The policy loan granted to local government units (LGUs) by the Department of Finances Municipal Development Fund Office (MDFO) could be an effective tool for implementing policy and institutional reforms at the local level.
Thus stated Philippine Institute for Development Studies Vice-President Gilberto M. Llanto in his paper, "Policy Lending for LGUs: An innovative Financing Instrument for Local Governments.
According to Llanto, the policy lending is an innovative way to influence policy reforms since it is not as limiting as the existing project-based lending where the project objectives and scope are more focused and time-bound.
The local program or policy loans of the MDFO are funds which are lent out for the purpose of assisting the local governments to attain or achieve certain policy targets or reform objectives. It may be used for budgetary support or for the implementation of an activity such as reform in local procurement. The end result of which is improved local fiscal performance or other reforms at the local level, Llanto explained.
The MDFOs policy loans are funded from the second-generation funds of the Municipal Development Fund (MDF). The MDF provides loans to local governments to finance revenue generating, infrastructure and social and environmental projects of local governments. The loan repayments have accumulated through the years into a second generation fund.
Llanto suggested that apart from the local policy program, the fund could also be used as a leverage to draw more funding for local projects without the need for more foreign loans.
Thus stated Philippine Institute for Development Studies Vice-President Gilberto M. Llanto in his paper, "Policy Lending for LGUs: An innovative Financing Instrument for Local Governments.
According to Llanto, the policy lending is an innovative way to influence policy reforms since it is not as limiting as the existing project-based lending where the project objectives and scope are more focused and time-bound.
The local program or policy loans of the MDFO are funds which are lent out for the purpose of assisting the local governments to attain or achieve certain policy targets or reform objectives. It may be used for budgetary support or for the implementation of an activity such as reform in local procurement. The end result of which is improved local fiscal performance or other reforms at the local level, Llanto explained.
The MDFOs policy loans are funded from the second-generation funds of the Municipal Development Fund (MDF). The MDF provides loans to local governments to finance revenue generating, infrastructure and social and environmental projects of local governments. The loan repayments have accumulated through the years into a second generation fund.
Llanto suggested that apart from the local policy program, the fund could also be used as a leverage to draw more funding for local projects without the need for more foreign loans.
