BSP to open La Union credit surety fund
THE CENTRAL BANK will open a new credit surety fund (CSF) in La Union this week, which is expected to extend access to credit for small-scale firms in the province.
In a statement published over the weekend, the Bangko Sentral ng Pilipinas (BSP) said it will launch a CSF cooperative in San Fernando City on Wednesday, marking the return to the program after a self-imposed hiatus during 2016, an election year.
“The La Union CSF is expected to stimulate economic activities and provide job opportunities in the province,” the BSP statement read, noting that the facility will be the 46th in the country.
The BSP said there are 13 cooperatives that will pool P3.7 million under the La Union credit facility. In turn, the La Union provincial government will pour P3.5 million to the fund.
The central bank’s CSF program provides alternative collateral for micro, small, and medium- scale enterprises ( MSMEs) by organizing them into cooperatives.
Here, CSF units serve as guarantor for its member groups and nongovernment organizations as they make formal loans from banks, which they will use to sustain and expand business operations.
Under the scheme, the MSMEs pool their money into one collective fund which will then be accepted by banks as collateral. Local government units and state-run agencies like the Industrial Guarantee and Loan Fund, the Development Bank of the Philippines, and the Land Bank of the Philippines may also pour in funds to CSF facilities in the form of grants or investments, so that member businesses can borrow bigger amounts.
Republic Act 10744 which lapsed into law in February last year, made the CSF program permanent. The law provides that the maximum amount which may be borrowed by a member-firm shall not exceed 10 times the contributions it paid to the fund at any given time.
There are currently 45 CSFs in 30 provinces and 15 cities nationwide, which has helped small firms to tap P3.2 billion in bank loans as of end March, according to latest central bank data.