What is Credit Surety Fund ?
The CSF program is a credit enhancement scheme developed by the Bangko Sentral Pilipinas which aims to increase the creditworthiness of micro , small and medium enterprises that are experiencing difficulty in obtaining loans from banks due to lack of acceptable collaterals , credit knowledge and credit track records.
what are MSMEs?
The availability of national firm level data particularly on micro enterprises in many developing countries still remains limited up to this date. The Philippines is no exception, which in turn limits the extent of empirical analysis on the economic contributions of micro, small and medium scale enterprises. This paper presents a novel dataset of Philippine micro, small and medium enterprises and the existing literature concerning the challenges and development issues of MSMEs in the industrial and developing countries. Using a dataset on over 1,700 MSMEs collected as part of the AIM Policy Center’s Enterprise Survey 2009, this paper discusses the characteristics of these firms and their perceptions on government policies on improving the business environment. This paper also draws on the wider literature on this topic in order to map out key areas where further information and evidence on Philippine MSMEs could be useful in informing more nuanced and possibly better-fitting policies.
What is the purpose of the CSF?
The Fund shall serve as a security for loans of MSMEs from banking institutions by providing a surety cover in lieu of acceptable collaterals. Banks generally require collaterals when extending loans, a requirement that some MSMEs often find difficult to comply. This help to grow the business in a small town or city, because some banks cannot give the loan to people due to lack of requirements. CSF help the middle class people to grow up their own business.
How is the CSF created?
It is created by pooling the contributions of cooperatives and NGOs, the local governments units (LGUs) and partner institutions. Under the program, a Fund shall be created at the provincial or city level to provide more flexibility.It is essentially a public – private partnership which links the key players of the economy into a unified purpose of promoting the MSME sector.It give breathe to the middle class people .
Who can join the CSF?
A cooperative that meets the following criteria may join the CSF:
Must be a member of good standing with the CDA
Must have an adjusted net worth of not less than P1.0 million; and
Must have a minimum capital-to-assets ratio of thirty percent (30%)
A cooperative or NGO that cannot meet requirement (b) shall still be qualified to participate in the CSF, provided, that:
It has no existing past due obligations with any of its creditors as shown in the latest audited financial statements; and
The Board of Directors of the cooperative/NGO shall execute a duly notarized affidavit certifying that the cooperative/NGO has no existing past due obligations.
Can trade associations join the CSF also ?
Yes, provided that the trade association has adequate financial assets and resources to guarantee the loans it will endorse to banks under the CSF Program.
What benefits can a cooperative or NGO derive from the CSF?
Following are some of the benefits that a cooperative or NGO may gain from becoming a member of the CSF:
Enhancement of credit evaluation and monitoring skills gained from the capability enhancement training program of the CSF.
Increase in share capital due to increase in membership; and
Income from surety fees collected;
Income from trust fund;
Who will administer the Fund?
The Oversight Committee , consisting of representatives from membercooperatives/NGOs elected by all members of the CSF and authorized representatives from the LGU and partner institutions, will administer and safeguard the Fund to ensure its growth through sound management and investment practices. The OC shall designate a trustee bank that will manage the Fund or part of the Fund. The trustee bank invests the fund in high – yielding government securities such as treasury bills and bonds to generate earnings and to further increase the fund.