MANILA, Philippines — The House Committee on Small Business and Entrepreneurship Development Wednesday vowed to “positively act” on the bill seeking to institutionalize the “Credit Surety Fund” which is aimed at enhancing and expanding the accessibility of Micro, Small and Medium Entrepreneurs (MSMEs) to the credit facilities of lending institutions.

Bayan Muna party-list Rep. Teodoro “Teddy” Casiño, committee chairman, made the assurance as the Bangko Sentral ng Pilipinas (BSP) continues to receive requests from a number of provincial executives to set up such a program in their respective areas.

“Since it is a positive bill and it is being pushed by BSP, the committee will also positively act on it because it will help a lot of small and micro businesses in the provinces,” he said.

“But the committee will resolve and put into place a clear mechanism so everything will be transparent and that the cooperatives will not be the ones to shoulder all the liabilities in case there are loans that become bad,” the House leader said.

House Bill 4970, which is jointly authored by Visayan lawmakers, Bohol Rep. Erico Aumentado and Negros Oriental Rep. Jocelyn Limkaichong, seeks to benefit more than 700,000 MSMEs.

To be known as the “Credit Surety Fund Act of 2011,” the measure calls for the creation of the Credit Surety Fund (CSF) in each province and chartered city all over the country to sustain the continuous flow of credit in the countryside.

The CSF, which was first established in Cavite, is a fund generated from contributions by well-capitalized and well-managed cooperatives and non-government organizations with counterpart contribution from the provincial, city or municipal government at least equal to the amount contributed by the cooperatives, according to the bill.

The program is being implemented in Aurora, Bohol, Negros Occidental, Compostella Valley, Davao del Norte, Nort Cotabato, Davao Oriental, Albay, Occidental Mindoro, Pangasinan, South Cotabato as well as in the cities of Cebu, Iloilo and Dipolog.

Aumentado, chairman of the House Committee on Ethics and Privileges, said through the CSF, MSMEs can have access to credit facilities from banks even without collateral by way of a surety cover issued jointly by the member-cooperative and the CSF Oversight Committee in favor of the creditor bank.

The oversight committee, as provided under the bill, will be composed of representatives of local government units and donor institutions as ex-officio members and representatives elected by contributor-cooperatives and NGOs.

Aumentado claimed that despite the implementation of the law that requires banks to allocate eight percent of their loan portfolio to micro and small enterprises and two percent to medium enterprises, lending institutions have failed to extend credit to MSMEs.

Credit allocation is provided under Republic Act 9501 or the Magna Carta for MSMEs, which was passed into law on May 23, 2008

“Despite this requirement, banks are still hesitant to extend credit to MSMEs including cooperatives in particular because of lack of acceptable collaterals, unstable income cash flows, lack of business experience or track record and low paying capacity,” Aumentado claimed.

He expressed concern that a big number of MSMEs, who are in need to finance their working capital requirements, have become willing victims of “informal sources” that charge unconscionable rates of interest.

Limkaichong, vice chairperson of the House Committees on Appropriations and Agriculture and Food, recognized the program as a means “to generate more employment and give support to the poverty alleviation program of the government.”

“It will also increase government revenue through collection of taxes, licenses and registration fees arising from regularization of the business operations of MSMEs and increased economic activities,” she added.

Under HB 4970, the original contributions to the CSF shall come from participating cooperatives and NGOs in each province, city or municipality. It also mandates the provincial, city or municipal government shall contribute to the CSF in an amount at least equal to the total contributions of the cooperatives.

All income of the Surety Fund shall be exempt from tax considering that stakeholders are mostly cooperatives that play a vital role in the attainment of economic development and social justice, according to the bill.

HB 4970 also tasks the BSP to spearhead the promotion, encouragement, creation and organizational development of CSF all over the country pursuant to its mandate to provide policy direction in the areas of money, banking and credit under RA 7653 or the New Central Bank Act.

In 2009, there were 780,437 business enterprises operating in the Philippines, 99.6 percent or 777,315 of which were MSMEs which contributed almost 63.2 percent of the total jobs generated that year, according to the report made by the Department of Trade and Industry (DTI).