Davao City urged to apply for Credit Surety Fund

The country’s micro, small and medium enterprises are availing themselves of the opportunity  to borrow money without the required collateral through the Credit Surety Fund established by the Bangko Sentral ng Pilipinas.
Councilor Diosdado Mahipus urged the city to apply for the CSF so that the city’s MSMEs can avail themselves of soft loans. This can be done if the city set aside the required counterpart fund. 
The CSF Program was conceptualized by the Bangko Sentral ng Pilipinas to spur economic growth in the countryside. Funding for the Program will be provided by the cooperatives of the respective localities, but with a counterpart fund from the local government concerned.
“The Credit Surety Fund is a very important economic tool that we failed to avail of and only because at the time when the authorities initiated the program which requires local funding counterpart, the city officials including the Council has not allotted funds for it,” Mahipus said.
The Fund actually comes as a result of Republic Act 9501 which is the Magna Carta for Small Enterprises.
A lot of cities and municipalities have already availed of the Fund including Davao del Norte, Compostela Valley, North Cotabato and Davao Oriental. Just last August. no less than 43 cooperatives from the fruit-producing Davao del Norte and the gold-rich Compostela trekked to the Bangko Sentral ng Pilipinas for the signing of a Memorandum of Agreement that will hopefully provide more impetus for the growth of the countryside.
BSP Governor Armando M. Tetangco, Jr. earlier said that under the Credit Surety Fund, a bank no longer requires collateral from MSME borrowers since the bank receives a surety cover from the concerned cooperative that will guarantee the payment of the loan.
Under this arrangement, the bank can just collect the unpaid amount from the CSF in case the borrower defaults on his payment. It may be a situation being avoided by both the government and the cooperatives involved in the CSF Program, but it is an assurance to the bank that their risk is protected.
Under the scheme, risk management shifts to the CSF so it is imperative that the management exercise due diligence to make sure that the surety covers are made available only for borrowers with established track record for debt payments.
Member cooperatives of both Compostela Valley and Davao del Norte have pooled a total of P6.9 million for the Program. The Davao del Norte government committed P1 million and expects to increase it to P4 million in the future.
Last week, the local governments of North Cotabato and Davao Oriental signed the MOA for the CSF after they pooled a total of P13 million for the Fund. P12 million of this came from North Cotabato while P1 million came from Davao Oriental.
The cooperatives of the said areas also contributed to the Fund — P1.5 million from the cooperatives in Davao Oriental and P3.2 million from the cooperatives in North Cotabato,  as starting fund for their respective province’s Credit Surety Fund.
“The CSF is a win-win solution to the inability of the local governments to provide loans for the people,” Mahipus said. With more loans, he added, there will be more business opportunities. This would result to more income, employment and production which will help the local governments solve the problem of lack of financing opportunities for the people.
Mahipus has urged the City to write the BSP and invite them to come to Davao so they could discuss the possibility of creating the CSF for Davao City.(Lovely A. Carillo)