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Draft Manual of Operations For Credit Surety Fund
Draft Manual of Operations For Credit Surety Fund
MANUAL
OF OPERATIONS
ACKNOWLEDGMENT
We would like to extend our sincerest appreciation to the untiring efforts, the sharing
of valuable time and precious ideas exerted by the members of the Technical Working Group
in the crafting of this Manual of Operations as per Special Order No. 2023-052 dated February
2, 2023 issued by the Office of the Administrator as follows:
Members
Head Office : Josie L. Villaver
Mary Grace I. Cinco
Ian Dave U. Alindajao
We wish to acknowledge the Administrator and the Members of the Board of Directors
of the Cooperative Development Authority for their unwavering support to the Credit Surety
Fund Service in ensuring the success of this endeavor.
Board of Directors
Chairman : Usec. Joseph B. Encabo
Members : Asec. Myrla B. Paradillo
Asec. Virgilio R. Lazaga
Asec. Abad L. Santos
Asec. Pendatun B. Disimban
Asec. Abdulsalam A. Guinomla
2. BOD – refers to the Board of Directors governing the body of the CSF Cooperative. It
is entrusted with the sound and prudent administration of the CSF Cooperative,
pursuant to the CSF Act and its implementing rules and regulations, Articles of
Cooperation and Bylaws.
6. Cooperators — refer to the original members of the CSF Cooperative in the Articles of
Cooperation who executed and signed as such;
7. CSF Act - refers to Republic Act No. 10744, otherwise known as the “Credit Surety
Fund Cooperative Act of 2015”;
9. CSF or Surety Fund or Fund — a fund generated from the contributions of well-
capitalized and well-managed member-cooperatives/NGOs, LGUs, GFls, IGLF and
other institutions/GAs which shall serve as security for the loans that will be obtained
by qualified borrowers from lending banks by way of a surety cover issued by the BOD
of the CSF Cooperative;
10. Donor — refers to an individual or a private entity that contributes to the CSF
Cooperative which shall be treated as grant. Donors shall not be considered as
members of the CSF and their contribution shall be booked as Restricted Capital for
Surety;
11. Dormant Past Due Accounts - accounts whose balances remain inactive, past due, or
non-moving in the books of accounts for 10 years or more and where
settlement/collectability could no longer be ascertained.
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12. Endorsers — refer to cooperatives which are members in good standing of the CSF
Cooperative and which attest to the creditworthiness of the endorsed member-
borrowers and assure that such are eligible to avail of a loan covered by the CSF
Cooperative.
13. Financial Guarantee – Surety Agreement - This account refers to the amount payable
by the CSF Cooperative to the lending bank, representing a maximum of 80% of the
outstanding unpaid principal loan balance, after the loan has been declared in past
due status based on the definition of “Past Due Account” under the rules.
14. GFIs — refer to government financial institutions in which the government directly or
indirectly owns majority of the capital stock and which are registered with or directly
supervised by the BSP. For purposes of the CSF IRR, these are, but not limited to, the
Development Bank of the Philippines (DBP) and Land Bank of the Philippines (LBP).
GFl’s contribution shall be in the form of either investment in common shares and
Restricted Capital for Surety, or grant, which shall qualify them as members of the CSF
Cooperative;
15. Grant — shall mean contributions from LGUs, GFIs, PhilGuarantee and GAs which
opted their contributions to be treated as such. Grants shall be booked as Restricted
Capital for Surety. All grants shall share in the earnings, in the form of imputed income,
and losses of the Fund. However, losses, if any, will only be up to the extent of their
aggregate contributions to the Fund. Upon dissolution of CSF cooperatives, grants
from LGUs, GFIs, PhilGuarantee and GAs shall be returned, net of guarantees issued
and liquidation expenses;
17. Imputed Income - shall refer to the earnings generated by the contributions of LGUs,
GFIs, PhilGuarantee and GAs treated as grants as well as the earnings generated by
the contributions of an individual or private entity, which shall not be distributed but
shall remain in the Restricted Capital for Surety until the dissolution of the CSF
Cooperative.
19. LGU — refers to the Local Government Unit such as provincial or city government that
contributes to the CSF Cooperative established in its locality, either in the form of
investment or grant, in an amount at least equal to the total contribution of the member-
cooperatives/NGOs. Provided, that a municipality within the province may also
contribute to a CSF which is administered and managed by a provincial CSF
Cooperative, which contribution shall be deemed as part of the contribution of the
province;
20. MSME– refers to Micro, Small and Medium Enterprises with business activity or
enterprise engaged in industry, agri-business and/or services, whether a single
proprietorship, cooperative, or partnership whose total assets, inclusive of those
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arising from loans’ but exclusive of the land on which the particular business entity’s
office, plant and equipment are situated.
23. Qualified Borrower — refers to the persons/entities who may borrow money from
lending banks, as follows: An MSME-member of a cooperative-member of the CSF
Cooperative; a cooperative that is a member of the CSF Cooperative; or an NGO that
is a member of the CSF Cooperative.
24. Receivable Assigned - This account refers to the amount due from the CSF
Cooperative’s member-borrower/endorser, by virtue of its endorsement or subrogation
of the debt, under a deed of assignment of credit issued by the lending bank in favor
of the CSF Cooperative, after payment has been made by the latter to the former in
accordance with the Surety Agreement.
25. Restricted Capital for Surety — refers to contributions of cooperatives, NGOs, LGUs,
GFIs, Philippine Guarantee Corporation (former Industrial Guarantee and Loan Fund
or IGLF), GAs, individuals and private entities which shall form part of the Credit Surety
Fund managed by a trustee bank. It shall be solely used to pay contingent liabilities
resulting from claims on past due loans;
26. Trust Deposit for Surety - This account refers to funds deposited by the CSF
Cooperative in a bank licensed by the BSP to provide trust services (trustee bank),
which fund shall be utilized to pay claims against the surety agreement.
27. Trustee bank/s — the bank/s designated by the BOD to manage the Fund. Such bank/s
must be authorized by the BSP to engage in trust and other fiduciary business under
Republic Act No. 8791, otherwise known as the “General Banking Law of 2000”,
subject to such other additional eligibility requirements as provided in this Rules.
28. Surety Agreement — the agreement executed by the proper parties as defined by the
CSF Act and its implementing rules and regulations, in favor of the lending bank,
whereby the surety obligates itself to be jointly and severally liable with a qualified
borrower in the event that the latter defaults: Provided, That, a surety agreement shall
not be deemed to be an insurance contract and the issuance thereof pursuant to the
CSF Act, and those previously issued by the Oversight Committees of existing CSFs,
shall not be considered as doing an insurance business under Republic Act No. 10607,
otherwise known as “The Insurance Code”, or any applicable law.
29. Unearned Income - Receivable Assigned - This account refers to the amount of income
received but not yet earned on receivable assigned from surety agreement, such as
interest on loans, 20% of the principal balance and other income received in advance
upon subrogation of the debt.
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30. Unrealized Loss – Surety Agreement - This account refers to the amount recognized
as possible loss which may arise from a decrease in estimated future cash flows from
any of the loan accounts guaranteed by the surety fund.
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PURPOSE
This Manual of Operations contains the policies, guidelines and procedures of the
Credit Surety Fund (CSF) Cooperatives, with respect to its Purpose in accordance with
Rule 10, Sec.3 of the IRR of RA 10744, that a CSF Cooperative shall be established
for the primary and exclusive purpose of administering the CSF which is used to
provide credit enhancement support by way of issuing surety cover to secure loans of
qualified MSME and cooperative/NGO borrowers in lieu of hard collaterals.
a) Provide a standard reference for the issuance of surety cover and financial
reporting;
b) Guide the BOD, Committees, and Management in the effective, systematic and
efficient performance of their duties and responsibilities;
c) Capacitate the CSF Cooperatives in the management of their overall systems and
operations; and
d) Ensure the safety and soundness of the CSF Cooperatives and to improve and
strengthen the operations of the institution.
e.) Guide the CSF Cooperative officers and Management Staff in complying with the
CSF Act and its IRR, and applicable guidelines to promote the stability and
sustainability of the CSF Coop.
The Manual has been organized and presented to facilitate understanding of the
operation of the CSF Cooperative. It, therefore, specifies the policies and the
corresponding procedures used in CSF operations. The related forms and checklists,
as well as pertinent rules, are attached to this Manual as exhibits.
SYSTEM OF DISTRIBUTION
Copies of this manual shall be distributed to all Registered Credit Surety Fund
Cooperatives, for information and reference.
The manual shall remain a property of the CDA even when distributed to CSF
Cooperative. This Manual and other related materials as described in here shall be
treated with strict discretion/disclosure and shall not be brought outside the CSF
Cooperative.
Review, enhancement and/or improvement shall be at least once in every two (2) years
or if necessary. Basis of these improvement(s) can be as a result of the process review,
passage and/or amendment of laws, rules and regulations, administrative issuances
and other material means/forms of the services presented in this Manual.
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CHAPTER 1 MEMBERSHIP
1.1 Open and Voluntary Membership
The CSF Cooperative shall adhere to the principle of open and voluntary membership
with reference to its implementing rules, regulations and procedures. It shall create an
environment that will motivate members to perform their duties, exercise their rights and
avail of the privileges.
1.2 Composition
The members of the CSF Cooperative are the following entities that have contributed to
the CSF:
1. Cooperatives;
2. Non-government organizations (NGO);
3. Local government units (LGU);
4. Government financial institutions (GFI);
5. Philippine Guarantee Corporation (PhilGuarantee) and
6. Government Agencies (GA’s);
A cooperative may be a member of more than one CSF Cooperative provided that the
former operates and has a branch or satellite within the latter’s area of operation and as
provided in its by-laws.
1.3 Qualification
1. Adjusted asset must be at least 1.0 million, which is computed as Total Asset
minus the following:
i. Past due loans and items under litigation (net of allowance for probable
losses); and
ii. Past due accounts receivable (net of allowance for probable losses);
i. Adjusted Capital equals to Paid-up share capital plus reserve fund less
unbooked allowance
ii. Adjusted assets as computed under 4.10
A “well-managed” cooperative/NGO:
iv. Must be earning based on the latest audited financial statements submitted
to CDA;
v. Must have adopted sound lending policies and practices if applicable;
vi. Must have audited financial statements;
vii. Members of the BOD and Credit Committee have acquired CDA’s
mandatory training hours;
viii. Must have no past due obligations with any of its creditors; and
ix. Must not have any existing leadership dispute or any other cooperative
dispute filed with the CDA or any court or tribunal.
1.4 Requirements
Cooperatives/NGOs interested to join the CSF Cooperative shall submit the following
minimum requirements:
1.5 - Application
The BOD shall act upon the application for membership within a reasonable time but not
more than two (2) months from date of submission of complete requirements.
The application form for membership shall include an undertaking to uphold the Bylaws,
policies, guidelines, rules and regulations promulgated by the BOD and the General
Assembly.
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An applicant cooperative/NGO may only be deemed a member after its application has
been approved by the BOD and has fully paid the CSF Cooperative its contribution and
share capital thereto as may be prescribed in the Bylaws. Once accepted, the CSF
Cooperative shall issue Certificate of Membership and Investment.
In case membership is refused or denied by the BOD, an appeal may be made to the
General Assembly and the latter’s decision shall be final. For this purpose, the General
Assembly may opt to create an Appeal and Grievance Committee, the members of which
shall serve for a period of one (1) year and shall decide appeals on membership
application within thirty (30) days upon receipt thereof.
Pending resolution of the committee within 30 days, the appeal is deemed approved in
favor of the member. Provided that the applicant is qualified and has submitted or
complied all the requirements.
1.6 Procedures
The following steps shall be observed by cooperatives/NGOs in the application for
membership:
1. Fill out the application form.
2. Submit the properly and completely filled-out application form together with the
documentary requirements and membership fee of _____________ (P ______).
3. The Applicant shall attend and complete the prescribed COS/PMES.
4. The Secretary shall submit the application form to the BOD for approval.
5. If approved, the applicant shall subscribe and pay the minimum amount of
contribution as prescribed in the Bylaws.
Partner institutions like the LBP, DBP, GAs and PhilGuarantee become members when
they have conveyed in writing and paid their contributions to the CSF cooperative.
Hence, they are not subject to qualification requirements.
1.8 Termination
c. For involuntary termination, the BOD shall notify in writing through registered
or electronic mail or shall be communicated in person to the member
cooperative/NGO which is being considered for termination. The member shall
be given an opportunity to be heard or to answer in writing within sixty (60) days
from receipt of the notice why its membership should not be terminated.
Any member terminated shall be informed in writing within fifteen (15) days after the
promulgation of the BOD decision.
LGUs, GFIs, PhilGuarantee and GAs may only withdraw their contribution upon
dissolution of the CSF Cooperative.
1.10 Appeal
In case membership is terminated by the BOD, an appeal may be made to the
General Assembly and the latter’s decision shall be final. For this purpose, the
General Assembly may opt to create an Appeal and Grievance Committee, the
members of which shall serve for a period of one (1) year and shall decide appeals
on membership termination within thirty (30) days upon receipt thereof.
Pending resolution of the committee within the prescribed period, his membership
remains valid and enforced and the appeal is deemed approved in favor of the
member.
a. Pay the capital subscription and participate in the capital build-up activities of
the CSF Cooperative;
b. Patronize the CSF Cooperative's business and services;
c. Participate in the membership education and training programs;
d. Attend and participate in the deliberation of all matters taken during General
Assembly meetings;
e. Observe and obey all lawful orders, decisions, rules and regulations adopted
by the Board of Directors and the General Assembly; and Promote the
purposes and goals of the SF Cooperative, the success of its business, the
welfare of its members and the cooperative movement in general.
b. LGUs
1. Share in the earnings of the CSF Cooperative, subject to the Bylaws;
2. Designate its authorized representative to the Board as Ex-officio
member without voting rights;
3. Inspect and examine the books of accounts, the minutes books, the
share register, and other records of the CSF Cooperative during
reasonable office hours; and
4. Such other rights and privileges as may be provided in the Bylaws, as
granted by the General Assembly provided not in contrary with this Rules.
It is the BOD's duty to promote the CSF Cooperative's long-term success and ensure
its sustained competitiveness in a way that is consistent with its fiduciary duty, which it should
exercise in the members' best interests.
1. Composition
The direction and administration of the affairs of the CSF Cooperative shall be vested
in the BOD. Unless otherwise provided in the Bylaws, it shall be composed of not less
than seven (7) and not more than fifteen (15) members.
The members of the BOD are natural persons consisting of the authorized
representatives of the member-cooperatives, as elected members; GFIs,
PhilGuarantee and other institutions/GAs, as appointed members; and LGU as ex-
officio member in accordance with the Bylaws of the CSF Cooperative, the CSF Act
and its IRR. They are the following:
ii. Appointed member. - GFIs, IGLF and other institutions/GAs shall become
automatic members of the Board. GFIs, IGLF and other institutions/GAs have
voting rights regardless of the nature of its contribution. Provided that the
number of automatic members from GFls and GAs shall not exceed two (2)
and one (1), respectively. If necessary, GFI's shall separately choose from
among themselves who will sit in the Board.
iii. Ex-officio member. - Refers to the authorized representative of the LGU who
shall become an automatic member of the Board without voting rights.
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No two (2) or more persons with relationships up to the third civil degree of
consanguinity or affinity nor shall any person engaged in a business similar to that
of the CSF Cooperative nor who, in any other manner, has interests in conflict with
the CSF Cooperative, shall serve as an appointive officer.
The BOD shall be responsible for the strategic planning, direction-setting and policy-
formulation activities of the CSF Cooperatives. The powers and responsibilities of the
BOD shall include but not limited to the following:
a. Determine and formulate the general policies and guidelines on the proper
administration of the CSF Cooperative pursuant to its Bylaws and the Implementing
Rules and Regulations;
b. Act as Manager of the CSF until such time that a trustee bank is designated or
appointed as trust fund manager;
c. Designate bank/s duly licensed by the BSP to perform trust and other fiduciary
functions as trustee bank/s or investment manager/s, which will, among others,
manage the investment, reinvestment and disposition of the fund as provided under
Republic Act. No. 8791, otherwise known as the “General Banking Law of 2000”;
e. Enter into contracts and transactions involving, affecting or relating to the CSF
Cooperative including but not limited to the issuance of the Surety Agreement in favor
of lending banks;
g. Periodically review the CSFs and be responsible for taking appropriate action on the
audit of the financial condition and operations of the CSF Cooperative;
h. Create committees and appoint officers subject to the qualifications provided by the
BOD and Bylaws;
i. Delegate to the Chairperson, Vice-chairperson, or any member of the BOD any of its
powers whenever deemed necessary for the best interest of the CSF Cooperative and
as allowed by law;
j. Exercise general supervision of all the affairs of the CSF Cooperatives including the
issuance of policies, rules and regulations governing the operations of the CSF and be
directly accountable to the general membership of the CSF Cooperatives;
k. Issue the Surety Agreement jointly and severally liable with the endorsing
cooperative-member, in favor of the lending bank to secure the loans of qualified
borrowers; and
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l. Perform such acts and exercise such powers and duties as may be necessary and
proper in order to achieve the purpose for which the CSF was created or for any
purpose which will redound to the benefit of the members of the CSF Cooperatives.
2.3 Committees
1. Creation of Committee
The members of both the Audit and Election Committees shall be elected by the
General assembly and the rest shall be appointed by the BOD.
Each committee shall formulate its own rules and regulations, policies and guidelines
in the performance of its functions and initiate programs and activities for the
furtherance of the CSF Cooperative’s goals and objectives, in accordance with this
Bylaws and CSF Cooperative Act and its IRR. All actions and initiatives made by the
committees shall be approved by the BOD or the General Assembly, as the case may
be.
2. Term of Office
The Committee Chairperson and Members shall hold office for a term of one (1) year
or until their successors shall have been elected/appointed and qualified.
3. Vacancy
4. Election Committee
This committee shall be composed of three (3) members including the Committee
Chairperson. No member of the committee shall hold any other position in the CSF
Cooperative during his/her term of office. The committee shall be responsible for the
following:
d. Supervise the conduct, manner and proceedings of election and other election-
related activities and act on the changes thereto;
g. Decide election and other election-related cases except those involving the
Election Committee or its members; and
5. Audit Committee
This committee shall be composed of three (3) members including the Committee
Chairperson. No member of the committee shall hold any other position in the CSF
Cooperative during his/her term of office. The committee shall be responsible for the
following:
a. Audit the performance of the cooperative and its various responsibility centers;
g. Submit reports on the result of the internal audit and recommend necessary
changes on policies and other related matters on operation to the General
Assembly;
6. Credit Committee
This committee shall be composed of three (3) members including the Committee
Chairperson. No member of the committee shall hold any other position in the CSF
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Cooperative during his/her term of office. The functions of the committee are as
follows:
a. Evaluate and recommend loan applications with surety cover of the member
cooperatives/NGOs for approval of the BOD in accordance with the IRR and the
standard criteria set by the CSF Cooperative;
7. Ethics Committee
a. Formulate, develop, implement and monitor the Code o covernance and Ethical
Standards (CGES) to be observer bythe members, offcers and employees of the
cooperative subiect to the approval of the Board of Directors and ratification by the
General/Representative Assembly;
8. Other Committees
The BOD, may by a majority vote of all its members, create such other committees
as may be deemed necessary for the operation of the Cooperative.
The qualifications and disqualifications of the BOD shall also apply to all the
members of the committees.
The BODs and members of the committees shall not receive any compensation
except for reasonable per diem approved by the General Assembly. Provided
however, that they shall not be entitled to any per diem when, in the preceding
calendar year, the CSF Cooperative reported a net loss or had interest on share
capital less than the official inflation rate for the same year. Provided further, that
no increase in per diems shall be granted during the first five years of existence of
the CSF Cooperative.
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3.1 Condition
Surety Agreement shall be issued only when all of the following conditions have
been met;
4. The borrower has complied with all the terms and conditions of the
cooperative under which such loan was approved for endorsement
to the bank and compliance with all other requirements as may be
required by the BOD.
5. The CSF Cooperative’s share in the service fee has been remitted
to the Treasurer of the CSF Cooperative;
11. The outstanding past due loans in the books of all or any of
participating lending banks did not reach ten percent (10%) of the
total outstanding loans covered by Surety Agreement.
1. All applicants shall be required to properly accomplish the application for Surety
Cover, information sheet and other necessary documents required by the CSF
Cooperative.
The endorsing cooperatives, or in its absence, the CSF Cooperative itself, shall
charge the MSME-borrowers reasonable annual service fees computed based
on the amount of the outstanding principal loan granted by the lending bank per
transaction. Subject to the maximum rate of five percent (5%) per annum,
suggested rates are as follows:
In case of loan with the endorser, one half of the Surety Fee shall be paid to
the endorsing cooperative and the other half shall be paid to the CSF
Cooperative.
In case of an approved credit line, the Surety Agreement shall be issued per
availment of loan.
The maximum obligation of the endorsing cooperative and the CSF Cooperative
under its Surety Agreement shall be 80% of the outstanding unpaid principal loan
balance.
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The Surety Agreement shall not cover any extension, renewal or novation of the
loan in the nature of new, separate and additional loans without approval of the
CSF Cooperative in the form of a new Surety Agreement.
The Surety Agreement should coincide with the term of the loan.
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3. The qualified borrower shall file application for business loan with surety cover,
as follows:
4. The endorsers, through the issuance of a BOD resolution, bind themselves jointly
and severally liable with the borrower to the bank, or to the CSF Cooperative if it
pays the borrower’s past due loan obligation.
9. The collateral acceptable are real estate and chattel mortgage in favor of the
endorsing cooperative or the CSF Cooperative.
10. The purpose of the loan must always be productive in nature such as additional
working capital for business, acquisition of equipment, purchase of goods, additional
inputs for agricultural and commercial projects, lending and other purposes that will
generate economic activities.
11. The members of the CSF Cooperative, the BOD, or any of the contributors, fund
providers or investors shall not interfere with the selection by the MSME among the
participating lending banks from which it will obtain a loan.
12. The BOD of the CSF Cooperative shall be responsible for setting written loan
policies.
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4.3 Requirements
a. Duly accomplished loan application form;
b. Latest Audited Financial Statement;
c. Certificate of Compliance, if applicable;
d. Feasibility Study to finance a project, if necessary;
e. Other necessary documents, as required by the BOD and the participating
lending bank; and
f. Payment of Service Fee and/or other fees.
4.7 Filing
The Credit Committee shall maintain a general file of all credit reports and all other
necessary documents and information needed in the evaluation and assessment of
credit.
Adjusted Capital_____
Adjusted Total Assets
1. The CSF Cooperative shall maintain at all times a twenty percent (20%)
minimum ratio of its liquid assets, investments and time deposits with
banks to outstanding contingent liabilities on account of Surety
Agreements issued.
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2. CSF Cooperative shall comply with the minimum liquidity ratio on a daily
basis, and shall have the appropriate systems in place to ensure the same.
This can also be monitored under the “Liquidity Profile” sheet of the
prescribed monitoring tool. For reporting purposes, CSF cooperatives shall
submit a monthly report on their compliance with the minimum liquidity ratio
through the prescribed monitoring tool to the Regional CSF Section
assigned personnel.
Regular Monitoring of credit risk and credit exposures, including regular credit
reviews of qualified borrowers shall be performed by the Credit Committee and the
Management of the CSF Cooperative.
1. The borrower shall submit to the BOD of the CSF Cooperative a report or
proof that the loan proceeds was utilized for the intended purpose.
2. Strictly monitor the past due ratio reflected in the prescribed monitoring
tool. The past due ratio should be less than 10% of all participating lending
banks, otherwise, stop issuing additional surety cover.
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The Receivable Assigned-Surety Agreement refers to the amount due from the CSF
cooperatives member-borrower/endorser, by virtue of its endorsement or subrogation of the
debt, under a deed of assignment of credit issued by the lending bank in favor of the CSF
cooperative, after payment has been made by the latter to the former in accordance with the
Surety Agreement.
1. The lending bank may file a claim against the CSF Cooperative within 30
days after the loan has been declared in past due status, provided that the
following conditions are met:
a. The account has been declared by the lending bank to be in past
due status based on the definition of “Past Due Account” under
the CSF IRR;
1.The BOD shall review the validity of claim and completeness of required
documents before paying the lending bank within a reasonable time as provided
in the surety agreement or in the Bylaws.
2.The CSF Cooperative shall book its claim against the endorsing cooperative or
borrower plus interest until fully paid, by virtue of its endorsement or subrogation
of the debt.
3. From its inception, aII payments to lending banks in connection to past due
accounts covered by Surety Agreement shall likewise be booked under Asset
Account as Receivable Assigned-Surety Agreement unless otherwise the CSF
Cooperative opted to write-off prior to its registration with CDA.
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3. In recording the collections received, the BOD shall first apply the collection
to its claim against the endorsing cooperative until fully paid. All collections
on CSF’s claim, net of collection cost, shall be deposited to the Trustee
Bank.
4. The Bylaws shall provide for a detailed mechanism and rules for collection
of past due loans covered by the CSF. It shall include non-litigious and soft
approaches and remedial measures in its collection strategies. These are
but not limited to rescheduling of loan, restructuring, refinancing and
negotiated settlement.
5. The BOD of the CSF Cooperative shall be responsible for setting effective
loan collection and monitoring policies designed with the following
characteristics:
i. Monthly and accurate reporting of delinquent loans;
ii. Timely and consistent follow-up actions;
iii. Utilization of outside collection sources when internal efforts fail
to produce results; and
iv. Maintenance of collection records.
The CSF Cooperative may write-off dormant past-due accounts when all of the
conditions for write off have been met. Proper approval must be obtained to record
write-offs of accounts. Each request for write-off must be based on review of
documented collection efforts ensuring that due diligence has been exercised.
The write-off of dormant past due accounts does not mean condoning or
extinguishing the obligation of the borrower.
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1. Conditions
An account has become past due when payment is not received upon the due
date. If collection efforts have been made and no further collection is foreseen, the
past due accounts may be written off, if the following criteria are met:
e. A quarterly report of all accounts written off will be provided to the BOD for
review.
2. Approval
The Chief Executive Officer/General Manager shall recommend to the BOD the
write-off of past due assigned receivable. The authority to approve the write-off
of past due assigned accounts is vested in the GA upon endorsement of the BOD
of the CSF Cooperative.
3. Accounting
The write-off of a dormant past due receivable assigned account refers to the
derecognizing the asset account and the corresponding allowance for
impairment from the books of accounts.
The losses from past-due loans shall be charged in the following order of priority:
a. Share in the Restricted Capital for Surety of the endorser;
b. Share in the RCS of the borrower;
c. General Reserves; and
d. Borne proportionately by all members of the fund as deduction
from their share in the Restricted Capital for Surety.
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6.5 Recovery
The write-off of a dormant past due account does not mean condoning or extinguishing
the obligation of the borrower. Hence, there is still probability of collection or settlement
of the accounts previously written-off.
The recovery or settlement of dormant accounts previously written off is evident in
instances, including but not limited to:
i. Voluntary payment; and
ii. Filing claims against the estate for individual MSME.
Accounting for recovery of dormant past due accounts that has been previously written
off is to set up or reverse the account back to the financial statement.
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1. The BOD shall designate a bank, authorized by the BSP to engage in trust
and other fiduciary business under Republic Act No. 8791, otherwise known
as the “General Banking Law of 2000”, to act as trustee bank (or fund
manager) and manage the CSF subject to additional eligibility requirements
as may be provided for in the IRR and in the Bylaws of the CSF Cooperative.
2. The surety fund shall be placed under a Trust Fund in a bank licensed to
provide trust services by the BSP, the consolidated fund of the CSF
Cooperative.
3. The terms and conditions of any agreement to be entered into by the BOD
and a trustee bank shall be embodied in a separate trust agreement.
6. LGUs, GFIs and other government agencies may only withdraw their
contribution upon dissolution of the CSF Cooperative.
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The BOD is responsible for the Risk Management Framework, implementing the
risk treatment plans, and monitoring and review.
lending banks have already reached ten percent (10%) of the total
outstanding loans covered by Surety Agreement;
10. Endorsement of any loan or avail of any loan through the CSF even if
the 20% CAR is below the requirement and/or Net Loss based on the
latest AFS;
11. Issuance of a Surety Agreement without the conduct of a BOD Meeting
and approval of the BOD;
12. Not receiving the Surety Fee before the Issuance of the surety cover;
13. Delinquency of loans;
14. Delay or non-submission of mandatory and other reports;
15. Non-securing of Certificate of Tax Exemption; and
16. Withdrawal of membership.
Step 3. Risk Assessment
Once the risks have been identified, the likelihood of the risk occurring and the
potential impact if the risk does occur are assessed using the risk rating as determined
by the risk assessment policy of the cooperative.
The likelihood of occurrence of an event whether almost certain, highly
probable, possible, low probability and unlikely to happen shall be defined and be rated
to assess risk.
The severity of the impact that may cause loss of property, severe injury, or
even loss of life of a particular risk whether catastrophic, critical, serious, marginal or
negligible shall be defined and be rated to determine risk exposure.
Step 4. Risk Analysis
The sources of risk, the likelihood of it to happen and the extent of impact or
damage it may cause shall be subject to an analysis to provide recommendation and
management action.
A sample of risk analysis is presented below:
The CSF Cooperative and the lending bank shall agree to inform each other
from time to time about the business operations and credit performance of the borrower
and to set up, for that purpose, a periodic monitoring mechanism to ensure that
appropriate risk mitigating measures are installed promptly.
For purposes of monitoring and to mitigate credit risk, borrowers with credit obligation
from other lending banks through their membership with other CSF Cooperative shall
disclose all the necessary information related to such loans.
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In case of findings and deficiencies, the cooperative shall comply with the
findings within fifteen (15) calendar days from the issuance of the notice.
1. Certificate of Registration
Within thirty (30) days after registration with CDA, the CSF Cooperative
shall apply for registration and comply with all the necessary requirements
and procedures in accordance with the guidelines issued by the BIR on the
matter.
CSF Cooperatives shall apply for the registration and subsequent renewal
of books of accounts whether manual or loose leaf within the prescribed
period or deadline issued by the BIR to avoid sanctions and penalties.
CSF Cooperatives shall comply all the necessary reports prescribed by the BIR
as indicated in the CTE.
b. Procedures
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The CSF Cooperative shall set and keep accurate and internal financial controls.
The reportorial requirements and administrative fees required from CSF
Cooperatives, taking into consideration their unique character and purposes.
The CSF Cooperative shall keep, maintain and preserve all its books of accounts
and other financial records in accordance with generally accepted accounting
principles and practices, applied consistently from year to year, and subject to
existing laws, rules and regulations.
To record the fund set-up by the CSF cooperative from contributions of its
members and receipt of grants from individual or private entities.
Cash xxx
Receivable - Assigned xxx
Cash xxx
b. An amount for the education and training fund, which shall not
be more than ten percent (10%) of the net surplus. The Bylaws
may provide that certain fees or a portion thereof be credited
to such fund. The fund shall provide for the training,
development and similar other activities geared towards the
growth of the cooperative movement as provided in the
Cooperative Code;
Entry of distribution:
2. The funds and its income or losses shall be shared or borne by the
members of the CSF Cooperative in proportion to their contribution. If
the contribution is treated as a grant, income shall be computed which
shall remain as Restricted Capital for Surety until the dissolution of the
CSF Cooperative.
3. Losses from past due loans shall be charged in the following order of
priority:
a. Four (4) copies of the General Assembly resolution certified under oath by the
CSF Cooperative’s secretary and majority of the BOD stating the fact that said
amendment or amendments to the Articles of Cooperation have been duly
approved by the required vote of the members.;
b. Four (4) copies of ACBL;
c. Duly notarized BOD and Secretary Certificate;
d. Treasurer's affidavit in case of increase of capital; and
e. Registration fee.
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1. The CSF or fund from the contributions of its members and receipt of grants from
individuals or private entities, shall not be deemed as part of the authorized
capital stock. It shall be recorded in a separate equity account titled as Restricted
Capital for Surety.
3. A member cooperatives/NGOs may own more than 10% of the total share
capital of the CSF Cooperative but not more than 50%.
4. The par value per share may be fixed at any amount not more than One
Thousand Pesos (₽1,000.00). Cooperatives are prohibited from issuing multiple
types of common shares with different par value per share. It is likewise
prohibited for any cooperative to increase/decrease the par value of the share
capital by way of amending their Articles of Cooperation and Bylaws.
5. The Cooperative may derive its funds from any or all of the following sources:
6. The General Assembly may authorize the BOD to raise a revolving capital by
deferring the payment of interest on share capital and authorized deduction of
percentage from proceeds of services rendered and retaining it as Restricted
Capital for Surety, or such other schemes as may be legally adopted. To
implement this provision, the BOD shall issue a Revolving Capital Certificate with
serial number and name.
7. The BOD shall issue a Share Capital Certificate only to a member who has fully
paid its subscription. The Certificate shall be serially numbered and contain the
shareholder's name, the number of shares owned, the par value, and duly signed
by the Chairperson and the Secretary, and bearing the official seal of the CSF
Cooperative. All certificates issued and/or transferred shall be registered in the
cooperative's Share and Transfer Book. The number of paid shares required for
the issuance of Share Capital Certificate shall be determined by the BOD. The
shares may be purchased, owned or held only by entities that are eligible for
membership.
8. The capital of a CSF Cooperative may consist of common share capital and
preferred share capital. The share capital contribution of the members shall be
considered as equity. Provided that it shall not be withdrawn and should not be
used in offsetting obligations whether past due or current while the membership
subsists.
9. Preferred Shares are shares issued to LGUs as may be allowed in the Bylaws.
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10. The Bylaws of every CSF Cooperative may provide for a reasonable and realistic
member-capital build-up program to allow the continuing growth of the members'
investments in their cooperative as their own economic conditions continue to
improve.
12. The Bylaws of a cooperative shall prescribe a fine of three percent (3%) on
unpaid subscribed share capital.