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), reached P207.4 billion as of end-February, according to the Bangko Sentral ng Pilipinas.
BSP Governor Benjamin Diokno said the latest figure was a sharp improvement from the P8.7 billion in MSME loans reported for the week ending April 2020.
The regulator requires banks to keep a minimum amount of cash reserves with the BSP, which is 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 2020, 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 pandemic on the economy.
As the pandemic took a toll on most businesses, Diokno said the central bank implemented a wide range of policies and regulatory relief measures to support MSMEs.
During the general membership meeting of the Philippine Retailers Association (PRA), the BSP chief cited the role of the retail sector as a growth driver of the Philippine economy, contributing P783.7 billion in gross value added equivalent to 15 percent of the country’s gross domestic product (GDP) in the fourth quarter of last year.
The sector, the BSP chief said, also grew by 8.2 percent and generated almost 10 million jobs in end-2021.
“Yet this very sector was one of the hardest hit by the pandemic,” Diokno noted.
Aside from allowing banks to use peso-denominated loans to MSMEs as alternative compliance with reserve requirements, Diokno said the BSP also implemented amendments to the regulatory capital treatment of exposures to MSMEs to free up capital and allow banks to extend more credit to the sector.
The changes include the temporary reduction in the credit risk weight of MSME loans that are in current status, and the assignment of zero percent risk weight for MSME loans that are guaranteed by the Philippine Guarantee Corp., Agricultural Guarantee Fund Pool and the Agricultural Credit Policy Council.
The central bank also extended to end-2021 the relief period on reporting of past due and non-performing loans of borrowers affected by COVID.