More LGUs interested in credit surety fund

MANILA, Philippines — More local government units (LGUs) have expressed willingness to participate in the credit enhancement program for small and medium enterprises (SMEs) established by the Bangko Sentral ng Pilipinas (BSP) more than 11 years ago.

Pia Bernadette Roman Tayag, managing director of the BSP’s Center for Learning and Inclusion Advocacy, said the LGUs in Kalinga, Tabuk City, and Davao del Sur have express willingness to organize the credit surety funds (CSFs) in their respective provinces.

“We want to ensure that the creation of CSFs is demand driven and based on the interest and commitment of the parties involved,” Tayag said.

The BSP initiated the CSF program in August 2008 as a credit innovation designed for those who cannot access bank credit due to lack of acceptable collaterals and credit information.

The CSF, through the issuance of a surety agreement, allows cooperatives and businessmen with viable business plans but limited capital to obtain loans from banks even in the absence of hard collaterals.

The CSF provides up to 80 percent surety cover for loans granted by banks to borrowers that would otherwise have difficulty assessing such credit facilities due to insufficient collateral, limited credit histories, and inadequate financial records, among other barriers.

“We see the CSFs as one of the credit enhancement mechanisms to encourage lending to SMEs. Through pooled contributions of participating cooperatives, LGUs and partners institutions, a fund provides a surety cover of 80 percent of an unsecured loan to an SME,” Tayag added.

She said the CSF, together with other “finfrastructure” like credit information and collateral registries are designed to spur credit to SMEs who are otherwise unable to access commercial funding.

Under Republic Act 10744 or the Credit Surety Fund Cooperative Act of 2015, Tayag said CSfs are now registered and regulated by the Cooperative Development Authority.

She said a total of 55 CSFs have been established nationwide, including 29 in Luzon, nine in Visayas and 17 in Mindanao.