Local government units (LGUs) can avail of concessional financing of up to 100 percent of project cost to enable them to implement their infrastructure and other development projects through three state-backed credit facilities offered by two government banks and an agency under the Department of Finance (DOF).
Finance Secretary Carlos Dominguez III has provided the League of Provinces of the Philippines (LPP), through its national chairman, Quirino Governor Dakila Carlo Cua, copies of the policy guidelines and documentary requirements of the loan facilities offered by the Land Bank of the Philippines (LandBank), Development Bank of the Philippines (DBP), and the Municipal Development Fund Office (MDFO) for LGUs.
“The DOF stands ready to assist our LGUs in efficiently and effectively implementing their priority development projects that are crucial to the fulfillment of President Rodrigo Duterte’s primary goal of providing a safe, decent, and comfortable life for every law-abiding Filipino,” Dominguez said in a letter to Cua that described the features of these credit facilities available to LGUs.
Dominguez, who is LandBank chairman, said LGUs can tap the LandBank’s Omnibus Term Loan Facility (OTLF), which allows qualified LGUs to fund infrastructure and socio-economic projects that are listed in their approved Local Development Plan and Public Investment Program.
The OTLF eliminates the inconvenience and associated transaction cost in securing loan approval for every single project to be implemented, Dominguez said.
The LandBank applies a prescribed formula in computing the net debt service ceiling and borrowing capacity of the LGUs.
Among the LGUs that have availed of the OTLF is the Manila city government, which signed a P10-billion loan agreement with the LandBank last year to finance the renovation and upgrade of its health, education and tourism infrastructure.
Dominguez said the DBP, on the other hand, can provide loans to finance priority projects of LGUs up to 100 percent of the total project cost based on the Estimated Calculated Cost Ranges (ECCR) or the winning bid price, but not to exceed the barangay’s net debt service ceiling and borrowing capacity as certified by the DOF’s Bureau of Local Government Finance (BLGF).
The usual basis of the BLGF is that the amortizations must not exceed 20 percent of the Internal Revenue Allotment (IRA) share of the concerned LGU, Dominguez said.
He said the DBP has helped finance various LGU projects such as school buildings, market places, administration offices, multipurpose halls, sports complexes, hospitals, the acquisition of heavy equipment and information technology equipment, and other projects directed to provide better services to the people.
The MDFO, an agency under the DOF, also offers concessional financing and technical assistance to LGUs, provided that their loans should be within their borrowing capacity as certified by the BLGF.
The LGUs, for instance, may avail of the Disaster Management Assistance Fund (DMAF) for their disaster prevention and mitigation initiatives, Dominguez said.
Other financing windows of the MDFO are available for funding of local projects related to public economic enterprise or those that are revenue generating.
The MDFO also provides loans to finance social and environmental projects, solid waste management facilities, sewerage and sanitation facilities, and other local infrastructure.
To further encourage LGUs to be financially capable and avail of loans for their development projects, Dominguez issued on Oct. 25, 2016, Department Order (DO) No. 054.2016, which streamlined the certification of the Net Debt Service Ceiling (NDSC) and Borrowing Capacity (BC) of LGUs.
The DOF reduced the documentary requirements from 12 to 4, and improved the process to ensure faster, accurate and efficient certification of the NDSC and Borrowing Capacity of LGUs by the BLGF.
The BLGF has also devolved the process of reviewing the completeness and orderliness of documents submitted by LGUs to all BLGF regional offices, including the initial computation of the NDSC and BC.