STATE-RUN Land Bank of the Philippines (LANDBANK) is extending a two-percent interest subsidy for new and existing loans obtained by local government units (LGUs) to encourage them to borrow more and finance their recovery programs.
LANDBANK said in a statement on Tuesday that the subsidy will be applied to the interest payments of loans incurred by municipal, city and provincial local governments until Dec. 31, 2022 or until the program’s P1-billion budget is used up.
The relief will be for loans under the bank’s Restoration and Invigoration package for a Self-sufficient Economy towards Upgrowth for LGUs or RISE UP lending program launched in July.
The loans for the projects have a fixed interest rate of four percent per annum until 2022, two percent of which will be subsidized by the National Government, while the remaining two percent will be charged to the borrower.
Republic Act No. 11494 or the Bayanihan to Recover as One Act (Bayanihan II) allots P1 billion each to state-run banks LANDBANK and the Development Bank of the Philippines (DBP) to provide interest subsidies to LGUs. The measure aims to encourage LGUs to tap credit facilities if they need additional financing for their recovery programs.
For its part, the DBP said in an e-mail that the bank recently secured approval from the Finance department and its lending centers of its own interest rate subsidy program and it is now “preparing to formally implement the program,” with details to be released “soon.”
Under LANDBANK’s program, cities and provinces can get an up to P10 million in interest subsidies while municipalities can get a maximum of P5 million each. This cap will allow more LGUs to benefit from the program, it said.
“We strongly encourage our LGUs to make full use of credit facilities subsidized by the National Government to bankroll development projects in their respective localities. This will contribute greatly to reviving local economies and helping the country recover from the impact of the COVID-19 pandemic,” LANDBANK President and CEO Cecilia C. Borromeo said.
The lender said the subsidy will be available for LGU loans that will fund permanent working capital to buy agricultural products and other equipment needed. This is also applicable to loans obtained for the construction of facilities that will provide faster transportation of crops to the market such as market infrastructure development, establishment of so-called “mobile palengke,” setting up collection and buying stations and other similar facilities.
“LGUs with loans for programs and projects that provide basic and support services, social welfare and healthcare, and other infrastructure activities that aim to bring back confidence of the people and spur the local economy and businesses are also eligible to avail of the interest subsidy,” it added.
The credit facility allows LGUs to borrow with terms of up to 15 years before maturity, inclusive of an up to three years of grace period.
LANDBANK said it approved P52.27 billion worth of loans for 156 LGUs under the lending program as of Nov. 30, with around P383 million already released to three borrowers. — Beatrice M. Laforga