MSME loans top P200 B – BSP

Published November 21, 2021, 10:15 PM

by Lee C. Chipongian

Banks have set aside P201.8-billion loans to micro, small and medium enterprises (MSMEs) as of end-October as alternative compliance to the reserve requirement (RR) rule.

To ensure continuous support to banking operations and key economic sectors including MSMEs, the Bangko Sentral ng Pilipinas has allowed banks to use loans to MSMEs and large enterprises that are not affiliated with conglomerates as RR compliance against deposit liabilities and deposit substitutes.

BSP encouraging banks to loan more to MSMEs 

The P201.8 billion MSME loans were the allocations as of the reserve week of Oct. 21. This amount was 13.5 percent of total required reserves during this period.

Banks also allocated P36.4 billion loans to large enterprises as alternative compliance with the RR, whuch was 2.4 percent of total required reserves for the same reserve period.

BSP Governor Benjamin E. Diokno said that since the BSP has allowed new loans or restructured loans to MSMEs as well as loans to large enterprises that are critically-impacted by the pandemic as alternative compliance with the RR, this was one of the effective relief measures that the BSP has extended to benefit small businesses.

“This means that banks need not maintain funds in their demand deposit account with the BSP but can tap the same for the purposes of lending to eligible enterprises,” he said last week.

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 stood at P8.7 billion only as of April 2020.

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.

 
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