CAGAYAN DE ORO CITY (MindaNews/05 November) — The Bangko Sentral ng Pilipinas (BSP) is going out of its way. Aside from doing traditional business with commercial banks it is now providing credit services to capital end-users, the micro, small and medium enterprises.
According to Louella D. Leones, manager of the BSP Credit Surety Fund (CSF), this is to correct an anomaly in the economy wherein 70 percent of the workforce comes from the micro, small and medium enterprises or MSMEs, but their contribution to the economy is only 32 percent.
The CSF aims to sustain economic growth by increasing credit flow to the countryside.
Leones said that the CSF is strengthening one of the mandates of the BSP which is to provide policy directions in terms of credit. Their other mandate is to manage money and regulate the banking sector.
The MSMEs are the real drivers of the economy but they have difficulties accessing the traditional banking system, Leones observed.
Among the barriers the MSMEs have encountered [in accessing credit from commercial banks] is the lack of collateral for their loans.
The CSF will guarantee these loans and will operate in partnership with cooperatives and local government units.
In a meeting with Cagayan de Oro-based cooperatives Friday, the cooperative sector was able to raise about P20 million as counterpart to the CSF.
Gov. Oscar S. Moreno of Misamis Oriental pledged a counterpart of P10 million.
The fund raised by the CSF stakeholders shall be matched by a loan facility which is 10 times the amount raised. With about P30 million already pledged as of Friday, the CSF in Cagayan de Oro and Misamis Oriental could reach up to P40 million, as other donors like participating banks are expected to put up additional fund for the facility.
That translates to an additional of about P400 million in additional loan facility to MSMEs guaranteed by a surety fund.
Director Orlando R. Ravanera of the Cooperative Development Authority (CDA) in Region 10 welcomed the development as it would further increase the contribution of the cooperatives to the economy of Northern Mindanao.
He said the CDA is now encouraging cooperatives to go into production and not just as distributors, users or retailers of products of the large businesses.
Data from the DTI indicate that 99.6 percent of the country’s registered businesses are MSMEs.
A BSP study revealed that 60 percent of the MSMEs’ credit demand is not served by the traditional banking system. Overall, loans to the MSMEs account for only 25 percent of the total volume of credit from the country’s banking system.
Aggravating this skewed arrangement is that 80 percent of the credit to the MSMEs is concentrated in the National Capital Region, leaving the remaining 20 percent to the countryside.
Under the CSF mechanism, the BSP will offer low interest loans to participating CSF banks like the Development Bank of the Philippines and the Land Bank of the Philippines. These banks will then offer these loans to participating cooperatives at interests of 6-8 percent.
Cooperatives offer lesser interest rates on loans at an average of 14 percent. Loans from banks go as high as 36 percent, despite the very low interest rates the BSP is giving them at four percent.
Cagayan de Oro and Northern Mindanao is considered the cooperative center of the country. It hosts the country’s largest cooperative, the First Community Cooperative (Ficco).
Ravanera said that a conservative estimate of the cooperative sector’s contribution to the regional economy is 10 percent of the Gross Regional Domestic Product. (BenCyrus G. Ellorin/MindaNews)