Loans to MSMEs breach P100 billion as of August

MANILA, Philippines — Loans extended to micro, small and medium enterprises (MSMEs) that are booked in compliance with banks’ reserve requirements breached the P100-billion level as of end-August as the Bangko Sentral ng Pilipinas (BSP) continued to extend regulatory relief measures amid the coronavirus pandemic.

BSP Governor Benjamin Diokno said the average daily balance of bank loans to MSMEs soared by a dramatic 971 percent to P106 billion as of end-August from P9.9 billion as of end-April as the BSP extended relief measures to the banking sector.

“This is a big relief for small businesses. The BSP is happy to note that their banks are up to the task,” Diokno said.

Due to the impact of the pandemic, Diokno said the BSP temporarily amended supervisory regulations to encourage lending to sectors severely affected by the health crisis.

For one, the BSP chief said monetary authorities now allow banks to count loans to MSMEs and large enterprises as part of their compliance to the level of deposits they are required to keep with the central bank.

The temporary measure, which allows banks to use additional loans to MSMEs and large enterprises severely affected by the pandemic as alternative compliance to the RRR, was extended up to the end of 2022.

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

The Monetary Board slashed the reserve requirement ratio for universal and commercial banks by 200 basis points to 12 percent from 14 percent on March 30 and that of thrift banks, as well as rural and cooperative banks by 100 basis points to three percent from four percent and to two percent from three percent, respectively, effective July 31.

Over P200 billion was released for additional lending due to the decision to lower the reserve requirement ratio as part of a commitment to bring down the level to single digit by 2023.

Diokno also said the BSP lowered the credit risk weight of loans granted to MSMEs that are current in status to 50 percent from 75 percent.

Likewise, he said MSME loans guaranteed by the Philippine Guarantee Corp, Agricultural Guarantee Fund Pool and the Agricultural Credit Policy Council were assigned zero percent risk weight.