TWO Visayas solons have filed a bill seeking to perk up the economy in the countryside. Reps. Erico Aumentado (2nd District, Bohol) and Jocelyn Limkaichong (1st District, Negros Oriental) are pushing for the institutionalization of the Credit Surety Fund (CSF). The measure envisions to enhance the accessibility of micro, small and medium entrepreneurs (mSMEs) to the credit facilities of banks. Department of Trade and Industry (DTI) records show that as of 2009, 780,437 business enterprises operated in the Philippines. Of these, 99.6% are mSMEs which contributed almost 63.2% of the total jobs generated that year. The solons said this sector, considered the backbone of the country’s economy, could contribute more to the economic growth if their problems, particularly the lack of capital and access to credit from banks, are addressed. So far, their need to expand or develop new products is hampered by these barriers, Aumentado and Limkaichong pointed out.

They added that most, if not, all cooperatives fall under the category of mSMEs, several hundred of which are well-capitalized and whose economic potential is waiting to be harnessed. Likewise, there are many non-government organizations registered with the Securities and Exchange Commission supporting the mSMEs. Both solons said Republic Act (RA) 9520 or The Philippine Cooperative Code of 2008 provides for the creation and growth of cooperatives as a practical vehicle for promoting self-reliance and harnessing people power towards the attainment of economic development and social justice, They also said RA 9501 or the Magna Carta for mSMEs was passed into law on May 23, 2008 to strengthen financial and other support mechanisms to mSMEs. Under this law, banking institutions are required to allocate eight percent of their loan portfolio to micro and small enterprises and two percent to medium enterprises. Despite this requirement, however, banks are still hesitant to extend credit to mSMEs including cooperatives because of lack of acceptable collaterals, business experience or track record, unstable income cash flows, and low paying capacity.

As a result, both lawmakers said a great number of mSMEs are forced to finance their working capital requirements from informal sources that charge unconscionable rates of interest which environment cannot sustain growth of the sector. This prompted the Bangko Sentral ng Pilipinas (BSP) to implement the CSF – a partnership between the citizens represented by members of cooperatives, non-government organizations (NGOs) and community-based banks, and provincial, city or municipal government and other government agencies, and is managed at the provincial, city or municipal level. It is a credit enhancement scheme aimed at democratizing access to credits of mSMEs from formal sources without the need of collateral. The CSF is a fund generated from contributions from cooperatives and non-government organizations (NGOs) with counterpart contribution from the provincial, city or municipal government that is at least equal to the amount contributed by the cooperatives. Other government agencies and financial institutions or individuals may also contribute to the fund. The CSF is organized by a Memorandum of Agreement among participating cooperatives, NGOs, LGUs, and other government agencies and financial institutions.

With the CSF, mSMEs can access the credit facility of banks even without collateral through a surety cover issued jointly by the member-cooperative and the CSF Oversight Committee in favor of the creditor bank. Eventually, there will be an increase in the flow of credit in the countryside. To note, the first CSF was established in Cavite, followed by those in Aurora, Bohol, Negros Oriental, Compostela Valley, Davao del Norte, Negros Occidental, North Cotabato, Davao Oriental, Albay, Occidental Mindoro, Pangasinan, South Cotabato and in the cities of Cebu, Iloilo, Dipolog while several other provinces have requested to follow suit. The BSP spearheads the implementation of the program. For Bohol, BSP Gov. Amando Tetangco Jr. led the CSF launching rites with then governor Aumentado at the Bohol Beach Club in the resort island of Panglao on Feb. During the program aired live on national television through NBN Channel 4, Tetangco admitted he was amazed with the speed the cooperatives in Bohol raised P5 million in so short a time. Retired BSP Assistant Gov. Andres Rustia had presented the concept to Aumentado in December 2008. Despite the series of holidays, the governor mustered the presence of cooperative and banking sector leaders in the province on December 28, a Sunday, and right then organized an interim Oversight Committee chaired by Dr. Cerina Bolos who represented the Cooperative Rural Bank, Inc. in Tagbilaran City.

The well-managed cooperatives throughout the province contributed to a fund pool that the First Consolidated Bank (FCB) with Richard Uy as chair and Argeo Melisimo as president, topped off to make P5 million. The amount is now deposited at FCB – the bank with the most branches in Bohol . It has automated teller machines in all its branches in the towns, and operates point-of-sale (POS) services in towns where it has to set up branches yet. With the amount in, Aumentado said the provincial government is under obligation to put up an equivalent amount as counterpart. The national government, through the Industrial Guarantee and Loan Fund (IGLF) also contributes an equivalent amount even as the Development Bank of the Philippines through its president Reynaldo David, committed to similarly put in some funds. The CSF will make the mSMEs “bankable”, Aumentado and Limkaichong said.