BSP to put up more Credit Surety Funds for MSMEs

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) aims to establish 13 more facilities across the country which will provide collateral for micro, small and medium enterprises (MSMEs) wanting to borrow from banks.

BSP Deputy Governor Diwa C. Guinigundo said they plan to launch seven Credit Surety Funds (CSF) this year and another six in 2015.

The CSF program, which is established in municipalities and provinces, supports the central banks’ objective of financial inclusion as this helps MSMEs gain access to credit. 

Guinigundo stressed small businesses usually face financing constraints such as insufficient collateral, limited credit history, and inadequate financial records.

As of end-2013, there were 29 CSFs across the country, with total loans extended amounting to P1.069 billion. 

The figures showed continuous improvement from the 26 CSFs established as of end-2012 and total loans approved reaching P615.6 million.

CSFs are formed through the cooperation of cooperatives, local government units, the Development Bank of the Philippines, the Land Bank of the Philippines, and the Industrial Guarantee and Loan Fund.

“The CSF facilitates access to bank credit of coop members of good standing, therefore addressing lack of collateral and insufficient credit history,” Guinigundo recounted.

“This improved credit, management and marketing skills of coop officers and staff,” he continued.

Aside from benefitting small businesses, the CSF also helps banks comply with the Magna Carta for MSMEs which requires them to allocate eight percent of their total credit portfolio for the small firms.

“This reduces banks’ credit risk from extending loans to MSMEs and promotes a more inclusive financial system since more people will have better access to banking services,” Guinigundo said.

As of end-2013, Guinigundo noted that banks’ compliance for loans to micro and small enterprises only reached 5.6 percent, below the prescribed allocation of eight percent.

The compliance for loans to medium enterprises, meanwhile, reached six percent last year, above the mandated two-percent allocation.

At the same time, the establishment of CSFs supports poverty alleviation in municipalities across the country as this encourages more economic activities and creates more jobs.