The central bank will continue to count loans to micro, small, and medium enterprises (MSMEs) as well as qualified large enterprises as part of compliance with the reserve requirements until end-2022 to extend relief measures to banks and non-banks and to provide funding to businesses hit by the pandemic. The previous cut-off period was end-December 2021.

Based on an amended circular signed by Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno in a Monetary Board meeting last week, banks and non-banks can use MSME loans as allowable reserve requirement ratio (RRR) alternative compliance from April 24 this year until December 29, 2022, while loans to large enterprises are also considered alternative compliance from May 29 this year until December 29, 2022.

The BSP made some changes to the allowable modes of alternative compliance which is now specific to peso-denominated loans granted to MSMEs and large enterprises. It also said that only loans that are current and not past due or non-performing are eligible to be considered as alternative compliance to the RRR. The exception is an MSME loan or large enterprise loan that has been renewed or restructured.

The BSP said banks and non-banks however can still “utilize” past due or non-performing MSME loans or large enterprise loans as alternative compliance for 30 days from the date the loans went sour.

As part of banks and non-banks’ relief measures to cushion the impact of the COVID-19 pandemic, the BSP issued Circular No. 1100 on October 8 which amended an earlier version, Circular No. 1083 approved last April 22.

Loans granted to MSMEs and large enterprises that are not part of conglomerate structure are counted as part of banks' compliance with the RRR rule.

Diokno said that based on BSP’s latest data, the average daily balance of bank loans to MSMEs have reached P106 billion as of end-August versus P9.9 billion end-April. This was an increase of 971 percent.

Loans to large enterprises, on the other hand, went up to P13.6 billion which grew by “17 times since we started monitoring from the effectivity” of a BSP memo issued last May, said Diokno.

BSP earlier reported that 97 banks have extended loans to MSMEs as compliance with the RRR while 13 banks used their lending to large enterprises as alternative compliance.

The BSP has other relief measures that are MSME-related such as temporarily reducing from 75 percent to 50 percent the credit risk weight of MSME loans that are current in status and assigning zero weight to MSME loans covered by guarantees from the Philippine Guarantee Corporation, Agricultural Guarantee Fund Pool, and the Agricultural Credit Policy Council.

Based on 2018 statistics, MSMEs accounted for 99.5 percent of total business establishments with 5.7 million jobs or 63.2 percent of the total workforce.