HELENA B. HABULANExecutive Director

23-September 2009

Municipal Development Fund Office (MDFO)Department of Finance

MDF/MDFO Background

MDFO Financing Facilities

MDF is a Special Revolving Fund for LGUs established under PD 1914 (29 March 1984)

Capitalized by proceeds of loans and grants from ODA and MDF Second Generation Fund (MDF-SGF)

Exclusively for re-lending to LGUs

Disbursement of MDF-SGF does not require budget appropriation

MDFO was created under EO 41 (20 November 1998)

Promote LGU self-reliance in undertaking socio-economic development programs through effective system of making ODA available to LGUs

Establish LGU creditworthiness to help access private funds

Secretary of Finance or designated Undersecretary Chairman

Deputy Director-General of the National Economic & Development Authority (NEDA) Member

Undersecretary of Public Works & Highways (DPWH) Member

Undersecretary of Budget and Management (DBM) Member

Undersecretary of the Interior and Local Governments (DILG) Member

Executive Director of the MDFO Ex-Officio Member_____________________________________________________________ The representative of the Undersecretary members shall be of a rank not

lower than Assistant Secretary level.

MDFO

Administrator of the MDF Second Generation Fund

(SGF)

Implementor of LGU FAPs

(LOGOFIND, CBRMP & HSRP)

Policy Formulation

Related to LGU Financing

Fund Administrator of Foreign Assisted

Projects (FAPs) for LGUs

Private Sources of Credit (Bonds, BOTs)

GFIs/BOTsMDFO Credit+TA

MDFO/otherGrants + TA

6th Class

Financially Strongest

1st Class

FinanciallyWeakest

LGU Income Class

Not Creditworthy LGUs

Marginally Creditworthy LGUs(726)

Creditworthy LGUs by unableto tap market(945)

Fully Creditworthy LGUs(14)

1. Millennium Development Goals Fund (MDGF)

2. Municipal Development Fund Project (MDFP)

3. Disaster Management Assistance Fund (DMAF)

4. Program Lending (PROLEND)

5. Project Technical Assistance and Contingency Fund (PTACF)

MDGFMDGFMillennium Development Goals Millennium Development Goals

FundFund

To support and fund LGU initiatives that directly contribute to the attainment of the MDGs.

MDGF

1. Investment Support ComponentProvides financial assistance for infrastructure and capital investment projects on soft credit scheme

2. Institutional Capacity Building ComponentProvides technical assistance and advisory services relative to the stages of the project cycle

MDGF

Subprojects related to the achievement of the Millennium Development Goals

MDG 1 – Eradicate extreme poverty and hunger

MDG 2 – Achieve universal primary education

MDG 3 – Promote gender quality

MDG 4 – Reduce child mortality

MDG 5 – Improve women’s reproductive Health

MDG 6 – Combat HIV/AIDS, Malaria and other diseases

MDG 7 – Ensure environmental sustainability

MDGF

Environmental protection programs

Community based forestry management subprojects which include integrated social forestry in communal forest

Livelihood facilities and community organizing activities in relocation sites

Rehabilitation, protection and maintenance of community watershed areas in collaboration with other agencies

Construction/Improvement/Rehabilitation of water systems

Construction of individual/sanitary public toilets

Development of sites for socialized housing purposes

MDGF

4th to 6th Income Class Municipalities

All Provinces provided the beneficiaries are 4th to 6th Income Class Municipalities

MDGF

INFRASTRUCTURE PROJECTSInterest Rate : 8.0% per annum (fixed)Repayments Period : 15 years inclusive of 3 years grace period on principal

payment

HEAVY EQUIPMENTInterest Rate : 7.5% per annum (fixed)Repayments Period : 10 years inclusive of 2 years grace period on principal

payment

SOFTER-SUPPORT PROJECTSInterest Rate : 7.5% per annum (fixed)Repayments Period : 5 years inclusive of 1 year

grace period on principal payment

100% loan financing

MDGF

No upfront collateral

No hold out on IRA

IRA deduction in case of default in repayment

Lower Interest Rate

No commitment fees

No pre-termination charge

Institutionalization of Design Monitoring Framework (DMF) per LGU project to enhance the success rate and target attainment

MDGF

MDFPMDFPMunicipal Development Fund Municipal Development Fund

ProjectProject

Provide concessional financing assistance to all LGUs for basic urban infrastructures to improve the delivery of basic services.

MDFP

Infrastructure

Environmental

Revenue Generating

Social

Other Infrastructures

Procurement of Equipment

MDFP

Solid Waste Management – Materials recovery facility, sanitary landfill and composting facility

Land Conservation – river/seashore protection and seawall protection

Air Quality Management in support to the Philippine Clean Air Act 1999

Water Management – sewerage system, drainage system and waste water treatment facility (biogas digester)

MDFP

Provinces

Cities

Municipalities

MDFP

100% loan financing

Equity is optional

Repayment Scheme:

INFRASTRUCTURE PROJECTS Interest Rate : 9.0% per annum (fixed)Repayments Period : 15 years inclusive of 3 years grace period on principal payment

Heavy EquipmentInterest Rate : 9.0% per annum (fixed)Repayments Period : 10 years inclusive of 2 year

grace period on principal paymentMDFP

DMAFDMAFDisaster Management Assistance Disaster Management Assistance

FundFund

Provide financial support for Disaster Risk Management initiatives of LGUs

Enhance community resilience to disaster

Promote economic growth

DMAF

Category 1 - Disaster Prevention and mitigation related projects

Reforestation

Natural Hazard Mapping

Slope Stabilization Projects

Category 2 - Response and Relief related projects

Category 3- Recovery and Rehabilitation projects

DMAF

DMAF

Category LGU Income Class

Interest Rate Repayment

1 Provinces 4th to 6th 4% 15 years inclusive of 3 years

grace on the principal payment Municipalities 1st to 6th 3%

2

Provinces All Income

Classes

3 years Cities 0%

Municipalities

3

Provinces 1st to 2nd 5%

15 years inclusive of 3 years grace on the principal payment

3rd to 4th 4%

5th to 6th 3%

Cities 1st to 4th 5%

5th to 6th 4%

Municipalities All Income Classes 3%

PROLENDPROLENDProgram LendingProgram Lending

Funds lent out to finance development projects of LGUs willing to pursue a policy reform agenda, with clear and well-defined deliverables to be completed within a time-bound period.

PROLEND

Service Delivery – provide relevant, effective, timely, and operational and cost efficient delivery of critical and basic public goods and services clearly linked to measurable outcomes of customer (community) satisfaction.Congruence with National Policy Objectives and Programs – support national policy objectives and enhancing the achievement of national government programs at the provincial, city and municipal level.

Revenue Generation - increase revenues mainly through the efficient, effective, and creative establishment, imposition, and collection of local taxes, charges and fees.Expenditure Management - improve efficiency in the allocation and utilization of resources, encouraging and institutionalizing transparency and accountability in fiscal and financial governance.

PROLEND

Environmental and natural resources management with special attention to public health, solid waste management, wastewater management, bio-diversity conservation and coastal resource management

Inter-LGU partnerships for Natural Resources Management Programs

Watershed Management Program

Integrated Area Development Programs

PROLEND

Must be a provincial LGU

Must have a positive borrowing capacity.

Provincial government is willing to pursue the policy reform in majority, if not all, of its municipalities and component cities. The number of the municipalities and component cities to be covered by the reform agenda must at least be equal to 50% plus 1.

Must have already started a reform program but not more than 40% completed since this will be the basis for the first tranche.

PROLEND

Not more than P200 Million

Or

Fifty Percent (50%) of the current borrowing capacity as certified by the Bureau of Local Government Finance, whichever is lower.

PROLEND

Interest Rate : based on 10 year T-bond rate

Repayment Period : 10 years inclusive of 3 years grace period on

principal payment

PROLEND

PTACFPTACFProject Technical Assistance and Contingency Project Technical Assistance and Contingency

FundFund

1. Help accelerate the LGU preparation and submission of feasibility studies and detailed engineering design.

2. Create a fund to finance the actual foreign exchange differentials of LGUs incurred in their project implementation.

3. Provide a source of financing for other technical assistance needs of LGUs.

PTACF

Eligible Subprojects/Activities Maximum Loan Amount*

1. Feasibility Studies 3% of estimated project cost

2. Detailed Engineering Design (DED) 6% of estimated project cost

3. Foreign Exchange Differential Actual cost

4. Others T.A. Requirements of LGUs Actual cost

* Should be within LGUs’ Net Borrowing Capacity

PTACF

All income class LGUs, except highly urbanized cities

PTACF

LGU Income Classification Interest rate

4th - 6th class municipalities 0%

2nd - 3rd class municipalities 0.50%

1st class municipalities 1.0%

Cities and Provinces 1.50%

Interest rate for FS and DED

Interest rate for contingency financing shall be subject to PGB approvalLoan should be repaid within the term of the Local Chief Executive

PTACF

MDF-SGF Loans cannot be used for the following purposes:

Expenses for Administration, Operation, and Maintenance

Travel Expenses and Luxury Vehicles

Debt Servicing Requirements

Payment of Taxes, Duties and Other Charges

Acquisition of Property, Real or Personal

Acquisition of Firearms, Explosives, and Ammunition

1. Letter of Intent – duly signed by the Mayor/Governor

2. Sangguniang Bayan Resolution

3. Feasibility study / project proposal

4. Certificate of Net Borrowing Capacity