EXECUTIVE ORDER NO. 138
EXECUTIVE ORDER NO. 138 - DIRECTING
GOVERNMENT ENTITIES INVOLVED IN THE IMPLEMENTATION OF CREDIT PROGRAMS
TO ADOPT THE CREDIT POLICY GUIDELINES FORMULATED BY THE NATIONAL CREDIT
COUNCIL
WHEREAS,
the government puts priority on the alleviation of poverty in the
country;
WHEREAS, greater access to financial services is considered one of the
important components in improving the living conditions of the
disadvantaged sectors of the economy;
WHEREAS, there a number of government-funded credit programs that are
inefficiently managed and implemented, resulting in huge inefficiencies
and waste of scarce government resources;
WHEREAS, the basic sector still lacks access to credit services despite
the proliferation of several directed credit programs implemented by
government line agencies;
WHEREAS, in 1994, Administrative Order No. 86 mandated the National
Credit Council (NCC) to rationalize directed credit programs with the
government providing a supportive and appropriate policy environment
and institutional framework towards a viable and sustainable financial
market;
WHEREAS, directed credit programs refer to those programs implemented
by the government which are funded out of budgetary allocation, special
funds from the government, loans or grants from donor agencies and are
lent out at subsidized interest rates;
WHEREAS, the government will continue to pursue a liberalized and
market-oriented economy where the private sector plays a major role and
the government provides the enabling environment for the efficient
functioning of markets and the participation of the private sector;
WHEREAS, this policy is explicitly espoused in the recently enacted
Agriculture and Fisheries Modernization Act and the Social Reform and
Poverty Alleviation Act;
WHEREAS, under this policy, subsidies provided by the government will
be transparent to encourage the private sector to provide financial
services to the basic sector. The government will, likewise provide
welfare assistance, instead of credit, to the most disadvantaged sector
of the economy;
WHEREAS, in accordance with the NCC mandate stated in AO No. 86 and as
the lead agency in the Flagship Program on Credit, the Social Reform
Agenda designated the National Credit Council (NCC) to formulate the
necessary policy guidelines for government credit programs;
NOW, THEREFORE, I, JOSEPH EJERCITO ESTRADA, President of the
Philippines, by virtue of the powers vested upon me by law, hereby
order the concerned government financial and non-financial agencies to
adopt the following policy guidelines for the implementation of credit
programs.
Section 1. The policy of providing the basic sector
access to financial services is anchored on the following principles:
•
Greater role of the private sector in the provision of financial
services to the basic sector;
• Adoption of
market-oriented financial and credit policies, e.g. market-oriented
interest rates on loans and deposits;
• Government
to provide an enabling policy environment, critical support services
and capability-building services that will facilitate the increased
participation of the private sector in the delivery of credit services;
•
Non-participation of government non-financial agencies and
government-owned and controlled corporation in the implementation of
credit programs.
Sec. 2. In line with the foregoing policy
principles, the following policies on savings and interest rates will
be adopted:
Savings
Mobilization
• Savings
mobilization will be promoted and encouraged among financial
institutions engaged in the delivery of financial services within the
appropriate regulatory framework.
• Use of
internally generated funds and savings deposits as source of loanable
funds will be given priority.
• Appropriate
regulatory and prudential standards will be enforced to promote the use
of small savings instruments, particularly in the rural areas.
Interest Rate
• Interest
rates charged for government credit programs should not be lower than
the prevailing market rates.
• The recovery
of financial and operational costs of the wholesale/retail financial
conduit should be a paramount consideration in interest rate
setting.
Sec. 3. The following guidelines will also be
adopted and used by the various institutions involved in the delivery
of credit services:
a.
National Government Non-Financial Agencies (GNFAs) and Government-Owned
and Controlled Corporations (GOCCs)
1.
GNFAs will focus on the provision and facilitation of critical services
such as basic rural infrastructure (e.g. rural roads, farm to market
roads, irrigation services, etc.), human and organizational
infrastructure to make rural-and-urban based on micro-enterprises
profitable.
2. GNFAs and
GOCCs in partnership with appropriate private sector institutions will
focus on the provision of capability building services (e.g. education
and training, operation of information centers, etc.) to those
institutions in the delivery of credit services to the basic sector.
3. GNFAs and
GOCCs will no longer be engaged in providing credit services directly
or indirectly to various sectors. Funds of existing credit programs
being implemented by GNFAs will be channeled through GFIs. GNFAs will
work closely with GFIs in identifying the broad target clientele. The
credit decision will be with the GFIs.
4. GNFAs and
GOCCs are directed to immediately start the rationalization of directed
credit programs that they are currently implementing in accordance with
the rationalization program of the National Credit Council.
5. Designated
regulatory authorities (e.g. Cooperative Development Authority (CDA)
for coops and Bangko Sentral ng Pilipinas (BSP) for private financial
institutions) will establish regulatory and supervisory standards
appropriate for credit institutions engaged in the delivery of
financial services. A system to monitor the implementation of credit
programs of government financial institutions will also be established
under the responsibility of the National Credit Council.
b. Government
Financial Institutions (GFIs)
1.
GFIs will be the main Government vehicle for the delivery of credit
services to the clientele by providing wholesale funds to private
financial institutions that will be engaged in retail lending. Private
financial institutions shall include rural banks, thrift banks,
development banks, cooperatives, cooperative rural banks,
non-government organizations and people’s organizations and other
financial institutions regulated by the Bangko Sentral ng Pilipinas
with acceptable experience in credit delivery.
2. For sectors
not adequately served by the private financial institutions, GFIs may
provide retail services to these sectors.
3. In line
with the direction to move towards wholesale lending, GFIs should
develop and strengthen institutional and financial linkages with
participating private financial institutions.
c. Donor
Agencies and External Funding
1.
The government/GFIs will tap external funding if the terms of the
funding do not result in the distortion of the financial market.
2. Grant funds
from donor agencies will only be used to finance capability and
institution-building activities. Grant funds for on-lending may be
allowed as long as the relending terms and conditions of the fund shall
conform to the guidelines provided in this Order.
3. Use of loan
funds from donor agencies for on-lending purposes of GFIs will be
subject to approval by the Department of Finance. The National Credit
Council, in coordination with concerned government agencies, shall
undertake the review of proposed loan programs and make pertinent
recommendations to the DOF.
Sec. 4. The National Credit Council is hereby
directed to formulate the operating guidelines of this Executive Order
in consultation with the concerned agencies of the government, and
implement a rationalization program for Directed Credit Programs using
the policy guidelines in this Executive Order. In view of this, the
Department of Budget and Management (DBM) is directed to coordinate
with the National Credit Council before budgetary funds for the
implementation of Credit Programs by GNFAs and GOCCs are released.
Sec. 5. All government financial and non-financial
agencies are directed to adopt these policy guidelines.
Sec. 6. The government directed credit programs to
be covered by this executive order include those but not limited to the
list shown in Annex 1 of this Executive Order.
Sec. 7. This Executive Order shall take effect
immediately.
DONE in the City of Manila,
this 10th day of August, in the year of Our Lord, nineteen hundred and
ninety nine.
SUMMARY INFORMATION ON DIRECTED CREDIT PROGRAMS (DCPs)