Department of Finance

Municipal Development Fund Office (MDFO)

HELENA B. HABULAN
Executive Director
23-September 2009
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
 MDFO

Fund
Administrator Implementor
Administrator Policy
of the MDF of LGU FAPs
of Foreign Formulation
Second (LOGOFIND,
Assisted Related to LGU
Generation CBRMP &
Projects (FAPs) Financing
Fund (SGF) HSRP)
for LGUs
MDFO/other MDFO Credit GFIs/BOTs Private Sources
Grants + TA +TA of Credit
(Bonds, BOTs)

Fully
Creditworthy
Creditworthy LGUs
LGUs by unable(14)
to tap market
Marginally (945)
Creditworthy
LGUs
Not (726)
Creditworthy
LGUs

Financially LGU Income Class Financially

Weakest Strongest
6th Class 1st Class
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)
 MDGF
Millennium Development
Goals Fund
 To support and fund LGU initiatives that
directly contribute to the attainment of
the MDGs.

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

2. Institutional Capacity Building

Component
Provides 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
MDGF sustainability
 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
MDGF Development of sites for socialized housing
purposes
 4th to 6th Income Class Municipalities

All Provinces provided the

beneficiaries are 4th to 6th Income
Class Municipalities

MDGF
 100% loan financing
INFRASTRUCTURE PROJECTS
Interest Rate : 8.0% per annum (fixed)
Repayments Period : 15 years inclusive of 3 years
grace period on principal payment
HEAVY EQUIPMENT
Interest Rate : 7.5% per annum (fixed)
Repayments Period : 10 years inclusive of 2 years
grace period on principal payment
SOFTER-SUPPORT PROJECTS
Interest Rate : 7.5% per annum (fixed)
Repayments Period : 5 years inclusive of 1 year
grace period on principal payment

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
 MDFP
Municipal Development
Fund Project
 Provide concessional financing
assistance to all LGUs for basic
urban infrastructures to improve the
delivery of basic services.

MDF
P
 Infrastructure

Environmental
Revenue Generating
Social
Other Infrastructures
Procurement of Equipment

MDF
P
 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)

MDF
P
 Provinces

Cities

Municipalities

MDF
P
 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 Equipment
Interest Rate : 9.0% per annum
(fixed)
MDF
P Repayments Period: 10 years
 DMAF
Disaster Management
Assistance Fund
 Provide financial support for
Disaster Risk Management
initiatives of LGUs

Enhance community resilience to

disaster

Promote economic growth

DMA
F
 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
DMA
F
Catego LGU Income Interest Repayment
ry Class Rate
1 Provinces 4th to 6th 4% 15 years inclusive of 3
years grace on the
1st to 6th 3% principal payment
Municipalities
2 Provinces All Income   3 years
Cities Classes 0%
 
Municipalities
3 Provinces 1st to 2nd 5% 15 years inclusive of 3
  3rd to 4th 4% years grace on the
principal payment
  5th to 6th 3%
Cities 1st to 4th 5%
  5th to 6th 4%
All Income 3%
Municipalities Classes

DMA
F
PROLEND
Program 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.

PROLE
ND
 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.

PROLE
ND
 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

PROLE
ND
 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.
PROLE
ND
 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.

PROLE
ND
 Interest Rate : based on 10 year T-bond rate

Repayment Period : 10 years inclusive of 3 years

grace period on principal payment

PROLE
ND
 PTACF
Project Technical Assistance and
Contingency Fund
 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 Maximum Loan
Subprojects/Activities Amount*
1. Feasibility Studies 3% of estimated
project cost
2. Detailed Engineering 6% of estimated
Design (DED) project cost

3. Foreign Exchange Actual cost

Differential
4. Others T.A. Actual cost
Requirements of
Should beLGUs
within LGUs’ Net Borrowing Capacity

PTACF
 All income class LGUs, except
highly urbanized cities

PTACF
 Interest rate for FS and DED
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 contingency financing shall be

subject to PGB approval
Loan 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
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