Loans to MSMEs, large firms hit P164 billion

MANILA, Philippines — Loans extended by banks to small and large businesses amounted to nearly P164 billion after the Bangko Sentral ng Pilipinas (BSP) eased reserve requirement rules for banks.

During the virtual Kapihan sa Manila Bay, BSP Governor Benjamin Diokno said loans to small businesses used for compliance with the reserve requirement ratio or RRR amounted to P134.8 billion, while bank loans to large companies amounted to P29.1 billion as of Nov.26, 2020.

The figures are still within the caps on the amount of loans extended by banks used as alternative compliance to RRR set at P300 billion for MSMEs and P425 billion for large companies by the regulator last month.

The BSP chief explained the BSP’s measures to incentivize lending to MSMEs and critically impacted large enterprises have resulted in the grant of new loans or in the renewal or restructuring of loan to borrowers.

“This is to encourage banks to continue lending to smaller businesses and critical large enterprises. This will also ensure sufficient domestic liquidity and credit in support of economic activity amid lockdown measures,” he said.

The BSP requires banks to keep a minimum amount of cash reserves with the BSP determined by the amount of deposit liabilities owed to customers.

The Monetary Board slashed the RRR for universal and commercial banks by 200 basis points last March 30 and for thrift, as well as rural and cooperative banks by 100 basis points effective July 31, 2020 as part of measures to soften the impact of the COVID-19 pandemic on the economy.

As part of COVID-19 response measures, the BSP allowed 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 measure, which allowed banks to use additional loans to MSMEs and large enterprises severely affected by the pandemic as alternative compliance to the RRR, has been extended to end-2022 instead of end -2021, giving the banking industry more time to study the risks of extending such loans.

Diokno said the BSP would continue to engage banks in monitoring developments and risk sounding impact of COVID-19 by extending financial relief to borrowers, incentivizing lending, promoting continued access to financial services, as well as supporting continued financial services delivery.

Diokno said the central bank is also supporting the passage of the proposed Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) and the Financial Institutions Strategic Transfer (FIST) bills to provide financing to MSMEs and other strategically important companies.