As a major boost for Small & Medium Enterprises (SMEs), the state-owned Philippine Guarantee Corporation (PHILGUARANTEE) has partnered with Discovery Capital Finance Corporation (DCFC), one of the fastest-growing financing institutions in the Philippines, to expand credit access across the country.
The strategic alliance leverages PHILGUARANTEE’s mandate as the Principal Agency for State Guarantee Finance to share in MSME credit risk, allowing DCFC to channel more capital into the SME sector, which is considered as the backbone of the Philippine economy.
A Foundation of Risk Mitigation
The partnership centers on PHILGUARANTEE providing credit guarantees on loans extended by DCFC under its various financing programs. This critical sovereign guarantee shares the credit risk exposure of DCFC. A key factor that often limits lending to smaller, growing businesses is information asymmetry which increases the risk in lending.
Diosdado C. Salang, Jr., the DCFC President & CEO, highlighted the fundamental mechanism driving this expanded financing capacity.
“This is a transformational partnership for us and, more importantly, for the Filipino entrepreneur. The guarantee from PHILGUARANTEE covers a portion of outstanding principal, protecting us, the financial institution, from credit risk,” said Mr. Salang. “This significantly reduces our risk, which in turn allows us to lower our cost of funding for these loans, enabling us to be more competitive and extend credit to a broader segment of the market.”
Three-Fold Benefit to SMEs: More Access, Better Terms, Faster Growth
The direct impact of this partnership will be immediately felt by SMEs, particularly those located in the provinces and in underserved areas where DCFC maintains a strong physical presence. The benefits are summarized in three key areas:
1. Increased Access to Capital (Enables More Lending)
The core benefit of this partnership is to encourage DCFC in increasing its lending volume to sectors and businesses it might otherwise have considered too risky. This means that more SMEs—from micro-entrepreneurs to mid-sized firms — will have higher chances to qualify for much-needed working capital and loans crucial for expansion.
2. Lower Cost of Funding (More Favorable Terms)
With a reduced risk profile owing to PHILGUARANTEE’s partnership, DCFC can now offer more favorable and competitive interest rates on their SME loan products. This reduces the financial burden on small businesses, making their repayment terms more manageable and improving their cash flows.
3. Accelerated Economic and Regional Growth
By removing financing bottlenecks, the alliance directly supports national development goals. The swift injection of capital into businesses nationwide, supported by DCFC’s wide network, fuels job creation and stimulates local economic activity across Luzon, Visayas, and Mindanao.
This partnership is viewed by both institutions as a strong commitment to financial inclusion, ensuring a level playing field for MSMEs with high-growth potential and never hampered by a lack of capital access.
, the state-owned Philippine Guarantee Corporation (PHILGUARANTEE) has partnered with Discovery Capital Finance Corporation (DCFC), one of the fastest-growing financing institutions in the Philippines, to expand credit access across the country.){kind=link}