More banks have extended loans to micro, small and medium enterprises (MSMEs) in compliance with reserve requirements, as the Bangko Sentral ng Pilipinas (BSP) continues to provide regulatory relief measures amid the lingering pandemic.
Jovelyn Hao, manager at BSP Technology Risk and Innovation Supervision Department, said loans provided by 89 banks to MSMEs reached P175.6 billion as of April 22 this year, which was about 12.4 percent of the total reserve requirements.
The latest number of banks and the amount used as compliance with the central bank’s reserve requirements were substantially higher compared with just P8.7 billion in loans extended by 47 banks to these enterprises as of April 30, 2020 following the effectivity of the relief measure, she said in a webinar.
“…We created a stimulus to the banking sector by allowing MSMEs loans to be part of banks’ compliance with the reserve requirements.
And because of this, banks have continued to grant new loans or refinance existing loans to MSMEs since March of last year,” she added.
Hao said the inclusion of new loans to MSMEs as part of banks’ compliance with the reserve requirement is part of a package of relief measures the BSP instituted to assist financial institutions in weathering the economic crisis, and also support households and business enterprises adversely affected by the pandemic.
She said the BSP also implemented a temporary reduction in the credit risk weights of MSME loans.
It also assigned zero risk weights for MSME exposures that are covered by the Philippine Guarantee Corporation, the Agricultural Guarantee Fund Pool, and the Agriculture Credit Policy Council, she said.
“These initiatives led to freeing up of bank capital requirements for MSME lending and to encouraging banks to lend to marginal sectors like farmers and fisherfolk,” Hao added.
Moreover, Hao said the central bank has extended the relief period on the reporting of past due and non-performing loans of borrowers affected by the coronavirus disease 2019 (Covid-19) pandemic.
“All of these are geared towards supporting the banks to enable more loan grants for MSMEs to facilitate their business operations and of course their recovery,” she said.
In line with its commitment to boost the capabilities and empower MSMEs, Hao said the BSP believes that innovative and sustainable financing approaches are instrumental in addressing the country’s access to finance challenges especially given the negative effects of the pandemic.
She said these approaches include developing a credit risk database, promoting supply chain finance in the banking sector to improve MSME access to finance, designing and conducting a demand-side survey for these enterprises, and implementing MSME financial education programs.
“I think this is one of the most important of all –the implementation of financial education programs for MSMEs in partnership with the DTI (Department of Trade and Industry) to capacitate for example, the Negosyo Centers in delivering financial education sessions as part of the broader capacity building programs for MSMEs,” she added.
Hao said the MSME sector is a driver of economic development in the country, accounting for 99.5 percent of the total establishments and employing 62.4 percent of the total labor force, and comprising 60 percent of total exporters.