By Bettina Faye V. Roc, Senior Reporter

More surety funds for SMEs

Posted on May 02, 2014

THE BANGKO Sentral ng Pilipinas (BSP) will set up more credit surety funds (CSF) this year through 2015 to support its bid to improve small businesses’ access to bank credit, an official said.

BSP Deputy Governor Diwa C. Guinigundo said the central bank will launch a total of 13 CSFs throughout the country over this year and next as part of its efforts towards greater financial inclusion.

“In 2014, we expect to put up one in Quezon City, Bataan, Marikina, Batangas, Camarines Sur, Muntinlupa, and in Quezon province,” Mr. Guinigundo said.

“Meanwhile, in 2015, we’ll launch CSFs for Agusan del Norte, Isabela, La Union, Nueva Ecija, Nueva Vizcaya, and Surigao del Norte,” the official added.

The CSF is a credit enhancement scheme developed by the BSP to facilitate access to bank credit for micro, small, and medium enterprises (MSMEs).

“Bank lending to MSMEs continues to be low, and this is partly due to factors like insufficient collateral, limited credit history, and inadequate financial records,” Mr. Guinigundo noted.

“The BSP supports greater financial inclusion via the CSF program,” he said.

The initiative, launched by the central bank in August 2008, works by pooling cash contributions from cooperatives, local government institutions, and government financial institutions like the Development Bank of the Philippines (DBP) and the Land Bank of the Philippines (Landbank).

These shared funds are then placed in a trustee bank and invested to serve as security for loans extended by banks to the MSMEs that are members of cooperatives that contribute to the CSF, in lieu of acceptable collaterals.

To join the CSF, a cooperative must meet various criteria, such as to have an adjusted net worth of not less than P1 million, a minimum capital-to-assets ratio of 15%, and an “active” status with the Cooperative Development Authority.

The maximum loan amount that a member-MSME can apply for is up to ten times its cooperative’s paid contributions to the fund. The surety cover is placed at a maximum of 80% of the approved loan amount.

Lenders supporting the facility are those with rediscounting lines with the BSP, the Landbank, and DBP.

As of March 31, 29 CSFs have been established all over the country, BSP data showed. Total pledges under the facility amount to some P465.5 million, up from the P461.3 million recorded as of end-2013.

The CSFs currently support some P1.12 billion in approved loans, more than the P1.069 billion registered as of last year’s close.

Beneficiaries of these facilities as of end-March totaled 8,421, also up from the 8,396 recorded last year.

Mr. Guinigundo noted that the CSF program has seen some encouraging results.

“By addressing some of the factors that deter banks from lending to MSMEs, it promotes a more inclusive financial system since more people will have better access to banking services,” the BSP official claimed.

“The program also supports poverty alleviation by encouraging more economic activities, resulting into more job opportunities,” added Mr. Guinigundo.