The central bank said banks have released an average of P174.9 billion new loans to micro, small and medium enterprises (MSMEs) as of mid-April as alternative compliance to the reserve requirement (RR) rule.
Based on Bangko Sentral ng Pilipinas (BSP) data, this amount is 12 percent of total required reserves during the reserve week ending April 15.
As part of relief measures to cope with the effects of the COVID-19 pandemic, the BSP has allowed the use of loans to MSMEs and large enterprises as alternative compliance with RR against deposit liabilities and deposit substitutes until the end of 2022. These loans are new or refinancing for existing MSME loans and critically-affected large enterprises.
As of mid-April, loans of banks to large enterprises as alternative compliance reached P14.2 billion, a mere one percent of the required reserves.
The BSP has put a limit of P300 billion for MSMEs and P425 billion for large enterprises as alternative compliance with the RR.
The utilization of loans is still low. For MSMEs, there is still an available P125.1 billion loanable amount. For large enterprises, about P410.8 billion balance for lending as alternative compliance with RR remains.
Before the relief measure was approved, MSME loans was only P8.7 billion (April 30, 2020).
The BSP allowed other modes of alternative compliance to MSMEs and large enterprises such as loans that are current and not past due or non-performing are eligible to be considered as alternative compliance to the RR. The exception is an MSME loan or large enterprise loan that has been renewed or restructured.
Loans granted to MSMEs and large enterprises that are not part of conglomerate structure are counted as part of banks’ compliance with the RR rule.
Besides allowing loans to MSMEs and certain large enterprises that were hit by the pandemic to be used as alternative compliance with RR, the BSP also reduced the credit risk weights of loans granted to MSMEs to free up capital and for banks to have more funding for MSMEs. “These initiatives stimulate increased lending to the MSME sector which was vulnerable during the pandemic,” said the BSP.