BSP ramps up launch of credit surety fund

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is ramping up the launch of credit enhancement schemes in more cities and provinces nationwide as part of efforts to develop a more inclusive financial system.

BSP Deputy Governor Diwa Guinigundo said the credit surety fund (CSF) program would be launched in the cities of Naga and San Jose, as well as the provinces of Camarines Norte and Sultan Kudarat in Mindanao.

“We are looking at launching four CSFs this year,” he said.

Others in the pipeline include the cities of Tacurong and Digos, as well as the province of Dinagat.

The CSF was initiated by the BSP in 2008 for micro, small, and medium enterprises (MSMEs) that cannot access bank credit due to lack of hard collaterals and credit history. The fund is created through the pooling of monetary contributions from cooperatives, non-government organizations, local government units, and partner institutions.

The fund serves as an alternative security in lieu of the hard collaterals required by banks, thereby helping capital-short MSMEs with viable business plans gain access to bank loans.

The scheme aims to enhance the creditworthiness of MSMEs and broaden their access to the credit facilities of banks and at the same time sustain the continuous flow of credit in the countryside through the establishment of well and prudently managed CSFs which shall serve as surety covers.

Last Nov. 7, the BSP launched a CSF in Batangas City bringing to 51 the number of cities and provinces covered by the credit enhancement scheme program.

The BSP said total CSF loans to 16,000 beneficiaries stood at P3.8 billion as of end-September and 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.