The
expansion of LGU depository banks to include private financial
institutions can accelerate local development by opening
up the capital market to the LGUs.
During its special general assembly early this month, the
league approved a resolution pushing the national government
to expand the number of private financial institutions to
be depository banks of LGUs.
 |
Gov.
George Arnaiz |
The
resolution’s sponsor, Oriental Negros Gov. George
Arnaiz, said that while the national government has been
pushing well-off LGUs to tap the capital market for their
financing needs and leave the more concessional funds to
the poorer ones, the former has not built the right financial
environment.
The governors underscored the fact that PFIs cannot lend
to LGUs because of government restrictions.
However, if the Department of Finance and the Bangko Sentral
ng Pilipinas expanded the number of PFIs to be depository
banks of LGUs this would lower interest rates of local government
lending because of the competition offered by these private
institutions.
The chief executives noted that the progress on the study
undertaken by the DOF, funded through the World Bank LOGOFIND
Project, is rather slow giving the impression that the government
is not serious in pursuing the proposal because of vested
interest.
On the other hand, the private sector through the Management
Association of the Philippines has seriously pursued the
matter and submitted a proposal to the BSP and a draft executive
order for the approval of Pres. Gloria Macapagal-Arroyo.
 |
Gov.
Tet Garcia |
Meanwhile,
Bataan Gov. Enrique Garcia Jr. sponsored a resolution requesting
the DOF to adopt the proper application of the concessional
terms of the Official Development Assistance (ODA) to benefit
the lower classes of LGUs.
He explained that the different on-lending terms and levels
of concessionality in the application of the Overseas Development
Assistance (ODA) distorts the financial market.
While the national government, through the National Credit
Council, has adopted a policy that lending rates should
be market-oriented in order to avoid distortions, it is
the GFIs who benefit from the margin between the borrowing
rate and the lending rate given the concessional terms of
ODA.
The governors cited the urgent need for the national government
to determine if part of this margin can be returned to the
national government for its programs to help LGUs pursue
its development initiatives.
The World Bank has funded the study for the purpose but
the recommendations are still under being considered by
the DOF, although the latter already needs to to submit
a proposal adopting the concessional terms imbedded in the
ODA channeled through GFIs. (AJS)
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