Loans disbursed by credit surety funds hit P6.9B at end-2020

BORROWINGS from credit surety funds (CSF) amounted to P6.925 billion last year as more micro-, small- and medium-sized enterprises (MSME) needed financing, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Wednesday.

The central bank chief said estimates from a BSP survey of 30 CSF correspondents showed loans from the program reached P6.925 billion as of end-December.

Credit extended by CSFs stood at just P2.08 billion in 2015, which was when the program was institutionalized under the Republic Act 10744 or the Credit Surety Fund Cooperative Act.

“The same upward trend can be seen in the cumulative number of beneficiaries with only 66 in 2009 growing to 15,233 in 2015,” Mr. Diokno said in an online briefing.

“As of end-2020, an estimated 17,527 beneficiaries have benefited from the CSF program since its launch as an advocacy program in 2008,” he added.

There were 55 CSFs across the country as of 2020, 14 of which are registered with the Cooperative Development Authority (CDA), which is the lead implementer of the program. For its part, the BSP is in charge of the promotion of CSF cooperatives and providing technical assistance for both CDA and CSF cooperatives.

“At least 15 more CSFs are expected to be registered by yearend with the rest likely to complete the process next year,” Mr. Diokno said.

Funds disbursed through the program come primarily from the contributions of well-capitalized cooperatives and local government units, as well as government financial institutions such as the Development Bank of the Philippines, Land Bank of the Philippines, and the Philippine Guarantee Corp.

The program is meant to provide financing for small businesses, as it gives “a maximum surety cover of 80% to loans granted by banks to MSMEs, which serves as an alternative to hard collaterals”, Mr. Diokno said.

While MSMEs make up about 99% of the country’s businesses, the sector faces financing constraints due to collateral requirements.

“Through this [CSF] mechanism, banks gain additional confidence in lending and expanding their exposure to cooperatives and MSMEs. At the same time, cooperatives and MSMEs under the program enjoy access to bank financing to enable them to grow their business, create jobs, and support their local economy,” Mr. Diokno said. — L.W.T. Noble