Department of Loans and Credit

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CREDIT SURETY FUND(CSF)
Sustaining Economic Growth Through Increased
Credit Flows
Department of Loans and Credit Bangko Sentral ng
Pilipinas
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CSF

• Credit enhancement scheme for micro, small and
  medium enterprises (MSMEs) which are experiencing
  difficulty in obtaining loans from the banks due
  to lack of acceptable collaterals, lack of credit
  knowledge and lack of credit track records.

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Why is the Bangko Sentral promoting the CSF
Program?
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Bangko Sentrals Mandate

• To provide policy directions in the area of
  money, credit and banking.

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Bangko Sentrals Advocacy

• To support the MSMEs in their role as drivers of
  the economy.

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The MSME Sector is the backbone of the Philippine
economy.

• Comprises about 99.6 of all registered firms
  nationwide.

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The MSME Sector is the backbone of the Philippine
economy.

• Employs 70 of the workforce.

Large
30
MSME
70
RP Enterprises
Employment
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The MSME Sector is the backbone of the Philippine
economy.

• Contributes 32 to economy.

Large
68
MSME
32
RP Enterprises
Value-Added
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There is a need to improve the productivity of
the MSMEs.

• Comparison of productivity among Asian countries.

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Loans to MSMEs

• About 60 of MSME Sectors demand for credit is
  not served.
• Loans to MSME Sector comprise 25 of the entire
  loan portfolio of the banking system.
• Lending to MSME Sector is low.

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Loans to MSMEs

• 4. Why?
• Banks
• Fear of unsecured loans
• Prefer big loans
• High transaction cost
• Low paying capacity

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Loans to MSMEs

• MSMEs
• Lack of acceptable collaterals.
• Lack of knowledge on credit sources and
  processes.
• Onerous documentation requirements

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Conclusion

• MSMEs are not bankable.

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The Good News

• MSMEs can be made bankable through the CSF

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What the Fund is

• Credit enhancement for MSMEs.
• Alternative to acceptable collaterals.
• Security for loans of MSMEs who are members of a
  cooperative.
• Assurance for payment of bank loans.

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• Network Linkage of the CSF
• Cooperatives and NGOs
• Local government
• Banking industry
• Bangko Sentral ng Pilipinas
• Donors

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Creating the CSF
COOPs/NGOs
Donor
Donor
LGU
P10 million
P10 million
P5 million
P5 million
Credit Surety Fund
P10 million
P20 million
P25 million
P30 million
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Management of the CSF

• Oversight Committee (OC) composed of
• Elected representatives from contributing
  cooperatives
• Representatives from contributing LGU and Major
  Donors
• Trustee bank acting as administrator of the CSF

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SURETY FEE PAID TO COOPERATIVES
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Lending Banks

• Allied Bank
• BPI Family Savings Bank
• Development Bank of the Phils.
• Land Bank of the Phils.
• United Coconut Planters Bank
• UCPB Savings Bank
• Qualified commercial, thrift, rural and
  cooperative banks

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Rediscounting Bank CSF Program Owner

• Bangko Sentral ng Pilipinas

• Rediscounting budget of
  P60 Billion

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BORROWING THROUGH THE SURETY PROGRAM
Applies for Loan with Surety Cover
Endorses loan application to the Bank
If bank approves loan, coop and CSF issues Letter
of Joint Suretyship
Receives loan proceeds
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DEFAULT (If Borrower Is Unable to Pay Loan)
Files claim to CSF
Pays the Bank
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Benefits of the CSF to Banks

• Easier to comply with the Magna Carta for MSME
• Reduces credit risk of extending loans to MSMEs
• More people will have access to banking services,
  thus promoting a more inclusive financial system

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CSF Updates
A. CSF Already Launched
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CSF Updates
B. CSF for Launching in 2009