BSP introduces preferential rate for MSME loans

November 6, 2017 - 2:55 PM
Bangko Sentral ng Pilipinas headquarters in Manila. The central bank’s first quarter Consumer Expectations Survey (CES) for 2018 showed an index of 1.7 percent, down from the previous quarter’s 9.5 percent and year-ago’s 8.7 percent. (Reuters file photo)

MANILA – The Monetary Board (MB), the policy-making body of the Bangko Sentral ng Pilipinas’ (BSP), has approved a lower risk weighting of 20 percent on loans extended by banks to micro, small and medium enterprises (MSMEs) if these are guaranteed by a qualified Credit Surety Fund (CSF) Cooperative.

Currently, qualified MSME loans are given a risk weighting of 75 percent.

BSP Governor Nestor A. Espenilla Jr., in Circular No. 979 issued on October 25, 2017, said the Board also recognizes the qualified CSF Cooperative as among the eligible guarantors under the risk-based Capital Adequacy Framework for banks.

The Circular identified qualified CSF Cooperative as “a cooperative that is organized consistent with the provisions of Republic Act (RA) No. 10744 (the Credit Surety Fund Cooperative Act of 2015) and its implementing rules and regulations (IRR).’

It, however, explained that the preferential rate will be given if the “maximum allowable leveraging ratio of the CSF Cooperative to guarantee bank loans shall be three (3)”, meaning the cooperative can guarantee up to three times of its capital.

“Provided further, that said leverage ratio shall be subject to periodic review for progressive increase as warranted by the CSF Cooperative’s performance but not to exceed 5x the CSF Cooperative’s Restricted Capital for Surety.”

The preferential rate for MSME loans guaranteed by a qualified CSF Cooperative takes effect 15 days after the publication of the Circular in a major daily or the Official Gazette.

BSP, in a statement, said the MB’s decision “intends to facilitate the increased flow of funds to MSMEs that will translate to the further growth of the sector and of the domestic economy.”

The CSF Program started in 2008, with the launch of the first CSF Cooperative in Cavite. (PNA)