Lending capacity to MSMEs remains low
Micro, small and medium entrepreneurs (MSMEs) still have limited access to credit sources affecting their overall development.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo issued his statement in yesterday’s launching of the Iloilo City Coopreneurs Surety Fund (ICCSF) and the signing of memorandum of agreement among the representatives of Bangko Sentral ng Pilipinas, Land Bank of the Philippines, Development Bank of the Philippine and city-based cooperatives at Hotel Del Rio.
The ICCSF is the first city-based surety fund created in the Philippines. Six Credit Surety Fund (CSF) were established in the provinces. The first was in Cavite. The provinces of Aurora, Bohol, Negros Oriental, Compostela Valley and Davao del Norte complete the six CSF.
The CSF is a fund generated from contributions by well-capitalized and well-managed cooperatives with a counterpart contribution from the provincial or city government equivalent to the amount contributed by the cooperatives. Other agencies that want to contribute may do so.
They defined well-capitalized cooperatives as cooperatives which have a minimum capital-to-assets ratio of 30 percent or capital-to-risk assets of 12 percent or higher.
Guinigundo said there is an estimate which indicates that 60 percent of the credit needs of the sector “remain unserved.” Their growth potential is significantly under-utilized.
The BSP strives to help establish the CSF in all major cities and provinces in the country in order to help sustain economic growth through increased credit flows especially in the countryside, said Guinigundo.
The BSP’s role in the implementation of the CSF is to ensure the sustainability of the continuous flow of credit in the countryside. It has allowed the rediscounting by the participating banks of the loans covered by the surety cover.
Guinigundo said the CSF aims to support the establishment, expansion and continued viability of MSMEs by providing them with direct access to the collaterals needed to secure loans from banking institution.
The entrepreneurs have now access to credit from banks by using the surety cover issued jointly by the parties as collateral. Before, they resort from sourcing credit from informal and unregulated lenders, he said.
“This allows MSMEs to compete head on with their more established counterparts in increasing global competitiveness. The assurance accorded by the program will make it more comfortable for banks to lend to MSMEs,” said Guinigundo.
The MSMEs provide employment to a significant force. It can provide a fertile ground for output expansion and job creation that will help sustain growth despite the fall-out from the global economic crisis, he added.
The BSP also aims to enhance the technical capabilities of MSMEs, building up their knowledge on credit worthiness, promoting and advocating development of a sound and sustainable operations apart from providing loan support, he said.
The BSP will closely monitor the activities of the CSF and its working environment for the cooperatives to adapt its policy initiatives as they assure their continuing support. “The road to the success of the endeavor is long and arduous,” Guinigundo said.