BSP puts up credit surety fund to guarantee coops loan from banks

Mar. 05, 2009

By CJ Kuizon
Davao Today

DAVAO CITY– The Banko Sentral ng Pilipinas (BSP) is putting up a Credit Surety Fund (CSF) in Davao city to address credit needs of cooperatives and small and medium enterprises (SMEs) during the time of the global financial crisis.

Louella Leones, assistant manager of the BSP Credit and Loans Department, said the CSF, launched in Cavite in August of last year, allows small and medium enterprises and cooperatives access to the banks loan portfolio by putting up a guarantee fund.

The program will assist SMEs in need of large capital to strengthen their businesses. Leones said a successful CSF has the potential to stir up economic activity, provide employment and generate additional revenue for the local government through business taxes and remittances.

But she said the BSP has been inviting selected well-managed and well-financed cooperatives to take part in the program by putting up their money that, together with the counterpart fund from the local government, will make up the guarantee fund. Of the 16 cooperatives that the BSP invited, nine cooperatives have put up a total of 10 million pesos, with contributions ranging from 100,000 to 5 million pesos.

She said the BSP hopes that the local government of Davao will put up a counterpart fund to match that of the cooperatives. On top of this, the Development Bank of the Philippines (DBP) and the Industry Guarantee Loan Fund (IGLF), a government corporation partly funded by the US government, have pledged additional funds, that will add up to the total guarantee fund.

But city officials said they are still looking for possible sources of the counterpart funds. Davao City mayor Rodrigo Duterte said he has ordered the local finance committee to find ways to finance the CSF.

The CSF will allow SME members of participating cooperatives to borrow up to ten times the amount that their cooperative has put up within the CSF. After an SME applies for a CSF-guaranteed loan, the cooperative where the SME belongs, will screen the members ability to pay before making the recommendation to the CSF oversight committee, a 12-member group composed of the nine participating cooperatives and representatives from the LGU, the DBP-IGLF group and the Department of Trade and Industry (DTI). The committee will conduct a separate credit investigation on the applying SME. The bank who will grant the loan will do another investigation.

Cooperatives and member SMEs have been clamoring for the CSF to start. Leones said SMEs usually have difficulties borrowing money from the banks, which usually prefer big borrowers. SMEs are also having a hard time putting up the necessary collateral. (CJ Kuizon/

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