To further support the growth of the micro, small and medium enterprises (MSMEs), the Monetary Board approved the amendments to the risk-based capital adequacy framework for banks by assigning a lower risk weight of 20 percent on performing loans to MSMEs to the extent guaranteed by a qualified Credit Surety Fund (CSF) Cooperative.
A qualified CSF Cooperative refers to a cooperative that is organized consistent with the provisions of the Republic Act (R.A.) No. 10744 (Credit Surety Fund Cooperative Act of 2015) and its implementing rules and regulations. Said CSF Cooperative shall have an initial leverage ratio of three, which means a CSF Cooperative can guarantee MSME loans up to three times of its capital. The leverage ratio can be subsequently increased subject to review of the performance of the CSF Cooperative.
Existing regulations provide that a 75 percent risk weight shall be applied to qualified MSME portfolio.
This policy 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 was first launched by the Bangko Sentral ng Pilipinas in 2008 with the end goal of enhancing the creditworthiness of MSMEs. This Program was institutionalized with the enactment of R.A. No. 10744 on 6 February 2016.
Source: Bangko Sentral ng Pilipinas (BSP)