Liquidity – cash -- is the lifeblood of business and industry.
It is the fuel that powers economic activities and sustains government operations.
The availability of money and credit determines the fortunes of private companies, especially the small. micro-, and medium enterprises.
The 2019 coronavirus disease pandemic disrupted he flow of cash and credit as majority of businesses and industries shut down operations as the pandemic spread and Metro Manila and most of Luzon, which contributes 70 percent of the country’ gross domestic product, went on quarantine.
To infuse cahd and credit back into the system, the House of Representatives' Defeat Covid-19 Committee approved a measure seeking to provide financial assistance to distressed enterprises critical to economic recovery in the aftermath of the coronavirus disease crisis.
The panel approved House Bill 6795 or the proposed Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery Act.
Majority Leader Martin Romualdez, who co-chairs the committee, stressed the need to address the liquidity or solvency problems of these distressed enterprises.
“We must move swiftly to encourage their continued operations and maintain employment levels,” Romualdez said.
The Leyte lawmaker has championed President Duterte’s socio-economic agenda in the chamber, spearheading vital and critical measures in the House in pursuit of sustainable growth and a abetter ;
And since MSMEs comprise 99 percent of the country’s enterprises and employs more than 70 percent of the country’s workers, Romualdez’ committee saw the urgency of throwing a vital lifeline to the sector.
The bill aims to strengthen the capacity of government financial institutions -- Philippine Guarantee Corp., Land Bank of the Philippines, and the Development Bank of the Philippines -- to provide the needed assistance to micro, small and medium enterprises and other strategically important companies.
The bill proposes to increase the maximum loan guarantee coverage per borrower, reduce guarantee fees, and other similar schemes of the PGC to benefit MSMEs heavily affected by the pandemic.
It also expands the loan assistance programs, and other credit accommodation facilities of LBP, DBP, Small Business Corp., and Agriculture Credit Policy Council.
The targeted sectors for LBP include players in the agricultural supply chain such as farmers, fisherfolk, traders, suppliers, processors and aggregators; and for DBP, eligible MSMEs engaged in infrastructure, services and manufacturing business.
The LBP and DBP “shall be mandated to create a special holding company, known as Accelerate Recovery to Intensify Solidarity and Equity (ARISE), for the purpose of reinvigorating strategically important industries to meet their liquidity needs”.
Equity participation in the special holding company may be held by qualified private sector investors, but LBP and DBP would have to maintain at least a majority ownership over the firm until such time that they have recovered their investment.
The special holding company “shall be authorized to invest or place funds in equity, execute convertible loans or purchase convertible bonds and other securities in strategically important companies, as well as to incorporate subsidiaries”.
To increase the capitalization of these government financial institutions, the bill seeks to appropriate P5 billion to PGC as paid-up capital, P35 billion to LBP, and P15 billion to DBP.