Saturday, July 16, 2011

Where to borrow money (for local government units) – the Municipal Development Fund

Some Philippine cities, provinces and towns may not be aware of this, but there is a special law (PD 1914), establishing the Municipal Development Fund (MDF) as a revolving fund made available for the local government units. Initially capitalized and funded by proceeds of foreign loans, assistance or grants, the amortizations of LGUs accrue to MDF and made available for re-lending for LGU projects.

The Fund may be used for the following:

1. Public Economic Enterprise/ Revenue Generating Projects such as public market, trading post (bagsakan center), slaughterhouses, land transportation terminals, municipal wharves and fish ports, dry port, sea port, cargo port, barge, roll-on roll-off (Ro-RO), airport strip, post harvest facilities, cold storage facilities, ice plants, public memorial parks, water supply level III, toll roads, local electrification such as mini-hydro electric power plant, wind power and solar energy, income generating policy reform-related initiatives (i.e. RPTA computerization, one-stop shop taxpayers system, etc.), cemetery, crematorium, columbarium, funeral services, microfinance and livelihood projects, food processing facility, OTOP Programs, commercial centers and other public economic enterprise/revenue generating projects, breeding station, agro-industrial facilities, establishment of seed farm and seed banks, purchase of fries and fingerlings, solar dryer, and other related facilities and equipment.

2. Social and Environmental Projects such as water supply, health centers, lying-in clinics and hospitals, nursery, day care center, orphanage/ home for the aged facilities, school buildings, public library and information centers, communal irrigation, farm-to-market roads, rural roads and bridges, municipal hall, policy reform-related initiatives (computerization programs such as of Financial Management Information System, Community-Based Information and Monitoring System, etc.), training center, non-formal education facility, sports complex, gymnasium, basketball court, housing project, traffic management systems, multi-purpose pavement, and other related facilities and equipment; reforestation, forest-related activities, soil conservation, mangrove and watershed protection, river and seashore protection, ecotourism project, freedom parks, reforestation and agro-forestry, watershed protection, and biodiversity conservation and other related facilities and equipment.

3. Solid Waste Management Facilities including materials recovery facilities, recycling plant, sanitary landfills, drainage system, sewerage and sanitation support facilities, waste water treatment facility, public sanitary toilets, waste-to-energy facilities, septage management and other related facilities and equipment.

An interested LGU must be able to show its net borrowing capacity and must be prepared with a project or feasibility study.

Maximum repayment period is 20 years, and total interest rates hover between 6%-8% depending on the LGU category. The Fund is available for full cost financing and provides free technical assistance.

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