QuestionsQuestions (Republic Act No. 10744)
RA 10744 is known as the “Credit Surety Fund Cooperative Act of 2015.” Its general purpose is to provide for the creation and organization of Credit Surety Fund (CSF) Cooperatives that manage and administer CSFs to enhance access of MSMEs, cooperatives, and NGOs to bank credit.
The CSF is a fund generated from contributions of well-capitalized and well-managed member-cooperatives/NGOs, LGUs, GFIs, and other institutions/agencies. Instead of “hard collaterals,” it serves as security for loans by providing a surety cover through a Surety Agreement issued by the CSF Cooperative’s Board of Directors.
Qualified borrowers include: (1) an MSME that is a member of a cooperative that is a member of the CSF Cooperative; (2) a cooperative that is a member of the CSF Cooperative; and (3) an NGO that is a member of the CSF Cooperative.
Endorsers are member-cooperatives/NGOs that attest to the creditworthiness of member-borrowers and bind themselves jointly and severally with the borrower in case of default.
No. RA 10744 expressly states that a surety agreement under the Act “shall not be deemed to be an insurance contract,” and issuance under the Act is not considered doing insurance business under the Insurance Code (RA 10607).
It acquires juridical personality “from the moment the CDA issues a certificate of registration” under its official seal, which is conclusive evidence of due registration unless canceled.
A CSF Cooperative shall be organized as an “LGU-partnered cooperative” in accordance with the CDA’s implementing rules and regulations. It may be established in a province or in a city.
At least 25% of the authorized capital share must be subscribed at registration, and at least 25% of the total subscription must be paid upon subscription. In any case, the paid-up capital share cannot be less than PHP 5,000. The CDA may increase the required paid-up capital share every five years when necessary.
The maximum loan availment is not more than ten (10) times the qualified borrower’s contributions to the Fund at any given time.
The CSF must be deposited in trustee banks. It may only be invested or placed in safe and high-yielding instruments, such as government securities.
CSF operations are administered by the CSF Cooperative, governed by its Board of Directors. The Board formulates policies, manages the CSF (acting as manager until trustee banks are designated), designates trustee banks, issues the Surety Agreement, supervises affairs, and ensures compliance through periodic review and appropriate actions.
The CDA is responsible for registration, regulation, monitoring, and supervision of CSF Cooperatives. It may create an additional department for CSF Cooperatives, sets registration criteria and qualifications (with assistance from BSP), issues implementing rules, enforces compliance, investigates and sanctions erring cooperatives, requires reports and documents, conducts examinations, sets performance standards, and submits annual status reports to DOF and BSP.
BSP must spearhead promotion and organizational development of CSF Cooperatives, facilitate technical assistance in coordination with other stakeholders, and assist the CDA in setting criteria and qualifications for CSF Cooperatives consistent with its mandate.
Member-cooperatives/NGOs and other private institutions may withdraw all or part of their contributions subject to implementing rules and provided there are no outstanding obligations on account of surety agreements and subject to reasonable terms such as fund liquidity. LGUs and GFIs and other government agencies may withdraw only upon dissolution of the CSF Cooperative.
CSF Cooperatives registered with the CDA enjoy the tax privileges of cooperatives under RA 9520 (Philippine Cooperative Code of 2008). However, members that are not cooperatives are subject to regular taxes under the NIRC and other tax laws.
RA 10744 and its implementing rules primarily govern organization, establishment, governance, and operation of CSF Cooperatives. The Cooperative Code of 2008 applies only insofar as it is not inconsistent with RA 10744.
In case of doubt, the provisions are to be “liberally construed and resolved in favor of the establishment of the CSF Cooperatives.”