The Bangko Sentral ng Pilipinas has announced the creation of a new credit surety fund (CSF) to boost micro small and medium enterprises (MSMEs) in the country.
With the establishment of CSFs, low-income traders will get as much chance as the high-income ones to expand their businesses and increase their profits, the central bank said.
CSF is a pool of money contributed by cooperatives, local government units, state-owned banks, and other entities, which will serve as collateral for MSMEs trying to secure bank loans.
The BSP will take the lead in organizing CSFs in various parts of the country.
According to the regulator, MSMEs usually find it difficult to secure bank loans because most lack assets that can serve as collateral. CSF will ease an MSME’s access to bank loans.
The CSF in Capiz will be formally launched on March 7. This is the 21st CSF in the country.
The central bank said it would spearhead the creation of more CSFs over the short term to spur economic activities in the countryside.
“The CSF program is expected to increase lending activities, as well as stimulate business and economic activities, generate employment, and increase the local government’s revenues,” the BSP said in the statement.
MSMEs account for over 90 percent of enterprises in the country. They also account for over 70 percent of employment.
Their problem on access to bank loans, however, was cited as a major hindrance to the development of that sector.
The improved access to loans and other financial services in the country is one of the key measures that the BSP believes will be crucial to achieving “inclusive” economic growth.
Developmental institutions, including the World Bank and the Asian Development Bank, have urged the Philippine government to strive for inclusive growth—one that benefits even the low-income sector.
This, they said, would be vital in reducing poverty specially in the countryside.
The developmental institutions credited the Philippines for maintaining a steady pace of economic growth over the years, even during the height of the global economic crisis in 2009. But they have also aired their concern that growth in the country has not trickled down to the low-income groups.
Poverty incidence in the Philippines, as of 2009, stood at 26.5 percent of the country’s population, according to the latest statistics.