ADB: BSP credit facility for MSMEs needs boost

THE BANGKO Sentral ng Pilipinas-initiated Credit Surety Fund (CSF) is a big help to micro, small and medium-sized enterprises (MSMEs), but it needs to be improved to provide a more solid boost to the Philippine economy, according to the Asian Development Bank (ADB).

Based on an ADB working paper penned by Gary V. Maningo, the CSF’s lack of legal status and limited finances have restricted the fund’s ability to extend its reach to the great majority of MSMEs, specifically those which do not have access to regular banking facilities.

Started by the BSP, the CSF is a credit guarantee program that enables enterprises and cooperatives to get loans from banks without providing collateral.

Current funding comes from cooperatives and nongovernment organizations, local government units, Development Bank of the Philippines, Land Bank of the Philippines, the Industrial Guarantee and Loan Fund and other organizations.

The ADB  noted the CSF has been growing rapidly since it started in 2007, with 37 individual CSFs already in operation at the end of 2014.

Over the years, fund inflows have reached $10.5 million and total accumulated approved loans have reached $33.8 million. Of the total approved loans, $27.8 million has been released to 14,434 MSMEs.

“The CSF has been performing well and according to expectations,” Maningo wrote. “However, the CSF still faces several limitations and challenges, including its legal status and limited funding.”

For the CSF initiative to improve performance, Maningo said plans and strategies anchored on institutional change, aggressive promotional campaigns and expanded capacity building activities for the stakeholders and borrowers were needed.

“There remain key challenges to be addressed including the institutionalization of the program, more rapid processing of loan applications and increases in the quality of credit information,” Maningo said.

“In any case, the CSF has proven to be successful and has plans and strategies to further improve its operations and expand coverage to establish more local CSFs, expand the portfolio of loans covered, and increase the number of MSME loan beneficiaries,” he added.