Total loans to small businesses through a government guarantee program have steadily increased, which in turn will help Filipino businesspeople to cope with the ongoing pandemic, according to the central bank.
In an online briefing, Governor of Bangko Sentral ng Pilipinas (BSP) Benjamin Diokno said that cumulative loans for micro, small and medium-sized enterprises released under the Credit Guarantee Fund (CSF) scheme reached an estimated value of P6.93 billion in December 2020, based on a survey conducted by the regulator.
The CSF is a credit reinforcement mechanism designed to face the challenges of MSMEs and their cooperatives in accessing bank financing due to the lack of guarantees and credit history. It provides collateral coverage of up to 80% of the bank loan obtained by a qualified member, which serves as an alternative to the collateral that many small businesses are unable to provide.
BSP reported that at the end of 2020, about 17,527 MSME borrowers have benefited from the CSF initiative since its launch as a defense program in 2008.
“CSF demonstrates the power of partnerships,” said Diokno. “By bringing together regulators, financial institutions, local governments, cooperatives and non-governmental organizations, the CSF becomes an effective tool not only for sustainable financing of MSMEs, but also for economic development and poverty reduction.”
As of March 31, 2021, 55 CSFs were established across the country, of which 14 are registered with the Cooperative Development Authority (CDA). At least 15 more CSFs are expected to be registered by the end of the year, with the remainder likely to complete the process next year.
In 2016, the CSF program was institutionalized under the Law of the Republic No. 10744, or “Credit Guarantee Fund Cooperative Act 2015”, which established the CSF as a new type of cooperative under the supervision of the Cooperative Development Authority . According to the law, BSP has the mandate to promote the organization and training of CSF cooperatives. INQ
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