By Melissa Luz T. Lopez
Senior Reporter
LOANS issued to small businesses surged in 2017 to nearly P1 billion, the Bangko Sentral ng Pilipinas (BSP) said, with lending supported by new rules on credit surety which took effect last year.
In its annual report, the central bank said some P952.2 million worth of loans were released through its credit surety fund (CSF) program between January and November 2017. Loan disbursements over the 11 months topped the 2016 total of P903.804 million.
Outstanding loan balances amounted to P1.1 billion at the end of November, with 713 new beneficiaries reached under the CSF program as six new credit facilities opened last year.
The central bank’s CSF program provides alternative collateral for micro, small, and medium-scale enterprises (MSMEs) by organizing them into cooperatives to pool funds. CSF units serve as guarantors for their members and non-government organizations as they apply for credit lines from banks, effectively improving the chances for these small businesses to obtain bank loans.
A firm can borrow as much as 10 times the amount which it contributed to the surety fund, with a minimum amount set at P100,000.
Since they began to be offered in 2008, credit surety loans amounted to P4.2 billion, P3.9 billion of which has been released to 16,993 small businesses, the BSP said.
The year 2017 saw new CSF cooperatives established in San Fernando, La Union; Tacloban City; Mandaue City; Sta. Rosa Laguna; Dinagat Islands; and Batangas.
This brought the program’s reach to 32 provinces and 19 cities, the BSP added.
Last year, the BSP eased rules on MSME credit by assigning a lower risk premium to CSF loans granted by banks, in a bid to prod increased lending to the sector.
The central bank through Circular 979 said loans extended to CSF-member businesses will be assigned a 20% risk weight, a substantial decline from the 75% weighting previously assigned to small-firm debt.
Banks have been lending sparingly to small firms despite a 10% credit quota required under Republic Act 9677 or the Magna Carta for MSMEs.
Under the law, banks must set aside 8% of their total loan portfolio for micro and small firms, while 2% should be allotted for medium-sized companies. However, only rural and cooperative banks are able to meet the lending requirements, with the bigger players opting to pay fines rather than take on the risk.
MSMEs account for 99% of companies and 60% of employment but contribute only 36% of gross value added, according to the May 2016 Investment Policy Review of the Organization for Economic Cooperation and Development.
