Loans for reforms offered to provincial governments

She said PROLEND or program lending for provincial governments intends to facilitate implementation of policy reforms at the LGU level in those key areas.

She clarified however that the loan package is a cost-sharing scheme. Programs for funding should be not more than 40-percent complete and enlisted in the LGU's annual investment plan.

Habulan said a program policy loan is intended to finance development projects of local governments provided these are implemented together with a policy reform agenda and have definite targets and schedules.

A borrower could loan as much as P200 million but its current borrowing capacity should be certified by the Bureau of Local Government Finance (BLGF) and the nature of reform factored in.

Interest rate is fixed for the entire loan term at not more than nine percent payable in 10 years. The loans could be released in four tranches based on compliance with certain requirements.

Habulan said the loan requires no collateral. She, however, said the memorandum of agreement should specify that the MFDO will request the Department of Budget and Management (DBM) to deduct the remaining outstanding loan if the LGU fails to pay after a grace period.

But mayors and governors present at the forum questioned the policy saying it is still the same as requiring a collateral.

Habulan stressed that the loan will be disapproved if it will be used to pay for other loans.

Habulan spoke at the forum on Harnessing LGU Corporate Capacities for Mindanao Development at the Apo View Hotel here.

The forum, organized by the Mindanao Basic Urban Services Sector Project (MBUSSP), was part of a month-long celebration of the enactment of the Local Government Code in October 1991.

The Code defines LGUs as both political units and corporate entities and gives them full autonomy to exercise proprietary functions in managing economic enterprises and public utilities.

But Virgilio Leyretana, chair of the Mindanao Economic Development Council, said earlier that 15 years after the law was enacted, much has to be done for the LGUs to fully harness their corporate potentials.