Bank loans to MSMEs rise to nearly P200 billion

MANILA, Philippines — Loans extended by banks to micro, small, and medium enterprises (MSMEs) used as compliance with the central bank’s reserve requirement ratio (RRR) nearly hit P200 billion as of Sept. 23, according to the Bangko Sentral ng Pilipinas.

BSP Governor Benjamin Diokno told participants of a virtual forum organized by the Chinese Filipino Business Club that the amount disbursed to MSMEs reached P195.9 billion, representing 13.3 percent share of the total required reserves as of the week ending Sept. 23.

This also represents a substantial increase from the P8.7 billion in MSME loans or 0.6 percent of total required reserves reported for the week ending April 2020 or since the BSP allowed loans to MSMEs as alternative compliance with the reserve requirement to incentivize lending.

“The BSP recognizes the crucial role of MSMEs in the economy. Let me discuss the regulatory and relief measures that the BSP has implemented to support them,” Diokno said.

The regulator 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 in March last year and for thrift as well as rural and cooperative banks by 100 basis points effective July 31 last year as part of measures to soften the impact of the pandemic on the economy.

For one, the regulator has allowed the new peso-denominated loans to MSMEs and critically impacted large enterprises that do not belong to a conglomerate to be counted as compliance with the BSP’s reserve requirement.

Other prudential measures to assist MSMEs approved by the Monetary Board include the temporarily reduction of the risk weights of loans granted to MSMEs

In the regulatory capital treatment as well as the deferment of the implementation of the revised risk-based capital framework for banks to end 2022 from end 2021.

Likewise, Diokno said the period of relief on the reporting of past due and non-performing loans of borrowers affected by the pandemic was also extended to end this year instead of the original timeline of March 8.