Loans to MSMEs under CSF near P7 billion

MANILA, Philippines — Loans released to micro, small and medium enterprises (MSMEs) under the credit surety fund (CSF) are now nearing P7 billion, according to the Bangko Sentral ng Pilipinas.

BSP Governor Benjamin Diokno said in his weekly virtual press conference that loans released under the CSF reached P6.92 billion, benefitting 17,527 borrowers as of end-2020.

“The CSF demonstrates the power of partnerships. By bringing together regulators, financial institutions, local government units, cooperatives and non-government organizations, the CSF becomes an effective tool not only for sustainable MSME financing, but also for economic development and poverty reduction,” Diokno said.

The CSF is a credit enhancement mechanism designed to address the challenges of MSMEs and their cooperatives in accessing bank financing due to lack of collateral and credit history.

It provides a surety cover of up to 80 percent of the bank loan availed by a qualified member, which serves as an alternative to hard collateral most MSMEs are unable to provide.

Managed and administered by a CSF cooperative, the fund is generated primarily from the contributions of well-capitalized cooperatives and local government units (LGU) as well as government financial institutions including the Development Bank of the Philippines, Land Bank of the Philippines and the Philippine Guarantee Corp.

As of end-March, Diokno said a total of 55 CSFs have been established, 14 of which are already registered as cooperatives with the Cooperative Development Authority (CDA) nationwide.

The BSP chief said 15 more CSFs are expected to be registered within the year, with the rest likely to complete the process next year.

Republic Act 10744 or the Credit Surety Fund Cooperative Act of 2016 established the CSF as a new type of cooperative under the supervision of the CDA.

The law mandated the BSP to promote the organization and capacity building of CSF cooperatives. It launched a series of webinars for the CSFs in partnership with the CDA to discuss how to manage liquidity, governance, legal concepts on sureties, credit appraisal and monitoring, and loan collection and debt management.

This year, the webinar series will focus on digital payments and the digital economy to help the CSFs and their members better navigate the new operating environment shaped by the pandemic.

The BSP is committed to undertake the necessary interventions to support the development of the CSF cooperatives as a valuable credit infrastructure in their local communities.

“Under the CSF program, cooperatives and MSMEs can have better access to bank financing while banks can gain additional confidence in expanding their loan portfolio to these borrowers,” Diokno said.

Last month, the BSP and the CDA inked an agreement to ensure access to financing for MSMEs affected by the impact of the COVID-19 pandemic.

The MSME sector accounts for 99 percent of business establishments and 63 percent of the total workforce in the Philippines.