A novel approach to accessing credit for small business

Here’s one novel approach of how a local government unit is help small business in its community access credit.  Wonder it can happen where I live (Sydney, Australia). Believe me, we need it too.

From BusinessWorld Philippines

August 22, 2012

BSP, Palawan launch credit surety fund

THE BANGKO Sentral ng Pilipinas (BSP) and the Palawan provincial government yesterday launched a facility that will guarantee loans that micro, small and medium enterprises (MSMEs) take out from banks.

In a statement, the central bank said that together with the Palawan provincial government, it launched yesterday the Palawan Credit Surety Fund (CSF), the 24th of its kind in the country.

“The Palawan CSF is a surety fund established to help cooperatives and their micro-, small- and medium-enterprise members secure collateral-free loans from banks,” the BSP said.

Ten cooperatives pooled funds for a contribution amounting to P2 million, while the provincial government of Palawan pledged another P2 million for the Palawan CSF.

“The Industrial Guarantee and Loan Fund, Development Bank of the Philippines and Land Bank of the Philippines have also expressed strong support to the CSF Program with their contribution pledges to augment the fund,” the BSP said.

A member MSME of any these 10 cooperatives, which normally will not have access to bank loans, may now apply for a loan at a bank participating in the Palawan CSF program. Once the loan is approved, the sponsoring cooperative will issue a surety cover to secure its member’s loan.

In case of a default, the CSF will pay the bank. The cooperative will collect the unpaid loan and interest from the borrower and remit these to the CSF.

The BSP, for its part, allows banks that extend loans under the CSF program to rediscount their collectibles in order to come up with cash that can be lent to other borrowers.

“Various sectors are expected to benefit from this credit enhancement scheme, which also serves as an alternative lending window for MSMEs,” the central bank said.

“The program also integrates a training component to enhance the skills of participating cooperatives in the areas of business plan preparation, loan evaluation, risk management and accounting system.”

The Credit Surety Fund program is one of the central bank’s efforts to attain “inclusive growth” in the country.

Inclusive growth is a broad-based approach that benefits even the low-income sector.

CSF programs were also launched in Capiz, Bohol, Gen. Santos and Davao this year.

Aside from the credit surety fund program, the BSP has also launched financial literacy campaigns to tackle topics on personal financial management and financial consumer protection. — KAM

Article location : http://www.bworldonline.com/content.php?section=Finance&title=BSP, Palawan launch credit surety fund&id=57233

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