Many cooperatives that borrowed from the Development Bank of the Philippines (DBP) have struggled to meet their obligations under the public utility vehicle (PUV) modernization program, the bank's chief executive said.
During a Senate budget hearing on Tuesday, Aug. 27, Michael de Jesus, DBP president and chief executive officer, reported that the past due rate for cooperative loan obligations has risen to 25 percent.
This trend, de Jesus said, has led the DBP to suspend its loan programs for these cooperatives.
“I think the past due rate [for cooperatives] has gone up to 25 percent, which is very high,” said de Jesus.
The past due rate refers to the percentage of loans that borrowers are failing to repay on time. In banks, the ideal past-due rate typically ranges from one percent to five percent.
“So put a hold on that, although that is our mandate, it won’t be sustainable if we continue lending and there’s a high past due so we have to understand why there’s a past due and address those issues,” de Jesus said.
The DBP president emphasized that before the bank lends money, the authorities should ensure that route plans are approved by the local government and that there is a bigger downpayment.
“Before, I think there could be a five percent equity. Now, we’re asking for higher equity, 20, 25, 30 percent so that they have more skin in the game,” he further said.
The DBP and Land Bank of the Philippines each have a special loan program that provides access to operators and drivers to adequate funding for the PUV modernization program: the SPEED PUV Loan Program for Land Bank and the Program Assistance to Support Alternative Driving Approaches (PASADA Financing Program) for DBP.
The PUV modernization program, which dates back to 2017, aims to replace jeepneys with vehicles with at least a Euro 4-compliant engine to lessen pollution and replace PUVs not road-worthy by Land Transportation Office standards.
DBP’s current monthly amortization ranges from P38,000 to P40,000 for seven years.
In a separate Senate hearing, DBP Senior Vice President Rustico Cruz said that at least P8.4 billion of loans were approved to more than 100 transport cooperatives and corporations under the PASADA program.
The government-owned bank supporting the national government’s key development programs is seeking to amend its charter to increase its authorized capital stock from P35 billion to P300 billion to expand its credit assistance.