THE Philippine Finance Association (PFA), a coalition of finance and lending companies, seeks government and private sector support to recover from the impact of the new coronavirus disease 2019 (COVID-19) crisis
Jude Romano, president of PFA, said in a statement if funds among their ranks dry up due to the decrease in lending activities, payday and informal “5-6” lenders will proliferate.
Romano said government should consider supporting liquidity for financing companies so they can keep on extending loans to unbanked clients.
“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.
According to the PFA, for the financing industry to continue supporting various sectors amidst the crisis, a five-year financial facility special window from the Bangko Sentral ng Pilipinas (BSP) may be given to financing companies in good standing, to be amortized in five years, with a moratorium of six months on principal payment.
The PFA said since the industry is committed to supporting micro, small and medium enterprises (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 three to six months grace period prior to start of payment of monthly principal amortization and interest.
The group said 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 six-month moratorium on principal payment on existing loan tenors of financing companies.
“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,” Romano said.
He said the group has echoed its support in giving cash-strapped borrowers ample time for repayment.
Jude Romano, president of PFA, said the group supports the Bayanihan to Heal as One Act which 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.
Romano said 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 enhanced community quarantine.
“The financing companies can be a viable partner in helping the government extend financial assistance to the poor, to MSMEs 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.
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.
