BSP ramps up relief measures to sustain lending to MSMEs

CEBU, Philippines —  Apart from the measures that are meant to ensure liquidity in the financial system, the Bangko Sentral Ng Pilipinas (BSP) has introduced a package of regulatory relief and incentive measures to sustain bank lending to Micro Small and Medium Entrepreneurs (MSMEs).

With the aim of stimulating lending, the grant, renewal or restructuring of loans to MSMEs form part of the alternative compliance with the reserve requirements beginning 24 April 2020 until 29 December 2022.

To support financial consumers and help buoy the economy from the impact of the pandemic, the BSP has issued a cumulative policy rate cut of 175 basis points since February 2020 to bring borrowing costs to record lows and boost lending.

These rates are the lowest on record since the BSP shifted to an interest rate corridor in 2016.

The credit risk weight of MSME loans that are current in status was also reduced to 50 from 75 percent until end-December 2021.

Meanwhile, loans that are guaranteed by the Philippine Guarantee Corporation, the Agricultural Guarantee Fund Pool (AGFP), and the Agricultural Credit Policy Council (ACPC) were assigned a zero percent credit risk weight.

According to BSP, this move is meant to encourage banks to lend to small farmers and fisherfolk.

As a result of these measures, top 30 banks granted loans amounting to P40.6 billion during the initial ECQ months of March and April 2020.

In addition, P25.6 billion in MSME loans were renewed while P1.8 billion were restructured by the top 30 banks during the same period.

As of the reserve week ending 29 October 2020, an average of P126.4 billion in MSME loans was used as compliance with the BSP’s reserve requirements, a substantial increase from the P8.7 billion in MSME loans reported in April 2020.

Amid the pandemic, BSP said the MSME industry is showing signs of life, with some businesses growing and thriving even during the community quarantines.