Credit surety fund enables financial inclusion
By: Atty. Euney Marie J. Mata-Perez on November 13,2025
I ATTENDED the annual conference of the Rural Bankers Association of the Philippines (RBAP), and this year’s theme was, “Bridging Generations, Building Futures: Growth, Succession, Governance in Rural Banking.”
Rural banks have a critical role in financial inclusion, with a special mandate to provide credit and banking facilities to rural communities, particularly to small farmers, small merchants and cooperatives.
The conference tackled various topics and challenges facing rural banks, such as succession and cybersecurity risks. Other topics included discussions on innovative credit solutions, digital payment options, and other advanced technologies.
One topic which caught my attention was Republic Act 10744, or the Credit Surety Fund Cooperative Act of 2015. This law mandates the creation and organization of Credit Surety Fund Cooperatives (CSF Cooperatives) to manage and administer the Credit Surety Fund (CSF) and issue surety cover to banks as guarantees for the loans to be obtained by its members.
It thus allows micro, small and medium enterprises (MSMEs) to obtain loans and financing from banks without the need of traditional collateral, which oftentimes is a barrier to obtaining such funds.
Pooled fund
The CSF is a pooled fund which shall serve as a source of guaranty or surety for loans from banks.
The initial contributions to the CSF shall come from participating member-cooperatives or nongovernmental organizations (NGOs) in a province and/or city. It includes a counterpart contribution from the local government unit (LGU) in an amount at least equal to the initial total contributions of the member-cooperatives or NGOs. It also includes contributions from government financial institutions (GFIs) and other institutions/government agencies which may or may not be equal to the total contributions of the member-cooperatives or NGOs.
Any increase in the contribution of existing or new member-cooperatives or NGOs, LGUs, GFIs and other qualified investors or donors shall likewise form part of the CSF.
Pursuant to Republic Act 9520, or the Philippine Cooperative Code of 2008, an LGU may contribute to the CSF in the form of an investment or grant, in an amount at least equal to the total contributions of the member-cooperatives/NGOs. GFIs and other institutions/government agencies may also contribute to the CSF in the form of investment or grant which may or may not be equal to the total contributions of the member-cooperatives/NGOs.
The contributions pooled from the abovementioned parties, which shall constitute the CSF, shall be used as surety for the loans of qualified borrowers from lending banks. The surety can provide cover of up to 80 percent of the amount borrowed. Because of the security cover, participating lender banks are encouraged to charge reasonable interest rates and service charges.
The maximum amount that may be borrowed by qualified borrowers under the program shall not exceed 10 times its contributions to the fund at any given time.
The CSF shall be deposited in trustee bank/s as herein defined, and shall only be invested or placed in safe and high-yielding instruments such as government securities.
The CSF’s operations shall be administered by CSF Cooperatives, which are governed by the Board of Directors. The Board of Directors shall designate bank/s, authorized by the Bangko Sentral ng Pilipinas (BSP) to engage in trust and other fiduciary business, to act as trustee bank/s and manage the CSF subject to additional eligibility requirements as may be provided for in the implementing rules and regulations.
CSF Cooperatives
A CSF Cooperative shall be organized as an LGU-partnered cooperative in accordance with the implementing rules and regulations to be promulgated by the Cooperative Development Authority (CDA), and may be established in a province or in a city. It shall enjoy the tax privileges of cooperatives under the Philippine Cooperative Code of 2008.
It was reported that at least 48 CSF Cooperatives have been established in the country to date. This number is expected to increase as the CDA and BSP continue to promote the program and encourage more LGUs, cooperatives, and other stakeholders to join and organize this type of cooperative. The BSP spearheads the promotion, creation and organizational development of CSF Cooperatives, as well as facilitates the acquisition of technical assistance, such as trainings and seminars.
Good partners
There is no doubt that the CSF provides alternative means of collateral cover for the loans or credit accommodations obtained by qualified borrowers from lending banks. Thus, CSF Cooperatives can be good partners to lending institutions, including rural banks. Through the CSF, they enhance financial inclusion, support local economic growth, and provide a more responsible alternative to informal lending.
Euney Marie J. Mata-Perez is a CPA-Lawyer and the Managing Partner of Mata-Perez, Tamayo & Francisco (MTF Counsel). She is a corporate, M&A and tax lawyer and has been ranked as one of the top 100 lawyers of the Philippines by Asia Business Law Journal and is the Chair of the Tax Committee of the Management Association of the Philippines. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment regarding this article, you may email the author at info@mtfcounsel.com or visit MTF website at www.mtfcounsel.com.
The article was published at the More to Follow Column at The Manila Times on November 13,2025. Please see this link.