Draft Manual of Operations For Credit Surety Fund

Ver.
MANUAL
OF OPERATIONS
CREDIT SURETY FUND COOPERATIVE

TABLE OF CONTENTS
TITLE PAGE
MESSAGES
PREFACE
ACKNOWLEDGEMENT………………………………………………………... i-ii
DEFINITION OF TERMS ………………………………………………………. iii-vi
PURPOSE OF THE MANUAL…………………………………………………. vii
SCOPE AND CONTENTS OF THE MANUAL……………………………….. vii
SYSTEM OF DISTRIBUTION OF THE MANUAL……………………………. vii
AMENDMENT AND REVISION OF THE MANUAL………………………….. vii
PART I- ORGANIZATION AND GOVERNANCE

CHAPTER 1- MEMBERSHIP
1.1 Open and Voluntary Membership……………………………… 2
1.2 Composition……………………………………………………… 2
1.3 Qualifications…………………………………………………….. 2-3
1.4 Requirements……………………………………………………. 3
1.5 Application……………………………………………………….. 3-4
1.6 Procedures………………………………………………………. 4
1.7 Duties and Responsibilities……………………………………. 4
1.8 Termination……………………………………………………… 4-5
1.9 Refund of Contribution upon Termination of Membership…. 5
1.10 Appeal……………………………………………………………. 5
1.11 Duties and Responsibilities……………………………………. 6
1.12 Rights and Privileges…………………………………………… 6-7
CHAPTER 2- CSF GOVERNANCE

2.1 General Assembly………………………………………………. 8-9
2.2 Board of Directors………………………………………………. 9-11
2.3 Committees……………………………………………………… 11-13
2.4 Qualifications and Disqualifications of Committee Members 13
2.5 Per Diem…………………………………………………………. 13
2.4 Organizational Structure of CSF Cooperative……………….. 14
PART II- CSF OPERATIONS AND ADMINISTRATION
CHAPTER 3- ISSUANCE OF SURETY COVER

3.1 Condition………………………………………………………….. 16-17
3.2 Signatory of the Surety Agreement…………………………….. 17
3.3 Application for Surety Cover and Service Fees………………. 17
3.4 Policies in the Issuance of Surety Cover……………………… 17-18
CHAPTER 4- LOAN EVALUATION AND CREDIT APPRAISAL

4.1 General Policies………………………………………………….. 19-20
4.2 Loan Evaluation System and Procedure……………………… 21-25
4.3 Requirements……………………………………………………. 26
4.5 Credit Appraisal………………………………………………….. 26
4.6 Credit Analysis…………………………………………………… 26
4.7 Credit Investigation Report……………………………………… 26
4.8 Filing………………………………………………………………. 26
4.9 Inspection and Appraisal of Properties………………………... 26-27
4.10 Capital Adequacy Ratio (CAR)…………………………………. 27
4.11 Liquidity of CSF Cooperative…………………………………… 27-28
CHAPTER 5- MONITORING OF LOANS COVERED BY SURETY AGREEMENT

5.1 Credit Risk………………………………………………………… 29
5.2 Loan Utilization Monitoring……………………………………… 29
5.3 Past Due Loans Monitoring……………………………………… 29-30
CHAPTER 6- ADMINISTRATION OF RECEIVABLE ASSIGNED-SURETY AGREEMENT
6.1 Process of Assignment Receivable…………………………….. 31

6.2 Payment Through Surety Cover………………………………… 31
6.3 Process of Collection……………………………………………... 32
6.4 Write-off of Receivable Assigned……………………………….. 32-33
6.5 Recovery…………………………………………………………… 34
CHAPTER 7- FUND MANAGEMENT
7.1 General Policies…………………………………………………… 35
CHAPTER 8- RISK MANAGEMENT
8.1 Risk Management Policy…………………………………………. 36

8.2 Risk Management Process………………………………………. 36-38
8.3 Periodic Monitoring……………………………………………….. 38
8.4 Declaration of Membership and Borrowings in other
CSF Cooperatives……………………………………................... 38-39
CHAPTER 9- COMPLIANCE TO LAWS AND REGULATION
9.1 Cooperative Development Authority……………………………… 40

9.2 Bureau of Internal Revenue………………………………………. 40-43
9.3 Other Compliances…………………………………………………. 43
CHAPTER 10- ACCOUNTING SYSTEM, BOOKS AND RECORDS
10.1 Internal Control………………………………………………………. 44

10.2 Books of Accounts…………………………………………………... 44
10.3 Accounting Entries…………………………………………………... 44-46
10.4 Allocation and Distribution of Net Surplus………………………… 46-47
CHAPTER 11- AMENDMENTS OF ARTICLES OF COOPERATION AND BYLAWS
11.1 Guidelines of Amendment…………………………………………... 48

11.2 Requirements………………………………………………………… 48
CHAPTER 12- CAPITALIZATION
12.1 General Policies……………………………………………………… 49-50
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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:
Acting Director : Joselito O. Hallazgo

Acting Chief, IED : Sherwin M. Arcipe
Chief, TAD : Recto E. Transfiguracioni
Members
Head Office : Josie L. Villaver
Mary Grace I. Cinco
Ian Dave U. Alindajao
Regional Office : Elmira R. Reyes

Sergio E. Herrero, Jr.
Anecita Unson
Rhandy B. Corro
Mark Ian G. Caseres
Gina M. Repunte
Irene M. Petilla
Fiona Bianca R. Cuenca
Marian A. Concepcion
Atty. Ronalyn M. Torres
Secretariat : John Erick R. Zepeda

Marygrace C. Jaquilmac
Leonila T. Memoracion
Rean C. Escandor
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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
Acting Administrator : Asec. Myrla B. Paradillo
ATTY. MA. LOURDES P. PACAO

Deputy Administrator - CSF Service and
Chairman, TWG
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DEFINITION OF TERMS AND ACRONYM

1. BSP – refers to the Bangko Sentral ng Pilipinas with powers and responsibilities as
defined under Republic Act No. 7653, otherwise known as the “New Central Bank Act”;
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.
3. CDA – refers to the Cooperative Development Authority created under RA 6939 as

amended by RA 11364, also known as the Cooperative Development Authority Charter
of 2019. Under RA 10744, it is the lead government agency implementing the CSF Act
and which is responsible for the registration, regulation, monitoring and supervision of
CSF Cooperatives;
4. COS — refers to Contributors Orientation Seminar
5. Cooperative — an autonomous and duly registered association of persons, with a

common bond of interest, who have voluntarily joined together to achieve their social,
economic and cultural needs and aspirations by making equitable contributions to the
capital required, patronizing their products and services and by accepting a fair share
of the risks and benefits of the undertaking in accordance with universally accepted
cooperative principles.
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”;
8. CSF Cooperative — an LGU-partnered cooperative comprised of well- capitalized and

well-managed member-cooperatives/NGOs that meet the criteria and qualifications
prescribed by the CDA, LGUs, GFIs, IGLF and GAs, all of which shall make
contributions to the CSF as defined and prescribed by the CSF Act.
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;
16. Investment — refers to the contributions of the cooperatives/NGOs to the CSF

Cooperative, which shall share in the earnings/losses of the CSF in proportion to their
contributions. It also includes contributions of the LGUs, GFls, PhilGuarantee and GAs
that were treated as investments. Investments are booked as 1% share capital and
99% Restricted Capital for Surety;
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.
18. IRR – refers to the Implementing Rules and Regulations of RA 10744
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.
21. NGO — refers to Non-Government Organization non-stock, non-profit organizations

duly registered with the Securities and Exchange Commission (SEC), focusing on the
upliftment of the basic or disadvantaged sectors of society by providing advocacy,
training, community organizing, research, access to resources, provision of
microfinance programs and services, or other similar activities.
22. PMES — refers to Pre-Membership Education Seminar
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.
The Manual has been designed to:
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.
SCOPE AND CONTENTS
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.
AMENDMENT AND REVISION
To ensure the Manual of Operation continuous applicability and usefulness, CSF

Service shall be responsible for periodically reviewing and updating this Manual to
reflect changes in operating conditions and practices.
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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PART I- ORGANIZATION AND GOVERNANCE

2
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
Only well-capitalized and well-managed cooperatives/NGOs are qualified to be

members of CSF Cooperative.
A “well-capitalized” cooperative/NGO must both satisfy these two minimum criteria:
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);
2. Adjusted Capital to Adjusted Assets Ratio (CAR) must be at least the

percentage as required in the Bylaws, which is computed as Adjusted Capital
divided by Adjusted Total Assets;
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:
A. A cooperative must satisfy the following requirements:

i. Must be registered with the CDA, as evidenced by a Certificate of Registration
and Certificate of Compliance issued by the CDA;
ii. Must be registered with the BIR and other relevant government agencies;
iii. Must be in existence for at least 1 year;
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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.
B. An NGO must satisfy the following requirements:
i. Must be registered with the SEC, as evidenced by a Certificate of

Registration;
ii. Must be registered with the BIR and other relevant government agencies;
iii. Must be in existence for at least 1 year and earning;
iv. Must have adopted sound lending policies and practices if applicable;
v. Must have audited financial statements; and
vi. Must have no past due obligations with any of its creditors.
Additional criteria may be imposed for applicant cooperatives or NGOs to be

considered as “well-capitalized” and “well-managed” which shall be incorporated in the
CSF Cooperative’s Bylaws and duly communicated to the applicant
cooperatives/NGOs.
1.4 Requirements
Cooperatives/NGOs interested to join the CSF Cooperative shall submit the following
minimum requirements:
a. Approved General Assembly Resolution duly signed by all members of the

BOD, authorizing the cooperative/NGO to join or participate in the CSF
Cooperative. Said resolution should indicate the amount of initial investment
and designation of one representative and one alternate (a BOD member
and/or Manager) who are authorized to sign contracts or agreements with the
CSF Cooperative;
b. Copy of the latest audited financial statements of the cooperative with the
accompanying notes/schedules;
c. Copy of Certificate of Registration with CDA or SEC and BIR;
d. Certificate of Compliance from CDA;
e. List of current BOD, Manager, and Credit or Loan Officer, together with their
curriculum vitae or information sheet;
f. Duly accomplished CSF Membership Application Form; and
g. Other documents deemed necessary as required by the BOD.
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.
1.7 Duties and Responsibilities

Among others, every member cooperative/NGO shall have the following duties and
responsibilities.
1. Pay the capital subscription and participate in the capital build-up activities
of the CSF Cooperative;
2. Patronize the CSF Cooperative’s business and services;
3. Participate in the membership education and training programs;
4. Attend and participate in the deliberation of all matters taken during
General Assembly meetings;
5. Observe and obey all lawful orders, decisions, rules and regulations
adopted by the BOD and the General Assembly; and
6. Promote the purposes and goals of the CSF Cooperative, the success
of its business, the welfare of its members and the cooperative
movement in general.
1.8 Termination
Termination of member cooperative/NGO may be automatic, voluntary or involuntary.
The following procedures shall apply for termination of membership:

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a. For automatic termination, a juridical declaration of bankruptcy or insolvency of

a member shall automatically terminate its membership in the CSF
Cooperative.
b. For voluntary termination, a cooperative/NGO member shall inform the BOD by

submitting to the CSF BOD Secretary a copy of Approved General Assembly
Resolution, signifying their intention to terminate the membership. It shall be
acted upon with utmost attention and expediency through a BOD resolution
within sixty (60) days from the date of receipt of the GA resolution.
In case of inaction within 60 days, the application of the withdrawing member

is deemed approved.
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.
1.9 Refund of Contribution upon Termination of Membership
The refund of the contribution shall be subject to the following conditions:

a. Liquidity of the Fund;
b. The value of the assets of the CSF Cooperative would be higher than the
aggregate amount of its liabilities after payment of the share capital and contribution
of the withdrawing cooperative; and
c. The withdrawing member-cooperative has no outstanding obligation on
account of the surety agreements issued.
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.
1.11 Duties and Responsibilities

Among others, every member cooperative shall have the following duties
and responsibilities:
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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.
1.12 Rights and Privileges

Members shall have the following rights and privileges:
a. Cooperatives/NGO
a.1 Member in good standing
1. Designate its authorized representative to vote and be voted upon in

an election for a position in the Board of Directors and Committees, subject
to the provisions of this Rules and its Bylaws;
2. Entitled to vote in any matters affecting the operation of the CSF
Cooperative, subject to the provisions of this Rules and its Bylaws;
3. Share in the earnings of the CSF Cooperative subiect to the Bylaws;
4. Endorse loans of its members except NGOs;
5. Directly avail of loans from banks, covered by the CSF;
6. 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
7. Such other rights and privileges as may be provided in the Bylaws, or
as granted by the General Assembly provided not in contrary with this
Rules.
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;
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.
c. GFIs, PhilGuarantee and GAs
1. Designate its authorized representative to sit as a member of the Board

of Directors, with voting rights, subject to the provisions of this Rules and
its Bylaws;
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2. Entitled to vote in any matters affecting the operation of the CSF

Cooperative;
3. Share in the earnings of the CSF Cooperative, subject to the Bylaws;
5. Such other rights and privileges as may be provided in the Bylaws, or
as granted by the General Assembly provided that these are not in
contrary with this Rules.
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CHAPTER 2 CSF COOPERATIVE GOVERNANCE

2.1 General Assembly
1. Composition of the General Assembly

The general assembly shall be composed of such members who are entitled to
vote under the provisions of the articles of cooperation and bylaws of the CSF
Cooperative. (refer to CSF BL)
2. Meetings
General Assembly meetings may be regular or special. All proceedings and
businesses undertaken at any meeting of the General Assembly, if within the
powers or authority of the CSF Cooperative, there being a quorum shall be valid.
The General Assembly shall hold its annual regular meeting at the principal office
of the CSF Cooperative or at any place in the Philippines within the period
specified in the Bylaws.
The BOD may, by a majority vote of all its members, call a Special General
Assembly meeting at any time to consider urgent matters provided that a written
notice to that effect shall be sent to all members within the period specified in the
Bylaws.
Notice of General Assembly meeting whether regular or special shall be served
by the Secretary, personally or by his/her duly authorized representative, by
registered mail, or by electronic means, or by courier on the period as provided in
the Bylaws or two (2) weeks prior to the date of the meeting.
In times of state of calamity due to emerging infectious diseases, force majeure
circumstances, extraordinary events, among others, the CSF Cooperative may
refer to the issuance by the CDA of any regulatory relief in the conduct of General
Assembly meetings.
For a regular General Assembly meeting, the notice shall be served to all
members of record at his/her last known postal address, or by posting or
publication, or through other electronic means. It shall be accompanied with the
following:
i. Agenda;
ii. Minutes of Meeting of the last General Assembly meeting;
iii. Consolidated Reports of the BOD and Committees;
iv. Audited Financial Statements; and
v. Other documents which may assist the members to intelligently
participate in the proceedings.
For a special General Assembly meeting, the notice shall be served upon each
member who is entitled to vote at his/her last known postal address, or by posting
or publication, or through other electronic means. It shall state the purpose and,
except for related issues, no other business shall be considered during the
meeting.
Notice of any meeting may be waived, expressly, or impliedly, by the member
concerned.
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Each member of the CSF Cooperative shall designate, by virtue of a BOD

resolution, its authorized representative who shall attend the general and/or
special meetings of the CSF Cooperative and will continue to function as such
until a new representative is designated by the member concerned.
3. Quorum
During a regular or special General Assembly meeting, a quorum is determined
as prescribed in the Bylaws.
4. Voting System
Each member of the CSF Cooperative who is entitled to vote, shall have only
one (1) vote.
2.2 Board of Directors
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:
i. Elected member - refers to member-cooperative/NGO of the CSF Cooperative

which has the right to vote and possesses all the qualifications and none of
the disqualifications provided in this Rules or Bylaws and shall be eligible for
election as member of the Board.The said members of the Board shall be duly
elected by the General Assembly. The term of office of the elected members
of the Board coming from the authorized representative of the member-
cooperatives/NGOs shall be two (2) years and shall hold office until their
successors are duly elected and qualified, or until duly removed for cause.
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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The BOD shall elect from the elected authorized representatives of

cooperatives/NGOs the Chairperson and Vice-chairperson. It shall also elect or
appoint other officers of the CSF Cooperative from outside of the BOD in
accordance with their Bylaws.
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.
3. Powers and Responsibilities
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”;
d. Accept contribution of new and existing members to the CSF Cooperative;
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;
f. Sue and be sued in cases involving the CSF Cooperative;
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 following committees shall be created:

a. Election Committee;
b. Audit Committee; and
c. Credit 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
If a vacancy occurs in any elective committee, it shall be filled by the remaining

members of the said committee, if still constituting a quorum, otherwise, the BOD, in
its discretion, may appoint or hold a special election to fill such vacancy. In case of a
vacancy in all other committees, the BOD may call an election to fill the vacancy or
appoint a person to fill the same subject to the condition that the person elected or
appointed shall serve only for the unexpired portion of the term.
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:
a. Formulate election rules and guidelines and recommend to the General

Assembly for approval;
b. Recommend necessary amendments to the election rules and guidelines, in

coordination with the BOD, for the General Assembly's approval;
c. Implement election rules and guidelines duly approved by the General

Assembly;
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d. Supervise the conduct, manner and proceedings of election and other election-
related activities and act on the changes thereto;
e. Canvass and certify the results of the election;
f. Proclaim the winning candidates;
g. Decide election and other election-related cases except those involving the
Election Committee or its members; and
h. Perform such other functions as prescribed in the By-laws or authorized by the

General Assembly.
5. Audit Committee
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;
b. Monitor the adequacy and effectiveness of the Cooperative's management and

internal control system;
c. Review continuously and periodically the books of account, financial records,

and policies governing internal control, accounting and risk management to ensure
that these are in accordance with the Cooperative principles and generally accepted
accounting procedures;
d. Review the internal audit report of the Cooperative;
e. Follow up actions on the internal and external audit recommendations;
f. Discuss the result of the internal audit with the BOD;
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;
h. Review, approve or amend the report and recommendation of the Ethics

Committee involving violations of the Code of Governance and Ethical Standards if
the remaining members of the BOD fail to act on said report and recommendation
within a period of thirty (30) days, or the violation is committed by the majority of the
BOD; and
i. Perform such other functions as may be prescribed in the By-laws or authorized

by the General Assembly.
6. Credit Committee
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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;
b. Act on applications of the members within their discretionary and approving

authority as set by the BOD; and
c. Perform other duties and responsibilities as may be delegated by the BOD.
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;
b. Conduct initial investigation or inquiry, upon receipt of a complaint involving

violations of the Code of Governance and Ethical Standards.
c. Submit report on its recommendation together with the appropriate sanctions, to

the Board of Directors for its proper action, or to the remaining members of the
Board of Directors, if the violation is committed by any members of the Board of
Directors. Provided, that if the remaining members of the Board of Directors fail to
act on the report within a period of thirty (30) days, or the violation is committed by
the majority of the Board of Directors, the Audit committee shall act on the same;
and
d. Perform such other functions as may be prescribed in the By-laws or authorized

by the Board of Directors.
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.
2.4 Qualifications and Disqualifications of Committee Members
The qualifications and disqualifications of the BOD shall also apply to all the
members of the committees.
2.5 Per Diem
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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2.6 Organizational Structure for CSF Cooperatives

15
PART II-CSF OPERATIONS

16
CHAPTER 3 – ISSUANCE OF SURETY COVER
3.1 Condition
Surety Agreement shall be issued only when all of the following conditions have
been met;
1. Upon issuance of a BOD Resolution stating the BOD’s decision on

the approval of the issuance of a Surety Agreement;
2. The BOD designated the Chairperson or in his/her absence, any

other authorized officer of the BOD to sign the Surety Agreement.
3. The bank’s notification for its issuance has been received;
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;
6. The borrower or endorsing cooperative has paid part of the service

fee to the CSF Cooperative;
7. The amount that may be borrowed by qualified borrowers or

endorsed through the CSF shall not exceed ten (10) times of the
Restricted Capital for Surety (RCS) of the member/endorsing
cooperative at any given time. However, if the borrower-
cooperative has no endorser, the maximum loanable amount shall
be five (5) times the amount of its Restricted Capital for Surety
(RCS).
8. The aggregate outstanding balance of loans granted by all

participating banks did not exceed three (3) times the CSF
Cooperative’s Restricted Capital for Surety, at any given time. The
3x leverage shall be subject to annual review for progressive
increase as warranted by the CSF Cooperative’s performance, but
not to exceed five (5) times the CSF Cooperative’s Restricted
Capital for Surety;
9. The CSF Cooperative maintained 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;
10. The outstanding past due loans of the endorsing cooperative/NGO

did not reach ten percent (10%) of the total outstanding loans
covered by Surety Agreement; and
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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.
3.2 Signatory of the Surety Agreement

A Surety Agreement shall be issued by the CSF Cooperative signed by its
Chairperson and the authorized representative of the endorsing cooperative.
However, in the absence of an endorser, the CSF Cooperative by itself may solely
execute a Surety Agreement in favor of the lending bank.
Subject to a resolution of the BOD or the Bylaws, the Chairperson, or in his
absence, the Vice-chairperson, shall be the authorized officer of the CSF
Cooperative to sign the Surety Agreement.
3.3 Application for Surety Cover and Service Fees
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.
2. Payment of Surety Fee
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:
a. 2% p.a. — for loans or sureties fully secured by real estate mortgage in

favor of the lending bank, endorsing cooperative;
b. 3% p.a. — for loans or sureties fully secured by chattels other than

inventories or secured partly by real estate mortgage in favor of the lending
bank, endorsing cooperative;
c. 4% p.a. — for loans or sureties secured by inventories or stock-in- trade;

and
d. 5% p.a. — for unsecured loans or sureties.
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.
3.4 Policies in the issuance of Surety Cover
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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CHAPTER 4 – LOAN EVALUATION AND CREDIT APPRAISAL

4.1 General Policies
1. Usage of the Fund. The contributions pooled from cooperatives/NGOs, LGUs,

GFIs, PhilGuarantee, GAs and individuals/private entities, shall constitute the
Restricted Capital for Surety, to be used as surety for the loans of qualified
borrowers from lending banks.
2. Maximum Loan Availment. The amount that may be borrowed by qualified

borrowers or endorsed through the CSF shall not exceed ten (10) times the
contributions of the member/endorsing cooperative to the Fund at any given time.
However, if the borrower cooperative has no endorser, the maximum loanable
amount shall be five (5) times the amount of its contributions.
For purposes of determining the maximum loan limit to be availed, the

contributions shall mean the total of the cooperatives’ investment in Restricted
Capital for Surety.
3. The qualified borrower shall file application for business loan with surety cover,
as follows:
a. If the borrower is an MSME-member of a contributor-cooperative, the loan

application with surety cover together with the documentary requirements
shall be filed with the contributor-cooperative.
b. If the borrower is a cooperative/NGO without a qualified endorser, the loan
shall be filed directly with the CSF Cooperative.
c. If the borrower is a cooperative with a qualified endorser, the loan
shall be filed with the contributor cooperative of which it is a member.
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.
5. Endorsers are as follows:
a. A Cooperative which is a member of the CSF Cooperative endorsing for this

purpose its individual MSME member; and
b. A secondary or tertiary cooperative which is a member of the CSF
Cooperative endorsing for this purpose its primary or secondary cooperatives.
6. A qualified cooperative-endorser must satisfy the following requirements:
a. Must have paid and maintained at least P100,000 contribution;

b. Must be a member in Good Standing with the CSF Coop;
c. Must have a valid Certificate of Compliance (COC) issued by the CDA;
d. Must be in existence for at least one (1) year;
e. Must be earning based on the latest audited financial statements submitted
to the Authority;
f. Must not have any existing leadership dispute or any other cooperative
dispute filed with the CDA or any court or tribunal;
g. Capital Adequacy Ratio (CAR) must be at least 20%;
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h. A liquidity ratio of 20% shall be maintained at all times;
7. An NGO qualified borrower must satisfy the following requirements:

b. Must have attended the COS/PMES;
c. Must be earning based on the latest audited financial statements submitted to
concerned Government Agencies;
d. A liquidity ratio of 20% shall be maintained at all times; and
e. Must be a member in Good Standing with the CSF Cooperative.
8. A cooperative qualified borrower must satisfy the following requirements:

b. Must have attended the COS/PMES;
c. Must be earning based on the latest audited financial statements submitted to
concerned Government Agencies;
d. A liquidity ratio of 20% shall be maintained at all times;
e. Must be a member in Good Standing as determined by the CSF Cooperative;
f. Must be compliant evidenced by a valid COC issued by the Authority;
g. Members of the BOD and Credit Committee have acquired CDA’s mandatory
training hours;
h. Must not have any existing leadership dispute or nay other cooperative
dispute filed with the CDA or any court or tribunal; and
i. CAR ratio must be at least 20%.
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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4.2 Loan Evaluation System and Procedures
1. If the borrower is a MSME-member of a contributor cooperative:

The loan application with surety cover together with the documentary
requirements shall be filed with the Endorsing contributor-cooperative;
1. Evaluate the loan application with surety

cover within 30 days. The endorsing
cooperative shall consider the viability of
the business proposal, credit worthiness
Credit Committee- Endorsing of its member-borrower, credit policy,
contributor/cooperative and that risks are managed and
controlled.
2. Present the Credit Evaluation Report to
the BOD.
1. Receive the recommended loan

applications from the Credit Committee
for review and approval/disapproval by a
simple majority of the members present.
BOD – Endorsing contributor cooperative 2. If denied, return the documents to the
MSME borrower.
3. Issue a BOD resolution stating the terms
and conditions of approval after
satisfying itself of the merits of the
application. Thereafter, the said loan
application shall be forwarded to the CSF
Cooperative for an independent
evaluation.
1. Review every loan application favorably
endorsed by the endorsing cooperative
within thirty (30) days. The review shall
be based on the following:
a. compliance by the endorsing
Credit Committee - CSF Cooperative cooperative or by the borrower-
cooperative of the documentary
requirements;
b. with the best practices on
cooperative governance;
c. credit evaluation, credit investigation
and risk management; and
d. the terms and conditions of the BOD
approval, and with the CSF IRR.
2. Present the Evaluation Report to its BOD.
for review and approval/disapproval by a
simple majority of the members present.
2. If denied, return the documents to the
endorsing contributor cooperative.
BOD - CSF Cooperative 3. Issue a BOD resolution endorsing the
said loan application to the lending bank
for an independent evaluation after
22

application.
1. Evaluate the loan application and shall
approve or disapprove the loan in
accordance with its credit policies and
relevant regulations.
Lending bank 2. If denied, return the loan application to the
BOD of the CSF Cooperative.
3. If the loan application is approved, notify
the BOD of the CSF Coop and shall
request for the issuance of the surety
agreement.
MSME Borrower 1. Pay the Service Fee to the Endorser before

the issuance of the Surety Agreement
Authorized representative - Endorsing 1. Sign on the Surety Agreement to be issued
contributor cooperative and the Chairperson to the lending bank
of the BOD (or the Vice-chairperson as
alternate signatory - CSF Cooperative
2. MSME Loans through Credit Lines of Cooperatives

a. A member-cooperative may apply for a credit line with any participating lending
bank to be used for relending purposes to its member-borrowers in good standing
and engaged in business activities, whose loans are secured by the surety
agreement.
b. The CSF Coop shall issue surety agreement to the loan of the cooperative-
borrower.
c. All loan proposals and applications for surety cover of sub borrowers shall be
evaluated and endorsed by the member-cooperative and the loans shall be
considered as availments from its credit line with the lending bank.
d. The surety agreement issued for loan of borrowing member cooperative shall
be executed by the endorsing cooperative and the BOD, or just the BOD in the
absence of an endorser.
e. The Bylaws may provide rules on the requirement of submission of business
plans and other requirements such as but not limited to the list of loans for
relending/rediscounting with attached sub borrower’s profile.
f. The BOD may designate its Chairperson to approve surety cover for cooperative
loan applications that are booked as availments against its credit lines, based on
certain conditions and limitations as may be imposed by the BOD. Provided that
any loan application by a cooperative, whose authorized representative is also the
Chairperson of the BOD, shall be endorsed to the lending bank by the Chairperson
of the BOD.
3. If the borrower is a cooperative with a qualified endorser
The application for surety cover together with the loan documentary
requirements shall be filed with the Endorsing contributor cooperative.
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1. Evaluate the loan application with

surety cover within thirty (30) days.
The endorsing cooperative shall
consider the viability of the business
Credit Committee - Endorsing proposal, credit worthiness of its
cooperative member-borrower, and that risks are
managed and controlled.
2. Present the Credit Evaluation Report
to its BOD

applications from the Credit
Committee for review and
approval/disapproval by a simple
majority of the members present.
BOD – Endorsing cooperative 2. If denied, return the documents to the
cooperative borrower.
3. Issue a BOD resolution stating the
terms and conditions of approval after
application. Thereafter, the said loan
application shall be forwarded to the
CSF Cooperative for an independent
evaluation.
1. Review every loan application favorably
endorsed by the endorsing cooperative
within thirty (30) days. The review shall
be based on the following:
e. compliance by the endorsing
cooperative or by the borrower-
Credit Committee - CSF Cooperative cooperative of the documentary
requirements;
f. with the best practices on
cooperative governance;
g. credit evaluation, credit
investigation and risk
management; and
h. the terms and conditions of the
BOD approval, and with the CSF
IRR.
2. Present the Credit Evaluation Report to
its BOD.

for review and approval/disapproval by
a simple majority of the members
BOD - CSF Cooperative present.
2. If denied, return the documents to the
Endorsing cooperative if denied.
3. Issue a BOD resolution endorsing the
said loan application to the lending
bank for an independent evaluation
24
after satisfying itself of the merits of the

application.
1. Evaluate the loan application and shall
accordance with its credit policies and
relevant regulations.
2. Return the loan application to the BOD
of the CSF Coop.
Lending bank 3. If the loan application is approved,
notify the BOD of the CSF Coop and
shall request the issuance of the surety
agreement.
Cooperative Borrower 1. Pay the Service Fee to the Endorser
before the issuance of the Surety
Agreement.
Authorized representative-Endorsing 1. Sign on the Surety Agreement to be
contributor cooperative and the issued to the lending bank.
Chairperson of the BOD (or the Vice-
Chairperson as alternative signatory)-
CSF Cooperative
4. If the borrower is an NGO or a cooperative without a qualified endorser

The application with surety cover together with the loan documentary
requirements shall be filed directly with the CSF Cooperative.
Credit Committee - CSF Cooperative 1. Review and evaluate loan

applications favorably endorsed by
the endorsing cooperative within thirty
(30) days.
2. Present the Credit Evaluation Report
to its BOD.

applications from the Credit
Committee for review and
approval/disapproval by a simple
majority of the members present.
BOD - CSF Cooperative 2. If denied, return the documents to the
Cooperative borrower.
3. Issue a BOD resolution endorsing the
said loan application to the lending
bank for an independent evaluation
after satisfying itself of the merits of
the application.
1. Evaluate the loan application and
accordance with its credit policies
and relevant regulations.
2. Return the loan application to the
Lending bank BOD of the CSF Coop.
3. Notify the BOD of the CSF Coop and
request for the issuance of the
25
surety agreement if the loan

application is approved.
Cooperative Borrower 1. Pay the Service Fee to the CSF

Cooperative before the issuance of
the Surety Agreement
Authorized representative - Endorsing 1. Sign on the Surety Agreement to be

contributor cooperative and the issued to the lending bank.
Chairperson of the BOD (or the Vice-
chairperson as alternate signatory-CSF
Cooperative
26
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.
4.4 Credit Appraisal

Credit Investigation and Rating
1. Review and evaluate the Feasibility Study (Technical feasibility, financial
feasibility, market feasibility and operational feasibility)
2. Evaluate the cooperative governance, compliance to laws, and rules and
regulations, if applicable
3. Conduct of Credit Investigation
a. All applicants for surety cover shall be interviewed by the credit
committee (personal background such as occupation, business,
location or address, securities offered, participation in the affairs of
the cooperative).
b. The credit committee shall review all the previous credit
records/history of the applicant, if available.
c. Conduct of field visit/ocular inspection if necessary.
d. The credit committee reviews the financial statements of the
borrower.
4.5 Credit Analysis
1. Review and analyze loan data based on the 5 Cs of credit (Character,

Capacity, Capital, Collateral, and Condition).
2. The credit committee shall establish an appropriate credit rating system
and or remarks to facilitate analysis.
4.6 Credit Investigation Report
1. All essential facts gathered by the Credit Committee regarding the

applicant borrower shall be summarized in the Credit Evaluation Report
which shall be prepared in triplicate copies.
2. The Credit Committee shall submit the credit investigation report to the
BOD as the basis for approving or denying surety cover applications.
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.
4.8 Inspection and Appraisal of Properties

1. Inspection or appraisal of properties shall be conducted by the Credit
Committee if the properties of the applicant are offered as collateral.
27
2. Valuation and Appraisal of Collateral
a. The valuation of properties shall consider the following factors: size,

location, value derived by sales comparison, income derived from
ownership (past & Future or prospect}, prevailing market price,
prevailing construction cost, including labor, materials, direct & indirect
costs, depreciation or loss in value due to physical wear and tear, &
economic obsolescence.
b. Real estate offered by the borrower shall be verified in the Registry of

Deeds.
c. At the option of CSF cooperative, the services of an independent

appraiser may be engaged.
4.9 Capital Adequacy Ratio (CAR)
1. Cooperatives/NGOs and endorsers shall maintain a capital adequacy ratio

of at least 20%. Non-compliance to this rule shall mean that prospective
loans and endorsement shall be held in abeyance until the adequate
CAR has been satisfied.
2. Formula to compute CAR is as follows:
Adjusted Capital_____
Adjusted Total Assets
Adjusted Total Assets must be at least P1,000,000.00, which is computed as

Total Assets minus the following: (a) Past due loans receivable and items under
litigation (net of allowance for probable losses); and (b) Past due accounts
receivable (net of allowance for probable losses).
The Adjusted Capital is computed as:

Adjusted Capital = Paid-up Capital plus Reserve Fund minus Unbooked
Allowance for Probable Losses
(Note: Unbooked Allowance for Probable Losses (which includes allowance

for credit losses and impairment losses)
3. An Aging of Receivable shall be maintained to accurately calculate the

required allowance for doubtful accounts and to determine if there are any
unbooked allowances.
4. The member coops/NGOs shall submit Interim and Annual Financial

Financial Statements to CSF Cooperative for updating its CAR.
4.10 Liquidity of CSF Cooperative
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.
28
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.
3. The available/(deficit) funds for succeeding surety agreements reflected

under the “Liquidity Profile” sheet of the prescribed monitoring tool should
be strictly monitored or complied with as a basis for the surety agreements
still to be applied for and approved.
29
CHAPTER 5 – MONITORING OF LOANS COVERED BY SURETY AGREEMENT
5.1 Credit Risk
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. Conduct of at least monthly monitoring of loans covered by Surety

Agreement and submission of the required data using the prescribed
monitoring tool issued by the CDA. The User Manual of the prescribed
Monitoring Tool is attached in this Manual.
2. Reports generated in the monitoring tool shall be presented during the

regular BOD meeting for information and appropriate action.
3. Reports generated in the monitoring tool shall be submitted to the CDA

in accordance with the guidelines issued for that purpose. All information
required in the monitoring tool furnished by the CSF Cooperative, shall
be true and correct in all material aspects as of which such information is
dated or certified and does not omit any material fact necessary in order
to make such information not misleading.
4. An ocular inspection of the projects financed through the CSF shall be

conducted.
5. Secure/request a copy of a monthly report from the lending banks/trustee

banks to monitor the status of the loans and investments of CSF.
6. To report as soon as possible any changes in the borrower's financial

condition or performance that impact, or may impact, the borrower's
capacity to repay the outstanding loan(s) to the bank as agreed.
5.2. Loan Utilization Monitoring
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. An immediate action/s shall be taken against those borrowers who

diverted the loan not on its intended purpose. After due notice and
hearing, this can be a ground for the revocation of the surety agreement.
In which case, the BOD shall notify the bank of such.
3. A project shall be monitored three months after the loan has been
released. For new projects, quarterly visits are conducted.
5.3 Past Due Loans Monitoring
1. As a general rule, loans, investments, receivables, or any financial asset,

including restructured loans, shall be considered past due when any
principal and/or interest or installment due, or portions thereof, are not paid
at their contractual due date, in which case, the total outstanding balance
thereof shall be considered as past due.
30
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.
31
CHAPTER 6 – ADMINISTRATION OF RECEIVABLE ASSIGNED-SURETY AGREEMENT
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.
6.1 Process of Assignment Receivable
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;
b. The lending bank submits a report showing, among others, that:
i. Despite diligent efforts to collect the past due account

remains unpaid;
ii. All remedial measures and alternative means, including
restructuring, were exhausted; and
iii. No other plain and speedy remedy available to collect the
loan.
2. The lending bank will execute a notarized “Deed of Assignment of Credit”

in favor of the CSF Cooperative and submit the same to the BOD together
with all original documents evidencing the loan grant, i.e. promissory notes,
subsidiary records, official receipts or other evidences of payment,
statements of account, demand letters/correspondence between the bank
and the borrower.
3. Adjustment to Financial Guarantee and Unrealized Loss from Surety

Agreement accounts, shall be made, based on the consolidated statement
of account provided by all participating lending banks to the borrower
member-cooperative.
6.2 Payment through Surety Cover
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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6.3 Process of Collection
1. The endorsing cooperative will be responsible for collecting defaulted loans

including principal, interest, penalties, foreclosure, litigation and other
incidental expenses.
The endorsing cooperative shall remit to the CSF Cooperative all

collections on defaulted loans within five (5) days from collection until the
CSF Cooperative is able to recover in full the amount of its exposure on
account of claims paid.
2. In any case, the CSF Cooperative, at its option, may:
i. Collect immediately from the endorsing cooperative the claim paid to

the lending bank; or allow the cooperative to collect from the
defaulted borrower and remit all collections to BOD; or
ii. Collect directly from the defaulted borrower through the assistance
of the endorsing cooperative.
iii. If the defaulted borrower is the cooperative and has no endorser, the
CSF BOD shall be responsible in collecting the past due loan.
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.
6.4 Write-off of Receivable Assigned
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.
33
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:
a. Conduct of regular monitoring and analysis of aging of assigned receivable

accounts. A schedule and aging of assigned receivables must be prepared to
support the request for write-off.
b. When the account has been past due for 10 years or more;
c. Existence of the applicable conditions:
i. Death of the borrower as evidenced by a death certificate;

ii. Cancellation and delisting of the cooperative borrower as certified by
the CDA;
iii. Dissolution and revocation of the NGO as certified by the Securities and
Exchange Commission (SEC);
iv. Insanity;
v. Unknown whereabouts of the borrower, and that the borrower could not
be located despite diligent efforts to find him/her;
vi. Judicial declaration of incapacity to pay or insolvency;
vii. Exhaustion of all remedies available to collect the dormant past due
accounts. Collection efforts have been made pursuant to the collection
policies such as sending demand letters, etc. of the CSF Cooperatives;
viii. No pending case in court involving the said dormant past due accounts;
and
ix. Other analogous circumstances as prescribed by the CSF cooperative.
d. An appropriate Allowance for Doubtful Assigned Account has been

established;
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.
34
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.
35
CHAPTER 7 – SURETY FUND MANAGEMENT
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.
4. The Investment shall preferably be in government securities and twenty

percent (20%) time deposits with banks as provided in the Bylaws.
Investments under a short term time deposits of less than one (1) year may
be allowed in accordance with the provisions on risk management in issuing
surety agreement.
5. Subject to the procedures and requirements stated in the IRR, a member-

cooperative/NGO and other private institutions may withdraw all or part of its
contributions: Provided, That it has no outstanding obligation on account of
the surety agreements issued and subject to such reasonable terms and
conditions such as, among others, the liquidity of the Fund.
6. LGUs, GFIs and other government agencies may only withdraw their
contribution upon dissolution of the CSF Cooperative.
36
CHAPTER 8 – RISK MANAGEMENT AND ASSESSMENT
Risk management is a comprehensive, systematic approach towards the identification,

evaluation, and prioritization of risks to minimize, monitor, and control the probability or impact
of unfortunate events or to maximize the realization of opportunities.
8.1 Risk Management Policy
Risk Management systems shall be adopted to sustain the safe and sound
operations of CSF Cooperative. A sound risk management policies and practices
shall be developed to ensure that risks associated are identified, assessed,
monitored, mitigated and controlled, as well as to ensure effective implementation.
The BOD is responsible for the Risk Management Framework, implementing the
risk treatment plans, and monitoring and review.
8.2 Risk Management Process

Step 1. Scope
The scope of the risk management process shall be focused on the various
facets of CSF operations such as Issuance of the Surety Agreement, Withdrawal of
Contributions, Past Due Accounts, and Compliance to Government Agencies, among
others.
Step 2. Risk Identification
Risk shall be identified for mitigation and avoidance. Among the possible risk
that may occur in the CSF operations that need to be avoided are as follows:
1. The usage of contributions which constitute the Restricted Capital for
Surety for activity other than the purpose indicated in the Articles of
Cooperation;
2. The grant of maximum loanable amount that may exceed five (5) times
the amount of contribution. The grant of maximum amount of loans that
a contributor-cooperative/NGO can endorse or borrow may exceed ten
(10) times the amount of its contribution to the CSF Cooperative, at any
given time;
3. Approval of Surety Cover to unqualified borrowers;
4. Approval of Loan Application the purpose is not productive in nature;
5. Non-adherence to the process in the issuance of surety cover;
6. The aggregate outstanding balance of loans granted by all participating
banks exceeds three (3) times the CSF Cooperative’s Restricted Capital
for Surety, at any given time;
7. Unable to 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;
8. Issuance of Surety Agreement to an endorsing cooperative/NGO even if
the outstanding past due loans of that endorsing cooperative/NGO have
already reached ten percent (10%) of the total outstanding loans covered
by the Surety Agreement;
9. Issuance of Surety Agreement to all member-cooperatives/NGOs even
if the outstanding past due loans in the books of all or any of participating
37
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:
RISK LIKELIHO SEVERIT RISK RECOMMEND

SOURC OD (L) Y (S) EXPOSURE ATION (Risk
E (L X S) Treatment
Plans)
Step 5. Risk Treatment

Once risks have been analyzed, appropriate risk responses can be determined
to mitigate risk to an acceptable level within reasonable costs. The risk response
options encompass all possible BOD’s response to risk, whether viewed as
opportunities, uncertainties, or hazards.
38
Some of the risk response options are enumerated below:

a. Mitigate - the practice of reducing the impact of potential risks by
developing a plan to manage, eliminate, or limit setbacks as much as
possible
b. Exploit - increases the probability or the positive impacts of an
opportunity.
c. Transfer - is a risk management and control strategy that involves the
contractual shifting of a pure risk from one party to another. One example
is the purchase of an insurance policy, by which a specified risk of loss is
passed from the policyholder to the insurer.
d. Accept - A concept where a business identifies risk and renders it
acceptable, thereby making no effort to reduce or mitigate it
e. Avoid - the elimination of hazards, events, and exposures that can
negatively affect an organization.
Step 6. Implementing Risk Treatment Plan
a. Identify existing risk treatment plans in place
b. Establish objectives of the risk treatment plan, i.e. which risk is being
mitigated and to what level/extent
c. Evaluate if the existing risk treatment plans meet their objectives
d. Assess if the treatment plans are sufficient and relevant, i.e. if any
additional or removal of risk treatment plans is required
Step 7. Monitoring and Review

The monitoring and review of the risk profile and the risk response plans is a
continuous process. The purpose of the review is to:
1. Provide assurance that risks are being managed as expected;
2. Assess whether the risk response plans remain relevant; and
3. Ensure that the risk profile anticipates and reflects changed
circumstances and new exposures.
Risk monitoring consists of a combination of regular communication, periodic

reviews or audits and evaluation by the BOD.
8.3 Periodic Monitoring
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.
8.4 Declaration of Membership and Borrowings in other CSF Cooperatives
Information of membership in more than one CSF Cooperative shall be disclosed. It

shall provide in the membership application form a section disclosing membership with
another CSF cooperative.
39
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.
40
CHAPTER 9 – COMPLIANCE TO LAWS AND REGULATION
9.1 Cooperative Development Authority (CDA)
1. Submit the annual, semi-annual, quarterly, and monthly submission, as

the case may be, of reports, financial statements, BOD resolutions and
such other documents as may be deemed as necessary by CDA to
ensure compliance with the CSF Act and its IRR.
The reports shall be submitted through personal, registered mail courier,

or electronic means, within 120 days from the end of every calendar year
to avoid penalties and sanctions.
2. The CSF Cooperative shall secure a Certificate of Compliance (COC) from

the CDA within the prescribed period.
The following are the required reports to be submitted to CDA:

a. Cooperative Annual Performance Report,
b. Social Audit Report,
c. Performance Report,
d. Audited Financial Statements duly stamped "Received”,
e. List of Officers and Trainings undertaken/completed, and
f. Mediation and Conciliation Report.
In case of findings and deficiencies, the cooperative shall comply with the
findings within fifteen (15) calendar days from the issuance of the notice.
3. The Accountable Officers shall refer to the employees or officers of the

CSF Cooperative responsible for the preparation of the required regular
reports and its attachments, and in whose fault or negligence the delay
may be attributed. In case of sanctions and penalties, the Accountable
Officers shall be liable not the CSF Cooperative.
9.2 Bureau of Internal Revenue (BIR)
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.
2. Registration of Books of Accounts
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.
3. Certificate of Tax Exemption (CTE)
a. BIR Form 1945 - Application for CTE

b. Documentary Requirements - FOR ORIGINAL ISSUANCE OF
CTE.
41
i. Certified True Copies of the Articles of Cooperation and

By-Laws, as certified by the CDA;
ii. Certified True Copy of the new Certificate of Registration
issued and as certified by the CDA;
iii. Certified True Copy of the current Certificate of
Compliance issued by the CDA, effective on date of
application;
iv. Photocopy of the BIR Certificate of Registration (BIR
Form No. 2303) of the Cooperative; and
v. Original copy of Certification under Oath of the List of

Cooperative Members with their capital contributions
and respective Taxpayer Identification Number (TIN)
prepared by authorized official of the Cooperative. In the
absence of the said TIN, provide full name and their
capital contribution. [Non-submission by the
Cooperative of the member’s TIN requirement within six
(6) months from the
issuance of the CTE shall be ground for the revocation
of the CTE]
c. Documentary Requirements - FOR RENEWAL OF CTE

i. Certified True Copy of the Certificate of Registration
issued by the CDA under the new Cooperative Code, as
certified by the CDA;
ii. Certified True Copy of the Latest Articles of Cooperation
and the Latest By-Laws of the Cooperative, as certified
by the CDA;
iii. Certified True Copy of the current Certificate of Good
Standing/ Certificate of Good Compliance issued by the
CDA, effective on the date of application [No application
for exemption will be processed in the absence thereof
or submission of an expired Certificate of Good
Standing]; and
iv. Certified True Copy of Latest financial statements of the
immediately preceding year duly audited by a BIR
accredited independent certified public accountant, and
CSF Cooperatives shall comply all the necessary reports prescribed by the BIR
as indicated in the CTE.
4. Submission of Annual Tax Incentives Report (ATIR)

a. The CSF Cooperatives are required to file their tax returns and
pay their tax liabilities, on or before the deadline as provided
under the National Internal Revenue Code (NIRC), as
amended, using the electronic system for filing and payment of
taxes of the Bureau of Internal Revenue (BIR).
b. Procedures
42
• The cooperative shall, in the preparation and submission of the

Annual Tax Incentive Report, observe the following procedures:
• Fill up the Annual Income Tax Incentive Report in the form
prescribed under Annex “A” of DOF-CDA-BIR Joint
Administrative Order No. 1-2019;
• Print the report and have it signed by the Chairperson and/or
General Manager;
• Submit the hard copy of the required Tax Incentive Report to the
CDA Extension Office having jurisdiction to the principal office of
the cooperative;
c. The cooperative shall submit the filled-up Annual Income Tax Incentive
Report Annex “E” within the period prescribed below:
Accounting Period Year Ending Deadline of Cooperative

On Submission
Calendar Year December 31 April 30 of the

succeeding year
Fiscal Year January – 15 days from the

November deadline of filing of
Annual Income Tax
Return
d. Failure of any registered cooperative issued with a CTE and availed of

tax incentives to comply with the submission of the compliance
requirements shall be imposed of the following penalties:
First Offense Certificate of Tax Exemption (CTE) shall be

deemed revoked and registered cooperative
shall be prohibited to avail of tax exemption for
a period of 1 year from the date of revocation.
Second Offense Certificate of Tax Exemption (CTE) shall be

a period of 3 years from the date of revocation.
Third Offense Certificate of Tax Exemption (CTE) shall be

a period of 5 years from the date of revocation.
43
Fourth Offense Certificate of Tax Exemption (CTE) shall be

shall be prohibited from re-application.
Registered cooperatives shall be liable for the payment of taxes immediately

upon revocation of the Certificate of Tax Exemption (CTE), inclusive of
surcharge, interest and compromise penalty. Upon payment of taxes,
registered cooperatives can re-apply for the issuance of CTE which shall be
effective only upon the lapse of the period of prohibition to avail of the tax
exemption.
9.3 Other Compliances
The CSF Cooperatives shall comply with the requirements under the following
specific laws:
a. Labor Code and Other Labor Laws
b. The Social Security Act
c. The National Health Insurance Act
d. Home Development Mutual Fund (HDMF) Law
e. Data Privacy Act
f. Local Government Code of 1991
g. Other Social Legislations, laws, rules and regulations
44
CHAPTER 10 - ACCOUNTING SYSTEM, BOOKS AND RECORDS
10.1 Internal Control
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.
10.2 Books of Accounts
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.
10.3 Accounting Entries
1. Capitalization of CSF Cooperatives
To record the fund set-up by the CSF cooperative from contributions of its
members and receipt of grants from individual or private entities.
To record the contribution as Grant

Cash in Bank xxx
Restricted Capital for Surety xxx
To record the contribution as Investment

Cash in Bank xxx
Paid-up Share Capital - Common xxx
Paid-up Capital - Preferred xxx
To record the establishment of Surety Fund

Trust deposit for Surety fund xxx
Cash in Bank xxx
2. Issuance of Surety Agreement - 80% of the Principal amount of Loan
a. To record the issuance of Surety Agreement
Unrealized loss – Surety Agreement xxx

Financial Guarantee - Surety Agreement xxx
b. To record the collection of Service Fee
Cash in Bank xxx

Service Fee xxx
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3. Collection and Defaults
a. Adjusting Entries, shall be made, if no Past-due reported by the lending bank

(80% of the principal amount paid), frequency of adjustment shall depend on
the approved accounting policies of the CSF Cooperative.
Financial Guarantee – Surety Agreement xxx

Unrealized loss –Surety Agreement xxx
b. To record payment to lending bank through surety cover (80% of Outstanding

loan, principal only)
Financial Guarantee – Surety Agreement xxx

Trust Deposits for Surety xxx
c. To record the Assignment of receivable without recourse
Receivable Assigned-Surety Agreement4 xxx

Unrealized Loss – Surety Agreement xxx
Unearned Income – Receivable xxx
Assigned
Due to Lending Bank xxx
d. To record collection of Receivable Assigned-Surety Agreement
Cash xxx
Receivable - Assigned xxx
e. To record the remittance of 20% due to lending bank.
Cash xxx
f. To record expenses in connection with the collection of Receivable Assigned-

Surety Agreement
Collection expenses xxx

Cash xxx
g. Adjusting entry to recognize the realized gain at period end
Unearned Income – Receivable Assigned xxx

Other Income7 xxx
h. To record the write-off of Receivable Assigned
Reserve Fund xxx

Unearned Income – Receivable Assigned xxx
Receivable assigned xxx
46
4. Other Adjusting Entry at the End of Accounting Period
Trust Deposit for Surety xxx

Imputed Income xxx
a. To record the Investment income earned from trust deposits
(Note: Rule 1, Sec. 24)
b. To close the imputed income to Restricted Capital for Surety

account
Imputed Income xxx

10.4 Allocation and Distribution of Net Surplus
1. Order of Distribution. — The net surplus of the CSF Cooperatives, shall

be distributed as follows:
a. An amount for the General Reserve Fund which shall not be

less than fifty percent (50%) of net surplus for the first five
years, and not less than ten percent (10%) in the succeeding
years;
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;
c. An amount for the community development fund, which shall

not be less than three per centum (3%) of the net surplus. The
community development fund shall be used for projects or
activities that will benefit the community where the cooperative
operates;
d. An optional fund, a land and building, and any other necessary

fund the total of which shall not exceed seven percent (7%).
Being optional, the Bylaws may or may not provide such fund;
and
e. The remaining net surplus, net of imputed income on LGU

contributions and grants, shall be made available to the
members in the form of patronage refund and interest on
share capital as return of investments to be credited to
Restricted Capital for Surety.
Entry of distribution:
Net Surplus xxx

Reserve Fund xxx
Cooperative Education and Training Fund xxx
47
Due to Federations and Unions xxx

Community Development Fund xxx
Optional Fund xxx
Interest on Share Capital Payable xxx
Patronage Refund Payable xxx
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. 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.
48
CHAPTER 11- AMENDMENTS OF ARTICLES & COOPERATION AND BYLAWS
11.1 Guidelines of Amendment
a. The amendments of Articles & Cooperation and Bylaws may be adopted in

regular and special general assembly meetings of the CSF cooperative;
b. Amendment may be done by specific provision/s;
c. Amendments shall be indicated by underscoring or otherwise appropriately
indicating the change or changes made and a copy of the amended articles duly
certified under oath by the CSF Cooperative secretary and a majority of the
directors stating the fact that said amendment or amendments to the Articles of
Cooperation and Bylaws have been duly approved by the required vote of the
members;
d. The amendment must be approved by at least two thirds (⅔) vote of all members
with voting rights. The LGU through its authorized representative is not entitled
to vote or has no voting right.
e. All amendments to the Articles of Cooperation and Bylaws shall be submitted
and shall take effect upon its approval by the CDA or within thirty (30) days from
the date of filing thereof if not acted upon by the CDA for a cause not attributable
to the CSF Cooperative.
The following provisions shall not be subject for amendment:
a. Names of the original cooperators;

b. Name of the cooperating directors;
c. Par value;
d. Capitalization unless there is an increase or decrease thereto; and
e. Transformation of the cooperative registered under RA 10744 from CSF
Cooperative into other types or categories of cooperatives.
11.2 Requirements for Registration of Amendments
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.
49
CHAPTER 12- CAPITALIZATION
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.
2. Member cooperatives/NGOs must maintain a contribution to the CSF an amount

of not less than P100,000 and it should be covered by an investment certificate.
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:
a. Original member's share capital contribution;

b. Continuous Capital Build-up;
c. Revolving capital which consist of the deferred payment of interest on share
capital and proceeds of services rendered; and
d. Other sources of funds as may be authorized by law.
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.
50
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.
11. The cooperative shall execute a subscription agreement upon admission of

additional members and whenever additional subscription shall be made by
existing member/s upon full payment of initial subscription. Unless otherwise
provided for in the Bylaws, the cooperative shall issue Share Certificates at least
every end of the calendar year based on the number of shares fully paid for the
said period.
12. The Bylaws of a cooperative shall prescribe a fine of three percent (3%) on
unpaid subscribed share capital.

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CREDIT SURETY FUND COOPERATIVE

PART I- ORGANIZATION AND GOVERNANCE

CHAPTER 2- CSF GOVERNANCE

PART II- CSF OPERATIONS AND ADMINISTRATION

CHAPTER 3- ISSUANCE OF SURETY COVER

CHAPTER 4- LOAN EVALUATION AND CREDIT APPRAISAL

CHAPTER 5- MONITORING OF LOANS COVERED BY SURETY AGREEMENT

CHAPTER 6- ADMINISTRATION OF RECEIVABLE ASSIGNED-SURETY AGREEMENT

6.1 Process of Assignment Receivable…………………………….. 31

CHAPTER 7- FUND MANAGEMENT

7.1 General Policies…………………………………………………… 35

CHAPTER 8- RISK MANAGEMENT

8.1 Risk Management Policy…………………………………………. 36

CHAPTER 9- COMPLIANCE TO LAWS AND REGULATION

9.1 Cooperative Development Authority……………………………… 40

CHAPTER 10- ACCOUNTING SYSTEM, BOOKS AND RECORDS

10.1 Internal Control………………………………………………………. 44

CHAPTER 11- AMENDMENTS OF ARTICLES OF COOPERATION AND BYLAWS

11.1 Guidelines of Amendment…………………………………………... 48

Acting Director : Joselito O. Hallazgo

Regional Office : Elmira R. Reyes

Secretariat : John Erick R. Zepeda

Acting Administrator : Asec. Myrla B. Paradillo

ATTY. MA. LOURDES P. PACAO

DEFINITION OF TERMS AND ACRONYM

3. CDA – refers to the Cooperative Development Authority created under RA 6939 as

4. COS — refers to Contributors Orientation Seminar

5. Cooperative — an autonomous and duly registered association of persons, with a

8. CSF Cooperative — an LGU-partnered cooperative comprised of well- capitalized and

16. Investment — refers to the contributions of the cooperatives/NGOs to the CSF

18. IRR – refers to the Implementing Rules and Regulations of RA 10744

21. NGO — refers to Non-Government Organization non-stock, non-profit organizations

22. PMES — refers to Pre-Membership Education Seminar

The Manual has been designed to:

SCOPE AND CONTENTS

AMENDMENT AND REVISION

To ensure the Manual of Operation continuous applicability and usefulness, CSF

PART I- ORGANIZATION AND GOVERNANCE

Only well-capitalized and well-managed cooperatives/NGOs are qualified to be

A “well-capitalized” cooperative/NGO must both satisfy these two minimum criteria:

2. Adjusted Capital to Adjusted Assets Ratio (CAR) must be at least the

A. A cooperative must satisfy the following requirements:

B. An NGO must satisfy the following requirements:

i. Must be registered with the SEC, as evidenced by a Certificate of

Additional criteria may be imposed for applicant cooperatives or NGOs to be

a. Approved General Assembly Resolution duly signed by all members of the

1.7 Duties and Responsibilities

Termination of member cooperative/NGO may be automatic, voluntary or involuntary.

The following procedures shall apply for termination of membership:

a. For automatic termination, a juridical declaration of bankruptcy or insolvency of

b. For voluntary termination, a cooperative/NGO member shall inform the BOD by

In case of inaction within 60 days, the application of the withdrawing member

1.9 Refund of Contribution upon Termination of Membership

The refund of the contribution shall be subject to the following conditions:

1.11 Duties and Responsibilities

1.12 Rights and Privileges

1. Designate its authorized representative to vote and be voted upon in

c. GFIs, PhilGuarantee and GAs

1. Designate its authorized representative to sit as a member of the Board

2. Entitled to vote in any matters affecting the operation of the CSF

CHAPTER 2 CSF COOPERATIVE GOVERNANCE

1. Composition of the General Assembly