Mindanao has frequently been referred to as the land of promise, an island of endless possibilities.

The Philippine government has in recent years set in motion plans of unlocking its full potential as the “food basket” and “agricultural hub” of the country.

One way of tapping into this huge potential is encouraging the growth and expansion of micro, small and medium enterprises (MSMEs), which are considered the backbone of economic activity in the Philippines. MSMEs comprise 99.6 percent of all registered companies in the country and account for 70 percent of employment nationwide.

Unfortunately, MSMEs still do not have ready access to funds principally due to their inability to put up collateral required by lending institutions.

The Credit Surety Fund (CSF) is designed to address that. In lieu of collateral, a bank will receive a surety cover that guarantees payment of the MSME loan from the surety fund.

As conceived by the Bangko Sentral ng Pilipinas, the Credit Surety Fund is initially funded by the contributions of member cooperatives. These contributions are matched by counterpart funds from the sponsoring local government unit, and the participating government financial institutions such as Land Bank of the Philippines and Development Bank of the Philippines. Loans granted by private banks under the program are immediately rediscountable with the Bangko Sentral ng Pilipinas.

To date, the Bangko Sentral ng Pilipinas has launched the Credit Surety Fund program in the provinces of Cavite, Bohol, Aurora, and Negros Oriental.

With Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. and fellow Monetary Board Members Juanita D. Amatong, Raul A. Boncan, Nelly Favis-Villafuerte, and Alfredo Antonio, I attended the launching of the Davao del Norte Credit Surety Fund (DNCSF) and the Compostela Valley Koopnegosyo Surety Fund (CVKSF) at the BSP Davao Convention Hall last July 31. Deputy Governors Diwa Guinigundo, Nestor Espenilla, Jr., Armando L. Suratos as well as BSP Assistant Governor and General Counsel Juan de Zuniga attended. Governor Arturo Uy of Compostela Valley and Governor Rodolfo del Rosario of Davao del Norte, who sponsored their respective cooperative groups, were present at the event.

Also there to witness the momentous occasion were Gilda Pico, President of the Land Bank of the Philippines (LBP); Jesus Guevara II, Executive Vice President of the Development Bank of the Philippines (DBP); Teresa Jesudason, Chief Executive Officer of the Industrial Guarantee & Loan Fund (IGLF) and concurrently Senior Vice President of the DBP; and representatives from the Bankers Association of the Philippines, the Chamber of Thrift Banks, and the Rural Bankers Association of the Philippines.

It was Monetary Board Member Juanita Amatong (an adopted Mindanaoan) who first broached the   Credit Surety Fund concept to Davao del Norte and Compostela Valley. Thereafter, Director Rosalinda Dumaliang (of the Department of Loans and Credit) and BSP CSF Consultant Andy Rustia went to work out the details.

The idea of a borrowers’ fund was an immediate “hit” in the two provinces. Governors Del Rosario and Uy immediately appreciated how the Credit Surety Fund can provide the momentum for sustaining the operations, as well as the expansion of micro, small and medium enterprises.

It took the provincial governments led by Uy and Del Rosario less than a month to complete the requirements for the establishment of their own surety funds. A total of 21 cooperatives from the Davao del Norte contributed P3,676,000 while 24 cooperatives from Compostela Valley contributed P4,200,000 to their respective Credit Surety Funds.

These funds were matched by the provincial governments, the Land Bank of the Philippines and the Development Bank of the Philippines, effectively quadrupling the initial contributions of the cooperatives.

In his speech at the launching ceremony, Governor Tetangco underscored the importance of ensuring the success of the Credit Surety Fund program through the faithful adherence to good governance practices by all the parties involved.

“Borrowers should pay their loans, cooperatives should give approval only to those with good credit standing, and other CSF members should give timely and judicious decisions.

Banks should process loans faster and give much better loan terms to MSMEs. The Government’s Industrial Guarantee Loan Fund managed by NEDA must provide guidance as well as funds,” Tetangco said.

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