With the “Bayanihan to Heal as One Act” now in place to help ease the financial burden of Filipinos amidst the COVID-19 crisis, a coalition of finance and lending companies has echoed its support in giving cash-strapped borrowers ample time for repayment.
“We know full well that this ongoing pandemic is not just a global health crisis; it is also a global economic crisis,” said Atty. Jude Romano, president of the Philippine Finance Association (PFA). “With the lockdown still in place in many areas, many businesses remain shut down, and jobs are put on hold, or worse, lost. And for those who have existing loans with financial institutions, it means having to make a choice between getting your next meal or paying your next installment.”
“During these difficult times, consumers should not have to make their decision. And we are one with the government in supporting the “Bayanihan to Heal as One Act” that can hopefully make things a little easier for our countrymen during this crisis,” Romano added.
Among its provisions, the “Bayanihan to Heal as One Act” gives borrowers a 30-day grace period for payments for loans without any late payments or penalties, covering the duration of the Luzon-wide enhanced community quarantine. The grace period has been effectively extended following President Duterte’s extension of the ECQ until May 15.
Romano noted that several members of the PFA had already extended payment holidays to their clients even prior to the passage of the Bayanihan Law, to mitigate the impact of the ECQ.
“The financing companies can be a viable partner in helping the government extend financial assistance to the poor, to MSMEs (micro, small and medium enterprises) and companies reliant on banks,” Romano noted, adding that PFA members have extended consumer loans amounting to P62.4 billion to 3.9 million borrowers belonging to the poor sector who are unbanked and underserved.
Meanwhile, other PFA members have provided P105 billion in loans to more than 220,000 MSMEs. Many of these lenders source their funds from banks to extend loans to their borrowers. “This is just a drop in the bucket as there are more than 700 financing companies registered with the SEC,” Romano explained.
But while financing companies are ready to assist the government in helping these sectors, Romano noted that the industry has likewise taken a hit due to the Covid-19 crisis. “For one thing, financing companies are heavily reliant on banks for their funds to loan to their clients. They will need to allocate the cash they have to pay their loans, which in turn might lead to a decrease in new loan extensions. Government should consider to support liquidity for financing companies so they can keep on extending loans to unbanked clients. Decrease in lending activities of regulated financing companies may even result in the proliferation of payday and informal “5-6” lenders.
“Financing companies are ready to partner with the government. They have the experience, the infrastructure, the risk management expertise and highly trained people on the ground. They are here for the long haul. But they badly need assistance from the government,” Romano said.
Assistance needed
According to the PFA, for the financing industry to be able to continue supporting various sectors amidst the crisis, a 5-year Financial Facility Special Window from BSP may be given to financing companies in good standing, to be amortized in 5 years, with a moratorium of 6 months on principal payment.
The PFA added that since the industry is committed to supporting MSMEs and workers who were on a “no work, no pay” basis, it can also benefit from specific low cost/low-interest loans to financing companies, with at least 3 to 6 months grace period prior to start of payment of monthly principal amortization and interest. These loans can then be used by the industry to fund loans for sectors most impacted by the crisis.
The PFA is also urging creditor banks to allow a 6-month moratorium on principal payment on existing loan tenors of financing companies.
Romano said that the PFA is looking forward to a dialogue with government and other stakeholders so that their recommendations may be discussed. “At the end of the day, the government as well as our industry share the same goal in helping our countrymen most impacted by the crisis. And together we can make it happen, in true ‘Bayanihan’ spirit.”
