Understanding the

Financial
Component of CSF
Cooperative
DEFINITION OF TERMS
 Contributions – investment or grants
 Donor – refers to an individual or a
private entity that contributes to the
CSF coop which shall be treated as
Grant. Donor shall not be considered
as member of the CSF and their
contribution shall be booked as
Restricted Capital for Surety.
Restricted Capital for Surety
 - refers to contributions of
cooperatives, NGOs, LGUs, GFIs, 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.
General Reserve Fund
 Ten percent (10%) of net surplus shall
be allocated for GRF. Provided, that in
the first 5 years of operation after
registration, this amount shall not be
less than 50% . The GRF shall be used
for the stability of the CSF Coop and to
meet net losses in its operations. This
fund shall not be utilized for
investment, other than those allowed in
the CSF Act and the Coop Code.
EQUITY OR MEMBER’S EQUITY
• COMPOSITION
> Authorized Share Capital
As provided in the ACBL
> Subscribed Share Capital
at least 25% of the ASC
> Paid up Share Capital
at least 1% of the investment in the CSF but
the total paid up capital of the CSF Coop shall be
at least 25% of the Subscribed SC but no less
than 5,000 pesos.
TYPES OF SHARES
1) Common Shares – to be issued to
cooperative/NGO that are
member-coops and to Govt.
Financial Institution (GFI),
Industrial Guarantee and Loan
Fund (IGLF) and Government
Agencies (GAS) that opted to
treat their CSF contributions as
investments.
2) Preferred Shares – refer to shares
issued to LGU s.
Unpaid Subscription
 Refers to a member unpaid
subscribed share capital which shall
be fully paid within two (2) years
or as otherwise provided in the by
laws, except for member
/cooperatives/NGOs whose share
capital must be fully paid before
the launching of the CSF
cooperative.
CSF or Surety Fund or Fund
 A fund generated from the
contributions of well capitalized and
well-managed member-
cooperatives/NGOs, LGUs, GFIs, 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 Board
of Directors of the CSF Coop.
 Grant
• Shall mean contributions from LGU, GFIs,
IGLF, and GAS which opted that 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 coops,
grants shall be returned, net of
guarantees issued and liquidation
expenses.
Imputed Income
 Refers to the earnings generated by the
contributions of LGU, GFIs, IGLF, 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.
Investment
 Refers to the contributions of the
cooperative/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, GFIs, IGLF
and GAS that were treated as
investments. Investments are booked as
1% Share Capital and 99% Restricted
Capital for Surety.
NET SURPLUS
 Refers to the excess payments made by
members on services availed of from
the CSF coop which shall not be
construed as profits. It includes other
inflow of assets resulting from its other
operating activities, which shall be
returned to members as prescribed in
the coop code.
Well-capitalized Cooperative
• With two minimum requirements :
a) Adjusted assets must be at least
1million pesos, which is computed as
Total Assets minus the ff:
1. Past Due Loans and items under
litigations (Net of Allowance for
probable losses); and
2) Past Due Accounts Receivables (net
of APLL)
 Well-capitalized Cooperative
b. Adjusted Capital to Adjusted Assets Ratio
(CAR) must be at least twenty percent
(20%), which is computed s Adjusted
Capital divided by Adjusted Total Assets,
which is computed as :
Adjusted Total Assets = Total Assets-
(Total Equity less Adjusted Capital).
Adjusted Capital Formula
 Paid up Capital plus Reserve Fund plus Income minus Past
Due Account (without allowance)
-------------------------------------------------------------------
Total Assets – Past Due without Allowance
Income – Gross Income minus Expenses less Imputed Income
less Statutory Funds
Past Due – Par one day plus 30 days allowance
-only those not provided with allowance
Sources of Capital of CSF
Cooperatives
a. Member’s share capital contribution
b. Revolving Capital which consist of the
deferred payment of interest on share
capital and proceeds of services
rendered; and
c. Other sources of funds as may be
authorized by law.
Revolving Capital
• To strengthen the capital structure of the
coop the GA may authorize the Board of
Directors 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 is 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, subject to Rule 25
thereof.
Capital

 The capital of a CSF Coop may consist of

common share capital and preferred
share capital. The share capital
contribution of members shall be
considered as equity. Provided, that it
shall not be w/drawn and should not be
used in offsetting obligations whether
past due or current while the
membership subsists.
Subscription Agreement
• The coop 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
in the Bylaws, the coop shall issue Share
Certificates at least every end of the
calendar year based on the number of
shares fully paid for the said period.
Share Capital Limit

 A member coop/NGO may own

more than ten percent (10%) of
the total share capital of the CSF
but not more than fifty percent
(50%).
PAR VALUE
 The par value per share of a CSF coop
may be fixed at any amount but not
more than One Thousand Pesos
(Php1,000.00) . CSF coops are
prohibited from issuing multiple types
of common shares with different par
value per share. It is also prohibited to
increase/ decrease the par value of the
share capital by way of amending its
ACBL.
SHARE CAPITAL CERTIFICATE
 The Board of Directors shall issue a Share Capital
Certificate only to a member who has fully paid its
subscription.
 To be signed by the Secretary and Chairman of BOD.
 The number of paid shares required for the issuance
of Share Capital Certificate shall be determined by the
BOD.
 The shares maybe purchased, owned or held only by
entities that are eligible for membership.
USAGE OF THE FUND
 The contributions from the coops/NGOs,
LGUS, GFIs, IGLF, GAS and
individual/private entities, shall
constitute the Restricted Capital for
Surety and shall be deposited in a trustee
bank/s, and shall be invested or placed in
a govt. securities.
Operating and Administrative
Expenses of the CSF Coop
 Shall be taken from the interest income
on regular bank deposits, service fees
and other CSF related activities.
 Unless otherwise provided in its bylaws
and action of the Board, net interests
and trust fund income earned from trust
investment shall be re-invested to the
Fund, subject to the provision of this
Rules on income distribution.
SERVICE FEES
 Maximum rate is 5% per annum
 Suggested rates:
a) 2%p.a. – for fully secured loans with real
estate mortgage in favor of the lending bank,
endorsing coop.
b) 3%p.a. for loans fully secured by chattels
other than inventories or secured partly by real
estate mortgage in favor of the lending bank,
endorsing coop.
c) 4%p.a. for loans or sureties secured by
inventories or stock in trade;
d) 5%p.a. for unsecured loans or sureties
Penalties
 Fines on Unpaid Subscribed Share
Capital. The bylaws of a coop shall
prescribe a fine of three percent
(3%) on unpaid subscribed share
capital.
Past Due Loans
 When any principal and/or interest or
installment due , or portions thereof, are
not paid t their contractual due date, the
total outstanding balance thereof shall
be considered past due.
 An allowance of 30 days is allowed not
to consider it as past due and for micro
finance loans it is only 10days.
Qualified Borrower
 An MSME –member of a cooperative-
member of the CSF cooperative;
 A cooperative that is a member of
the CSF coop; or an
 NGO which is a member of the CSF
coop
Allocation of Net Surplus
 Reserve Fund – 50% for the first 5 years and not less than
10% in the succeeding years;
 Education and Training Fund- not more than 10% of the NS
 Community Development Fund – at least 3% of the NS
 Optional Fund - shall not exceed 7% of the NS
 The remaining bet 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 and Patronage Refund as
return of investments to be credited to Restricted
Capital for Surety.
Sample Transactions

 Contributions of Coop A, B , C ,D & E members to CSF

Coop in the amount of P100,000.00 each as share
capital and P5,000 each as Membership Fee.

 Dr. Cash on Hand P525,000.00

Cr. Paid Up Share Capital 5,000.00
Membership Fee 25,000.00
Restricted Capital for Surety 495,000.00
Sample Transactions

• Contribution of the LGU in the amount of

Php5,000,000.00 and MF of P5,000.00 in the form of
investment

Dr. Cash on Hand 5,005,000.00

Cr. Paid up Share Capital 50,000.00

Restricted Capital for
Surety 4,950,000.00
Membership Fee 5,000.00
Sample Transactions

 Contribution of NGO A and B in the amount of

P100,000.00 each and MF of Php5,000.00.each.
Dr. Cash on Hand 210,000.00
Paid up Share Capital 2,000.00
Restricted Capital
for Surety 198,000.00
Membership Fee 10,000.00
Sample Transactions
 GAs donated 1.6million pesos to the CSF coop

Dr. Cash on Hand 1,600,000.00

Cr. Restricted Capital for
Surety 1,600,000.00
 Sample Income Statement
CSF Cooperative
Statement of Operations
For the Year Ended December 31, 2019
Service Fees 1,000,000.00
Membership Fees 40,000.00
Interest Income from Investment 30,000.00
Other Income 5,000.00
Gross Income P1,075,000.00
Sample Income Statement

Less: Expenses
Salaries and Wages P255,000.00
Officers Honorarium 50,000.00
Office Supplies 5,000.00
Miscellaneous Expenses 3,000.00
Total Expenses P313,000.00
Net Surplus P762,000.00
==========
Sample Income Statement
 Net Surplus Before Allocation P762,000.00
Reserve Fund – 50% 381,000.00
Education & Training Fund 10% 76,200.00
Community Devt. Fund – 3% 22,860.00
Optional Fund - 7% 53,340.00
Total Statutory Funds 533,400.00
Net Surplus after Statutory Fund 228,600.00
Less: Imputed Income
(5 % of Gross Income ) 53,750.00
( 5% x 1,075,0000 ) ___________
Amount Available as ISC and PR P 174,850.00
=============
Sample Computation of
Interest on Share Capital
• Total Paid Up Capital 57,000.00
• Restricted Capital for Surety 7,243,000.00
• Total P7,300,000.00
============
Formula : Amount Available for ISC
Total Average SC and Restricted Capital for Surety
Assumption: All Share Capital and Restricted Capital was paid at the
beginning of the year and the Board of Directors decided that the
amount for ISC and PR will be allocated 70% for Interest on Share
Capital and 30% for Patronage Refund.

70% x P174,850.00 = 122,395.00 -ISC

• 30% x P174,850.00 = 52,455.00 -PR
Sample Computation of
Interest on Share Capital
• To apply the formula
122,395
7,300,000.00
Rate = 1.68%
 Sample Computation for
Patronage Refund
• Since CSF Coop is not the one who extends the loans to its members the
basis of PR is the total service fee paid by the members to the CSF
Cooperative .
• The Formula is : Amount available for PR
Total Service Fee Paid by the members
• : 52,455
1,000,000.00
= 5.25%
 Sample Balance Sheet
 CSF Cooperative
 Statement of Financial Condition
 As of December 31, 2019
ASSETS
Cash in Bank P712,860.00
Unused Supplies 1,500.00
Financial Assets at Cost 7,300,000.00
Furnitures/Fixtures and Equipment 50,000.00
Total Assets P8,064,360.00
 Liabilities
SSS, ECC, Philhealth, Pagibig
Premiums Payable P 2,400.00
Due to CETF/Apex 38,100.00
Interest on Share Capital Payable 122,355.00
Imputed Income Payable 53,750.00
Patronage Refund Payable 52,455.00
Total Liabilities P269,060.00
 Equity
 Members Equity
Paid Up Share Capital 57,000.00
Restricted Capital for Surety
- Grants 1,600,000.00
- Investment 5,643,000.00
 Statutory Fund
Reserve Fund 381,000.00
Education and Training Fund 38,100.00
Community Development Fund 22,860.00
Optional Fund 53,340.00
Total Equity P7,795,300.00
TOTAL LIABILITIES AND EQUITY P8,064,360.00
Entries to record the interest
on Share Capital and PR
 Dr. Interest on Share Capital 122,395.00
Cr. Restricted Capital for Surety 122,395.00

Computed as 57,000 x 1.68% = 957.60

7,243,000 x 1.68% = 121,434.40
122,395.00
=========
To record Patronage Refund

 Dr. Patronage Refund Payable P52,455.00

 Cr Restricted Capital for Surety P52,455.00

 Dr. Imputed Income Payable P53,750.00

 Cr Restricted Capital for Surety 53,750.00
Interest on Share Capital and
Patronage Refund is computed
as follows:
 100,000.00 x 1.68% ISC = P1,680.00

 Granting Service Paid by Coop A to the CSF Coop is

P50,000.00 so the PR is :

 50,000 x 5.25% = P2,625.00

Subsidiary Ledger
If the ISC & PR are to be
credited to the Restricted
Capital for Surety
COOP A PAID UP SHARE RESTRICTED
CAPITAL CAPITAL FOR
SURETY
AMOUNT 1,000.00 99,000.00
Interest on Share 1,680.00
Capital
Patronage Refund _______________ 2,625.00
TOTAL 1,000.00 103,305.00