Loans to small firms surge to P4.6B in 2017

LOANS GRANTED to smallscale firms surged in 2017 as the central bank relaxed rules on pricing risks and as more credit surety fund ( CSF) groups were created during the year.

Data from the Bangko Sentral ng Pilipinas ( BSP) showed that approved loans to small businesses reached P4.586 billion as of end-2017 via CSF cooperatives. This showed a 41% jump

from the P3.253 billion of accumulated CSF credits in 2016.

Of the amount, P4.316 billion has been released to 17,169 beneficiaries as of December.

The central bank’s CSF program provides alternative collateral for micro, small, and medium- scale enterprises ( MSMEs) by organizing them into cooperatives with a pooled fund. CSF units then serve as guarantors for its member businesses and non- government organizations as they apply for credit lines from banks, in order to improve their chances of securing loans.

A firm can incur a loan worth as much as 10 times the amount which they poured into the surety fund, with the minimum placement set at P100,000.

The central bank relaxed banking rules covering small business loans underwritten by CSF cooperatives last year. BSP Circular 979 assigned a 20% risk premium to CSF credit, a substantial drop from a 75% weight assigned to debts extended to MSMEs.

Implementing rules for Republic Act ( RA) No. 10744 which made permanent the CSF system also took effect in October 2017, which brought the BSP and the Cooperative Development Authority together in assisting and organizing small firms into formal entities.

The year 2017 also saw six new CSF cooperatives established in San Fernando, La Union; Tacloban City, Leyte; Mandaue City, Cebu; Sta. Rosa Laguna; Dinagat Islands; and Batangas. This brought the program’s reach to 32 provinces and 19 cities, the BSP added.

RA 9677 or the Magna Carta for MSMEs require banks to set aside a tenth of their loanable funds for small businesses. In particular, lenders must allot 8% of its total loan portfolio for micro and small firms, while 2% should be allotted for medium-sized companies.

Despite this rule, banks have been reluctant to lend to the sector given the perceived risks, with the bigger players opting to pay fines instead.

Total loans extended by Philippine banks to MSMEs reached P537.638 billion as of December, short of the P643.826 billion required of them under the 10% rule set by law.