Loans to MSMEs under credit guarantee scheme hit P 7B

Total loans extended to small businesses under a government guarantee program has been rising steadily, which will, in turn, help Filipino entrepreneurs weather the ongoing pandemic, according to the central bank.

In an online briefing, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said that cumulative micro, small and medium enterprise loans released under the Credit Surety Fund (CSF) scheme reached an estimated P6.93 billion in December 2020, based on a survey conducted by the regulator.

The CSF is a credit enhancement mechanism designed to address the challenges of the 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 that many small businesses are unable to provide.

The BSP reported that as of end-2020, an estimated 17,527 MSME borrowers have benefited under the CSF initiative since its launch as an advocacy program in 2008.

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

As of March 31, 2021, 55 CSFs have been established across the country, of which 14 are registered with the Cooperative Development Authority (CDA). At least 15 more CSFs are expected to be registered by yearend, with the rest likely to complete the process next year.

In 2016, the CSF program was institutionalized under Republic Act No. 10744, or the “Credit Surety Fund Cooperative Act of 2015,” which established the CSF as a new type of cooperative under the supervision of the Cooperative Development Authority. Under the law, the BSP is mandated to promote the organization and capacity building of CSF cooperatives. INQ