The Bangko Sentral ng Pilipinas (BSP) is continuously undertaking various initiatives to support the micro, small and medium enterprises (MSMEs) and the agricultural and fisheries sector, including banks providing loans to smaller businesses in compliance with the central bank’s reserve requirements.
“The most important of which during the pandemic was to make new lending to MSMEs eligible for compliance with our reserve requirements,” Francisco Dakila Jr., Deputy Governor of the Monetary and Economics Sector of the BSP, said during a virtual business conference.
The BSP has allowed banks to use new loans to MSMEs as alternative
compliance with the reserve requirements to encourage them to continue
lending to these smaller businesses.
Dakila said the central bank also has instituted other measures to boost these businesses, including reduction in the credit risk weight of MSME loans, and assignment of zero-percent risk weight for MSME loans that are covered with guarantees.
He said the BSP also supports initiatives to increase access to credit and financing of the agriculture and fisheries sector as it recognizes its “great potential” as an engine of growth.
He identified these initiatives as the agricultural value chain financing framework (AVCFF), financial inclusion initiatives, and credit surety fund (CSF).
“The agricultural value chain financing framework addresses the associated credit risks with the agriculture and fisheries sector by shifting the focus of lending from individual farmers and fisherfolk to the whole value chains. Participation in a value chain allows farmers to leverage on effective farming technologies and methods and have access to financing and sustainable market demand,” he said.
Dakila said AVCFF also allows financial institutions to put in place a disaster contingency mechanism requiring the adoption of risk mitigants to minimize losses and provide relief to a borrower to facilitate recovery.
To encourage participation in the lending scheme, incentives are also provided to financial institutions that comply with regulations, including compliance with the agri-agra requirement and the additional 25-percent increase in the single borrowers’ limit for loan granted to actors in the agricultural value chains for a period of three years, he said.
“And the BSP hopes that the issuance will provide the necessary guidance for banks to be able to serve the needs of the agricultural and fisheries sector, specifically the small owners in a manner that is both visible and sustainable,” he added.
Dakila further said financial inclusion initiatives include those in the areas of policy, regulation and supervision; financial education and consumer protection; data and measurement; and financial inclusion advocacy and strategic international linkages.
“Through financial inclusion, the BSP aims to provide timely and affordable financial services to the different segments of Philippine society, particularly sectors that are often underserved by the formal financial system, including the MSMEs and the agriculture and agrarian reform sectors,” he said.
Developed as a credit enhancement scheme, Dakila said the CSF serves as security for loans of MSMEs from lending banks by providing a surety cover in lieu of acceptable collaterals.