BSP, Baguio to establish P4.8-M surety fund

MANILA, Philippines - Small businesses operating in Baguio City will soon have more access to credit as the Bangko Sentral ng Pilipinas (BSP) announced plans to tie up with the local government to establish a fund worth at least P4.8 million.

In a statement last Wednesday, BSP said it will sign a memorandum of agreement with Baguio on Monday for the official launch of its 26th credit surety fund (CSF) at the Baguio Country Club in the city.

 “Seven cooperatives/NGO’s (non-government organizations) from Baguio City joined the Baguio CSF with an aggregate contribution of P2.8 million, while the City Government of Baguio pledged to contribute P2 million,” BSP said.

 “Likewise, the Development Bank of the Philippines expressed strong support to the CSF program by contributing its counterpart pledge to the Baguio CSF,” it added.

The central bank initiated the CSF program in 2008 to give micro, small and medium enterprises (MSMEs) easier access to bank loans. MSMEs are seen difficult to secure bank funding as they are perceived risky in the absence of good capital and collateral.

BSP said CSF “essentially links” MSMEs to banks by tagging cooperatives, local government units and NGOs to pool funds, which in return, is as credit surety cover for members’ bank loans. The cover plays the role of collateral.

The central bank, for its part, allows banks which extend loans under the CSF program to replenish their fund through the regulator’s rediscounting facility. The facility assists lenders in meeting their short-term liquidity requirements.

The end goal is to ensure MSMEs, which according to government data account for more than 90 percent of total businesses in the Philippines, are able to continue and expand operations to provide employment and in effect, contribute to growth and well-being.

 “It is essentially a public-private partnership which links the key players of the economy into a unified purpose of empowering the MSME sector,” BSP said.

 “With the integrated training component system to help strengthen participating cooperatives in the areas of business plan preparation and loan appraisal, businessmen are expected to take advantage of this credit enhancement scheme,” it added.

As of the first semester, BSP data showed there are 276 cooperatives and 90 non-government institutions contributing to various credit surety funds nationwide an estimated P350 million.