proposed credit information bureau, for instance, is now being geared to have the capability of dealing not only with corporate and individual borrowers but also with microfinance borrowers.

BSP said it is hiring foreign consultants with expertise in setting up credit information bureaus, a project that would be paid for using foreign grants possibly from the ADB and the World Bank.