Senate approves creation of Credit Fund for Micro and Small Businesses

The Senate today approved on third and final reading a bill that seeks to provide micro, small and medium entrepreneurs more access to micro-financing.

Senate Bill No. 2909, introduced by Sen. Paolo Benigno "Bam" Aquino IV, aims to expand and strengthen the current Credit Surety Fund (CSF) program of the Bangko Sentral ng Pilipinas (BSP) by making it easier for micro, small and medium enterprises (MSMEs), cooperatives and non-government organizations, authorized representatives of local government units (LGUs), government financial institutions (GFIs) and other institutional/government agencies, to gain access to credit facilities.

Aquino, chairman of the Committee on Trade Commerce and Entrepreneurship, said the "lack of access to financing remains the biggest roadblock for the growth of MSMEs in the country since the existing requirements for credit do not consider the nature of micro and small businesses."

Aquino said the measure would give small enterprises with loan requirements ranging from P500, 000 to P5 million access to loans provided by established banking institutions.

"By building up the capability of MSMEs, cooperatives and NGOs in the areas of credit evaluation, loan and risk management, and good governance principles, the measure is expected to generate more employment, which in turn gives more teeth to the poverty alleviation program of the government through increased investments and economic activities, especially in the countryside," Aquino said.

Under the measure, the BSP will spearhead the promotion, creation, and organizational development of CSF Cooperatives. It will provide technical assistance such as training and seminars as well as assist the Cooperative Development Authority in setting the criteria and qualifications for CSF cooperatives. It will also provide other forms of assistance as maybe determined by the Monetary Board.

The CSF is created by pooling the contributions of cooperatives and NGOs, the local governments units (LGUs) and partner institutions. It allows MSMEs to borrow from banks using the CSF as security for the loan instead of conventional collateral.

"The CSF is an effective program that can address the financing gap that is affecting many entrepreneurs in the country," Aquino said, referring to the BSP's credit enhancement scheme that allows MSMEs, which are members of cooperatives to borrow from banks without collateral.

Under the BSP's CSF, cooperatives and NGOs may accept collaterals that are otherwise not acceptable to banks such as stocks in trade, agricultural land, chattel and vehicles.

Data shows that the BSP has around 40 CSF projects across the country. It also shows that 548 cooperatives are now involved in the project, with over 14,000 Filipinos benefitting from the program.

"This measure gives us the opportunity to take the next step in our quest to embolden our countrymen with the right resources and opportunities. The challenge, now, is to how to help our countrymen grow their micro businesses into small enterprises, and the enterprises, to medium enterprises," Aquino said. (Yvonne Almirañez)