Banks set aside P195 billion for lending to MSMEs

Banks have allocated P194.6 billion worth of loans to micro, small and medium enterprises (MSMEs) as alternative compliance to the reserve requirement (RR) rule, based on data from the Bangko Sentral ng Pilipinas (BSP).

A customers scans a QR code at a restaurant in Taguig (Screenshot from Taguig City government video)

BSP said the amount was earmarked by the banking system as RR compliance as of the reserve week of mid-September. It is about 13.4 percent of total required reserves during the period.

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. The RR ratio is the percentage of bank deposits and deposit substitute liabilities with the BSP.

Loans to large enterprises, also as an alternative to RR compliance, have reached P37.8 billion as mid-September, or about 2.6 percent of the total required reserves. The BSP specifically allowed banks to use loans to large enterprises that are not affiliated with conglomerates.

The utilization of loans as RR compliance is still low, however. The BSP has put a limit of P300 billion for MSMEs and P425 billion for large enterprises as alternative compliance with the RR.

Before the relief measure was approved last year, MSME loans reached P8.7 billion only.

The BSP has reduced the RR ratio or the cash reserves ratio by 200 basis points from 14 percent to 12 percent in 2020. The RR reduction released more than P200 billion of fresh bank funds in the financial system.

The BSP also 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.