Credit Surety Fund Cooperative Act of 2015

REPUBLIC ACT NO. 10744

AN ACT PROVIDING FOR THE CREATION AND ORGANIZATION OF CREDIT SURETY FUND COOPERATIVES TO MANAGE AND ADMINISTER CREDIT SURETY FUNDS TO ENHANCE THE ACCESSIBILITY OF MICRO, SMALL AND MEDIUM ENTERPRISES, COOPERATIVES AND NONGOVERNMENT ORGANIZATIONS TO THE CREDIT FACILITY OF BANKS AND FOR OTHER PURPOSES

SECTION 1. Title. — This Act shall be known as the "Credit Surety Fund Cooperative Act of 2015".

SECTION 2. Declaration of Policy. — The State hereby recognizes the need to foster national development, promote inclusive growth, and reduce poverty by promoting the growth of micro, small and medium enterprises (MSMEs) that facilitate local job creation, production and trade in the country. Moreover, the State affirms its declared policy to foster the creation and growth of cooperatives as a practical vehicle for promoting self-reliance for the attainment of economic development and social justice. Further, it is the State's policy to strengthen the cooperative movement in the Philippines by empowering the Cooperative Development Authority (CDA) and providing it with the necessary powers and resources to fulfill its...

Summary of Republic Act No. 10744 (Credit Surety Fund Cooperative Act of 2015)

Title and Declaration of Policy (Sections 1-2)
• This Act shall be known as the "Credit Surety Fund Cooperative Act of 2015".
• The State recognizes the need to promote the growth of MSMEs, cooperatives, and NGOs to facilitate job creation, production, and trade.
• The State aims to empower the Cooperative Development Authority (CDA) to fulfill its mandate.
• The State shall encourage and assist in the creation and organization of Credit Surety Fund Cooperatives (CSF Cooperatives) to administer Credit Surety Funds (CSFs) and enhance access to bank credit for MSMEs, cooperatives, and NGOs.

Objectives (Section 3)
• Encourage, promote, and assist in the creation and organization of CSF Cooperatives with juridical personality.
• Enhance the creditworthiness of MSMEs, cooperatives, and NGOs, and broaden their access to bank credit facilities.
• Sustain the continuous flow of credit in the countryside through well-managed CSFs as surety covers.
• Build the capability of cooperatives and NGOs in credit evaluation, loan and risk management, and good governance.
• Generate more employment and contribute to poverty alleviation through increased investments and economic activities.
• Strengthen the CDA by providing it with powers and resources to effectively regulate cooperatives, including CSF Cooperatives.

Definition of Terms (Section 4)
• Defines key terms such as Articles of Cooperation, Bangko Sentral ng Pilipinas, Board of Directors, Bylaws, Contributions, Cooperative, Cooperative Development Authority (CDA), Credit Surety Fund (CSF), Credit Surety Fund Cooperative (CSF Cooperative), Endorsers, Government Financial Institutions (GFIs), Lending Bank, Local Government Unit (LGU), Members of the CSF Coop, Micro, Small and Medium Enterprise (MSME), Non-government Organization (NGO), Qualified Borrowers, Registration, Surety Agreement, and Trustee Banks.

Credit Surety Fund Cooperative (CSF Cooperative) (Sections 5-8)
• A CSF Cooperative shall be organized as an LGU-partnered cooperative in accordance with the implementing rules and regulations. (Section 5)
• A CSF Cooperative shall file its articles of cooperation and bylaws with the CDA for registration. (Sections 6-7)
• A CSF Cooperative acquires juridical personality upon issuance of a certificate of registration by the CDA. (Section 8)

Tax Treatment and Board of Directors (Sections 9-10)
• A registered CSF Cooperative shall enjoy the tax privileges of cooperatives under the Philippine Cooperative Code of 2008. (Section 9)
• The Board of Directors shall consist of representatives from member-cooperatives/NGOs, GFIs, and other government agencies, with the LGU representative as an ex officio member without voting rights. (Section 10)

Powers and Responsibilities of the Board of Directors (Section 11)
• The Board of Directors shall have various powers and responsibilities, including:
- Determining general policies and guidelines for the administration of the CSF Cooperative.
- Acting as the manager of the CSF until trustee banks are designated.
- Designating trustee banks to manage the CSF.
- Promulgating rules for infusion of additional contributions and admission of new members.
- Entering into contracts and transactions involving the CSF, including issuing Surety Agreements.
- Reviewing the CSF and taking appropriate action on audits.
- Creating committees and appointing officers.
- Exercising general supervision over the affairs of the CSF Cooperative.
- Issuing Surety Agreements jointly with endorsing entities in favor of lending banks.

Authorized, Subscribed, and Paid-Up Capital (Section 12)
• At least 25% of the authorized capital share must be subscribed at registration, and 25% of the subscription must be paid upon subscription.
• The paid-up capital share shall not be less than ₱5,000, subject to increase every 5 years as determined by the CDA.
• The CSF shall not be deemed part of the authorized capital stock.

Establishment and Composition of the CSF (Sections 13-14)
• A CSF Cooperative shall set up one CSF to provide alternative collateral cover for loans obtained by qualified borrowers from lending banks. (Section 13)
• The CSF shall consist of:
- Contributions of member-cooperatives/NGOs.
- Counterpart contribution of the LGU, at least equal to the total contributions of member-cooperatives/NGOs.
- Contributions of GFIs and other institutions/government agencies, which may or may not be equal to the total contributions of member-cooperatives/NGOs. (Section 14)

Usage and Administration of the Fund (Sections 15-17)
• The CSF shall be used as surety for loans of qualified borrowers from lending banks and shall be deposited in trustee banks. (Section 15)
• The maximum amount that may be borrowed by qualified borrowers shall not exceed 10 times their contributions to the Fund at any given time. (Section 16)
• The CSF operation shall be administered by the CSF Cooperative, governed by the Board of Directors, and managed by designated trustee banks authorized by the BSP. (Section 17)

Withdrawal of Contributions (Section 18)
• Subject to procedures and requirements in the implementing rules and regulations, a member-cooperative/NGO and other private institutions may withdraw all or part of their contributions, provided they have no outstanding obligations on account of surety agreements issued.
• LGUs, GFIs, and other government agencies may only withdraw their contributions upon dissolution of the CSF Cooperative.

Cooperative Development Authority (CDA) (Section 19)
• The CDA shall be the government entity in charge of registration, regulation, and supervision of CSF Cooperatives.
• The CDA shall:
- Formulate policies on the registration of CSF Cooperatives, including setting criteria and qualifications for cooperatives and NGOs to join.
- Issue implementing rules and regulations with the assistance of the BSP.
- Supervise and monitor compliance of CSF Cooperatives with the Act and its implementing rules and regulations.
- Investigate and impose sanctions for violations.
- Require submission of reports, financial statements, and other documents.
- Conduct regular examinations or inspections.
- Set performance standards for the proper operation of CSF Cooperatives.
- Submit an annual status report of each CSF Cooperative to the Department of Finance (DOF) and the BSP.

Role of the Bangko Sentral (Section 20)
• The Bangko Sentral shall:
- Spearhead the promotion, encouragement, creation, and organizational development of CSF Cooperatives.
- Facilitate the acquisition of technical assistance for CSF Cooperatives.
- Assist the CDA in setting criteria and qualifications for CSF Cooperatives.

Books of Accounts, Records, Reportorial Requirements, and Administrative Fees (Section 21)
• The CSF Cooperative shall set and keep accurate internal financial controls, as stated in the implementing rules and regulations.
• The reportorial requirements and administrative fees for CSF Cooperatives shall be provided in the implementing rules and regulations.

Implementing Rules and Regulations (Section 22)
• The CDA, DOF, and BSP shall promulgate the implementing rules and regulations within 60 days from the effectivity of this Act.

Governing Law, Interpretation, and Construction (Sections 23-24)
• The provisions of this Act and its implementing rules and regulations shall primarily govern the organization, establishment, governance, and operation of CSF Cooperatives.
• The Cooperative Code of 2008 shall apply only insofar as it is not inconsistent with this Act.
• In case of doubt, the provisions shall be liberally construed in favor of the establishment of CSF Cooperatives.

Transitory Provisions (Section 25)
• All existing CSF agreements established prior to the effectivity of this Act, pursuant to the BSP's CSF Program, are deemed eligible to be registered at the CDA as CSF Cooperatives, subject to the rules of registration.

Amendatory, Separability, and Effectivity Clauses (Sections 26-28)
• Inconsistent provisions of other laws, presidential decrees, rules and regulations, executive orders, or parts thereof shall be deemed amended accordingly. (Section 26)
• If any provision of this Act is declared unconstitutional, the other provisions not affected shall continue to be in full force and effect. (Section 27)
• This Act shall take effect 15 days after its publication in the Official Gazette or in two newspapers of general circulation. (Section 28)