MSME loans under CSF program reach P5 billion

MANILA, Philippines — Total loans approved by banks to micro, small and medium enterprises (MSMEs) under a credit enhancement scheme has reached P5 billion a decade after it was launched, the Bangko Sentral ng Pilipinas (BSP) said.

BSP Deputy Governor Diwa Guinigundo said P5 billion worth of loans have been approved by banks under the central bank’s Credit Surety Fund (CSF) program that was launched in 2008.

Guinigundo said the loans were disbursed to around 17,000 beneficiaries as of end May this year.

The BSP initiated the CSF program in August 2008 as a credit innovation designed to improve access to bank credit amid 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 central bank continues to ramp up the launch of CSF in more cities and provinces nationwide as part of efforts to develop a more inclusive financial system.

Guinigundo said the BSP is now talking with local government units (LGUs) to prepare the required ordinances as it intends to launch three to four CSFs starting July or August this year.

The BSP is looking at the cities of Naga and San Jose, as well as the provinces of Camarines Norte and Sultan Kudarat in Mindanao. The pipeline also includes the cities of Tacurong and Digos, as well as the province of Dinagat.

The BSP last launched a CSF in November last year. The launch of the CSF in Batangas City brought to 51 the number of cities and provinces covered by the credit enhancement scheme program. It now operates in 31 provinces and 20 cities nationwide.

Based on the 2015 statistical data provided by the Philippine Statistics Authority, 99.5 percent of the establishments in the Philippines are MSMEs.

One of the roadblocks for their continued growth is access to financing, prompting MSMEs to succumb to loan sharks or the “5-6” lenders who charge exorbitant interest rates.

Based on an impact assessment survey conducted in 2014 and 2015, the credit obtained from CSFs by MSMEs allowed them to increase their average number of employees by 30 percent, their sales by 26 percent, and their monthly profit by 41 percent.

Likewise, revenues of local government units (LGUs) increased 37 percent from taxes and fees.