Credit enhancement scheme that aims to improve the bankability and credit worthiness of micro, small and medium enterprises (MSMEs), including cooperatives and NGOs,
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Credit Surety Fund for CDA 26th anniversary
1. Presented during the 26th
Anniversary of the CDA
Quezon City
Credit Surety Fund (CSF)Credit Surety Fund (CSF)
Sustaining economic growth through increased credit flows
2. Credit Surety Fund (CSF)Credit Surety Fund (CSF)
Sustaining economic growth through increased credit flows
Augusto C. Lopez-DeeAugusto C. Lopez-Dee
Managing DirectorManaging Director
Monetary Operations Sub-SectorMonetary Operations Sub-Sector
Bangko Sentral ng PilipinasBangko Sentral ng Pilipinas
3. Entrepreneur with good business
model
Has expansion plans but lacks
capital
No collateral, no access to credit
Unbankable
FINANCIAL INCLUSION? XX
INCLUSIVE GROWTH? XX
Seven years ago...Seven years ago...
4. Credit enhancement scheme that aims to improve
the bankability and credit worthiness of micro,
small and medium enterprises (MSMEs), including
cooperatives and NGOs, which are experiencing
difficulty in obtaining loans from banks due to lack
of acceptable collaterals, credit knowledge and
credit track records.
It takes the place of acceptable collaterals
required by banks to secure the loan.
Credit Surety FundCredit Surety Fund
9. Who can join the CSF?Who can join the CSF?
“Good members, good CSF”
10. Maximum Loan
Amount
Up to 10 times the coops’ paid contributions
to the CSF
Borrowers Coops/NGOs with business and/or their
member-MSMEs
Surety Cover Minimum of 80% of the loan amount
Lenders Banks with rediscounting line with the BSP,
DBP or LBP
Terms and conditions,
once again…
11. 45 CSFs established nationwide
Source: Bangko Sentral ng Pilipinas
Source: Bangko Sentral ng Pilipinas
12. 45 CSFs established nationwide45 CSFs established nationwide
As of 31 December 2015As of 31 December 2015
LUZON
1. Cavite
2. Aurora Province
3. Albay
4. Occidental Mindoro
5. Pangasinan
6. Oriental Mindoro
7. Benguet
8. Puerto Princesa City
9. Palawan
10. Laguna
11. Baguio City
12. Tarlac
11. Bataan
12. Quezon City
13. Marikina City
16. San Jose City, N.E.
17. Science City of Munoz
18. Nueva Vizcaya
19. Zambales
20. Cagayan
21. Nueva Ecija
22. Santiago City, Isabela
23. Parañaque
24. Cabanatuan
VISAYAS
MINDANAO
1. Davao del Norte
2. Compostela Valley
3. Davao Oriental
4. North Cotabato
5. Zamboanga del Norte &
Dipolog City
6. South Cotabato
7. Sarangani
8. General Santos City
9. Davao City
10. Northern Mindanao
11. Agusan del Norte
12. Butuan City
13. Malaybalay City, Bukidnon
14. Valencia City, Bukidnon5. Cebu
6. Capiz
7. Aklan
14. Republic Act No. 10744
“Credit Surety Fund Cooperative Act of 2015”
06 February 2016
AN ACT PROVIDING FOR THE CREATION AND ORGANIZATION OF CSF
COOPERATIVES TO MANAGE AND ADMINISTER CREDIT SURETY FUNDS TO
ENHANCE THE ACCESSIBILITY OF MICRO, SMALL AND MEDIUM ENTREPRENEURS,
COOPERATIVES AND NONGOVERNMENT ORGANIZATIONS TO THE CREDIT
FACILITY OF BANKS AND FOR OTHER PURPOSES.
Sustainability of the Credit Surety FundSustainability of the Credit Surety Fund
15. RepublicRepublic Act No. 10744Act No. 10744
Year Events
28 Jul 2011 • House Bill (HB) 4970 (original version)
• Filed by Representatives Erico Aumentado and Jocelyn Limkaichong at
the House of Representatives
• Referred Committee on Small Business & Entrepreneurship
Development
2012 • Creation of TWG to study the bill.
• Series of meetings
30 April 2013 • HB 4970 was archived due to 2013 Philippine General Elections
30 Jul 2013 • HB No. 278
16. RepublicRepublic Act No. 10744Act No. 10744
Year Events
11 Aug 2015 • HB 278 was substituted by HB 6007 per Committee Report No. 827.
19 Aug 2015 • SB 2218 was substituted by SB 2909 as approved in the Committee on
Trade, Business and Entrepreneurship.
27 Aug 2015 • HB 6007 passed on 3rd
Reading at the Plenary. Submitted to Senate.
05 Oct 2015 • SB 2909 approved on 3rd
reading at the Senate.
14 Oct 2015 • Bicameral Conference Committee was held to unify the provisions of the
two bills.
26 Nov 2015 • Consolidated Bill adopted by the Senate
02 Dec 2015 • Consolidated Bill adopted by the House of Representatives
05 Jan 2015 • Enrolled Bill signed by Congress forwarded to the Office of the President
06 Feb 2015 • Enrolled Bill enacted into Law as Republic Act No. 10744
17. RepublicRepublic Act No. 10744Act No. 10744
Credit Surety Fund Cooperative Act of 2015Credit Surety Fund Cooperative Act of 2015
Salient features:
•Grants juridical personality to a proposed CSF Cooperative and
is evidenced by a Certificate of Registration;
•Exemption from the Insurance Code (not doing an insurance
business)
•Tax exemption of CSF Cooperatives
•Limited liability of CSF stakeholders
•Maximum loan availment (10 times of contribution)
18. Role of the Cooperative Development AuthorityRole of the Cooperative Development Authority
1. Regulation
• Formulate policies on the registration of CSF Cooperatives
• Issue, with the assistance of the BSP, the Implementing Rules
and Regulations
2. Supervision and Monitoring
•Supervise activities of the CSF
•Investigate and impose sanctions, including suspension of operations of
erring CSF Coops, for violation of laws, rules and orders
•Require submission of annual, semi-annual or quarterly reports, financial
statements, board resolutions
•Conduct regular examination or inspection of documents
•Set performance standards for proper operation of CSFs
•Submit annual status report of each CSF Cooperative to the DOF and BSP
RepublicRepublic Act No. 10744Act No. 10744
19. Role of the Bangko Sentral ng PilipinasRole of the Bangko Sentral ng Pilipinas
1. Spearhead the promotion, encouragement, creation and
organizational development of CSF Cooperatives all over
the country
2. Facilitate the acquisition of technical assistance such as
training and seminars in coordination with other public or
private stakeholders for purposes of the CSF; and
3. Assist the CDA in setting the criteria and qualifications for
CSF Cooperatives and provide such other forms of
assistance as may be determined by the Monetary Board to
be consistent with its mandate.
RepublicRepublic Act No. 10744Act No. 10744
20. Entrepreneur with good business model
Has expansion plans but lacks capital
Can now access bank credit even without
hard collaterals
Financial Freedom
INCLUSIVE GROWTH
Seven years hence...Seven years hence...
21. Thank you.
Augusto C. Lopez-DeeAugusto C. Lopez-Dee
Managing DirectorManaging Director
Monetary Operations Sub-SectorMonetary Operations Sub-Sector
Bangko Sentral ng PilipinasBangko Sentral ng Pilipinas
Credit Surety FundCredit Surety Fund
Sustaining economic growth through increased credit flows
Editor's Notes
Good morning everyone.
It is my honor and privilege to present to you one of the key advocacy programs of the Bangko Sentral ng Pilipinas which was conceptualized in July 2008. This is the CREDIT SURETY FUND. The CSF is anchored on the theme: sustaining economic growth through increased credit flows.
Where are we coming from?
Seven years ago, an entrepreneur with a good business model is could not pursue his business plans due to lack of capital. He could not borrow from the bank because he has no hard collaterals to secure his loan. This environment is not conducive to the growth of MSMEs. They are considered unbankable and are excluded in the financial system. So, a great number of MSMEs are constrained to finance their working capital requirements from their meager savings or from informal sources that charge unconscionable rates of interest. As a result, most MSMEs fall into the hands of loan sharks.
High cost of borrowing from informal sources and the lack of available working capital affect the MSMEs’ growth and consequently their contribution to national economy.
The CSF is a credit enhancement scheme that aims to increase the credit worthiness of MSMEs which are experiencing difficulty in obtaining loans from banks due to lack of acceptable collaterals, credit knowledge and credit track records.
It is a case of financial inclusion because it helps unbankable MSMEs become bankable.
The CSF is a public-private partnership which links the key players of the economy into a unified purpose of promoting the MSME sector.
The CSF is a fund generated from contributions by well-capitalized and well-managed cooperatives with a counterpart contribution from the city or provincial government equivalent to the amount contributed by the cooperatives. Other agencies and government financial institutions also took part in the program, namely: the Development Bank of the Philippines, the Land Bank of the Philippines and the Industrial Guarantee and Loan Fund.
The funds are then deposited in a trustee bank selected by the Oversight Committee. The trustee bank invests the Fund in government securities to enable the Fund to grow and be used as security or collateral for MSME loans.
This, in effect, provides MSMEs a level playing field in the credit market by giving them access to credit despite lack of hard collaterals.
It is governed by an Oversight Committee whose members are the elected representatives of the coops and NGOs and the ex-officio members of the LGU and partner institutions.
A well-managed and well-capitalized coop or NGO that can contribute a minimum amount of P100,000 may join the CSF.
The maximum amount of loan that a contributor-coop/NGO can borrow from the bank is up to 10 times its contribution to the CSF. So, if a coop contributed P100,000, it can borrow or endorse loan applications of their members up to P1.0 million. The borrower may either be the coop/NGO with business activity or its individual MSME-member. The CSF covers 80% of the loan. The lenders are banks with rediscounting line with the Bangko Sentral, Development Bank of the Philippines or Land Bank of the Philippines.
The Bangko Sentral ng Pilipinas spearheads the promotion and establishment of the CSF nationwide. To date, there are 45 CSFs participated in by 643 coops and NGOs.
The CSF has been established in 30 provinces and 15 cities. We have 24 CSFs located in Luzon, 7 in the Visayas and 14 in Mindanao.
The financial landscape for Filipino entrepreneurs is now more promising. Republic Act No. 10744, now officially known as the Credit Surety Fund Cooperative Act of 2015, was passed on 6 February 2016. It is “An Act Providing for the Creation and Organization of Credit Surety Fund Cooperatives to Manage and Administer Credit Surety Funds to Enhance the Accessibility of Micro, Small and Medium Enterprises, Cooperatives and Nongovernment Organization to the Credit Facility of Banks and for Other Purposes”. RA 10744 institutionalizes the CSF program we have started 7 years ago.
It took approximately four (4) years for the CSF to become a law. It started way back in July 2011 or two years after the CSF started, when cooperatives wanted a juridical personality to strengthen the CSF. The LGUs likewise needed a framework or legal basis to contribute to the CSF. It was the late Rep. Erico Aumentado and Rep. Jocelyn Limkaichong who first authored House Bill 4970, which underwent series of TWG meetings until it was archived in 2013 due to the Philippine General Elections.
On 30 July 2013, the House Bill was refiled under HB 278, this time by Coop-NATCCO Rep. Cresente C. Paez. In 2014, Sen. Bam Aquino likewise authored Senate Bill No. 2218.
Last year, both chambers of Congress approved the Consolidated Bill resulting from the Bicameral Conference Committee Meeting in October 2015. The Enrolled bill was forwarded by Congress to the Office of the President for approval on 6 January 2016. And finally, after approximately 4 years, the Credit Surety Fund Cooperative Act of 2015 was passed on 6 February 2016.
The drafting of the IRR, as stated in the Law, will be joint undertaking of the CDA, the BSP and the DOF and will undergo public hearings from stakeholders until 21 April 2016, after which it shall take effect 15 days after publication in a newspaper of national coverage.
What are the salient features of the Law?
First, the Law grants juridical personality to a proposed CSF Cooperative and is evidenced by a Certificate of Registration. As such, it
Second, the Law states that the act of issuing surety agreements to cover loans of our MSMEs shall not be considered as doing an insurance business under Republic Act No. 10607.
Third, a CSF Cooperative registered with the CDA shall enjoy the tax privileges of cooperatives under Republic Act No. 9520, otherwise known as the “Philippine Cooperative Code of 2008”;
Fourth, since the CSF Cooperative has a juridical personality, its liability will be limited only to the extent of the assets of the CSF Cooperative and not beyond the personal assets of its stakeholders; and
Last but not the least, the law emphasizes the maximum loan availment of borrowers under the CSF program which is up to ten times the contributions of participating cooperatives.
The law also clearly defines the extent of involvement of the CDA in the Credity Surety Fund. The CDA shall be the government entity in charge of registration, regulation and supervision of CSF Cooperatives. In order to implement the provisions of this Act, the law grants authority for CDA to create an additional department or the CDA’s CSF Department specifically designated for CSF Cooperatives.
Of course, the Bangko Sentral will not be out of the picture. The BSP shall continue to spearhead the promotion, encouragement, creation and organizational development of CSF Cooperatives all over the country. We shall continue to strengthen the Capability Enhancement Program of the CSF to help our cooperatives improve their performance in terms of financial management, credit appraisal and monitoring, risk management and entrepreneurial and business management. And as stated in the law, we shall assist the CDA in setting the criteria and qualifications for CSF Cooperatives and provide such other forms of assistance as may be determined by the Monetary Board to be consistent with our mandate.
With the passage of the Law, there will be close coordination between the CDA, the BSP and the DOF.
Seven years hence, the Credit Surety Fund Program may be considered a breakthrough in financial inclusion. Today, we can proudly say that previously unbankable MSMEs with viable business plans, can now access bank credit using the CSF as alternative collateral.
Before I share an short AVP on the CSF, allow me to congratulate the CDA on its 26th Anniversary. We look forward to our collaboration with the CDA and the DOF in building stronger MSMEs and better quality of life.
Thank you and good day.