Banks extend P71 billion loans to MSMEs during lockdown

MANILA, Philippines — Philippine banks granted and refinanced loans amounting to P71 billion to help micro, small, and medium enterprises (MSMEs) survive the economic fallout from the global pandemic, according to Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno.

In a virtual meeting, Diokno told members of the Rotary Club of Makati Dasmariñas that the amount were reported by 90 banks as an alternative compliance to the BSP’s reserve requirements.

The economy came to a grinding halt after the government placed Luzon under strict quarantine measure in mid-March to slow the spread of the virus. The lockdown was relaxed when the National Capital Region was placed under general community quarantine, allowing some businesses to resume.

Diokno said the amount of loans granted or refinanced as of June 26 was a substantial increase from the P9.9 billion used by 55 banks as part of their compliance to the reserve requirement ratio (RRR) immediately after the effectivity of the relief measure.

MSMEs contribute nearly 36 percent of the total value added to the economy and account for 99.5 percent of the total establishments and employ almost 63 percent of the total labor force.

As part of regulatory relief measures extended to banks, the BSP allowed banks to use additional loans to MSMEs as well as large enterprises severely affected by the pandemic as alternative compliance to the RRR until the end of 2022.

The extension gave banks and quasi-banks more time to study the risks of extending loans to MSMEs and large enterprises severely affected by the health crisis.

The BSP requires banks to keep a minimum amount of cash reserves with the central bank determined by the amount of deposit liabilities owed to customers. It slashed the RRR for universal and commercial banks by 200 basis points last March 30, freeing up P200 billion into the financial system to boost economic activity.

It also lowered the RRR for thrift as well as rural and cooperative banks by 100 basis points effective July 31 to three and two percent, respectively.

“With recent concerns about potential nonpayment or delinquent payment of loans coming from both business and household sectors, the BSP deployed a range of regulatory relief measures to encourage BSP-supervised financial institutions to grant a temporary grace period for loan payments or to restructure the loan accounts of their borrowers,” Diokno said.