As alternative compliance to the reserve requirements (RR), bank lending to micro, small and medium enterprises (MSME) reached P154.1 billion in 2020, about 11 percent of the required reserves.

Loans to large enterprises as alternative RR compliance amounted to P32.9 billion or 2.3 percent of the required reserves.

The Bangko Sentral ng Pilipinas (BSP) said there is a lot more room in the utilization of loans to both MSMEs and large enterprises based on the limits set by the Monetary Board of P300 billion for MSMEs and P425 billion for large enterprises.

The latest utilization leaves P145.9 billion and P392.1 billion in available balance for loans to MSMEs and large enterprises, respectively, said the BSP.

Credit releases to MSMEs increased last year as part of BSP regulatory relief measures to help small businesses affected by the COVID-19 lockdowns. The relief measures allowed banks to extend peso-denominated loans to MSMEs and certain large enterprises critically hit by the public health crisis as a form of alternative compliance with the RR against deposit liabilities and deposit substitutes.

Before the relief measure was approved, MSME loans stood at P8.7 billion only. But  MSME loans have been increasing since April 24, 2020 when the BSP allowed the prudential measure. These loans are new or refinancing for existing MSME loans and critically-affected large enterprises.

Aside from the RR compliance to channel more loans to the MSME sector, the BSP extended relief measures on the reporting of past due and bad loans, reduced the credit risk weights for these loans from 75 percent to 50 percent and assigned zero weight with government guarantees from the Philippine Guarantee Corporation, Agricultural Guarantee Fund Pool, and the Agricultural Credit Policy Council.

As the economy slowly reopened and lockdowns are eased in certain areas, the BSP in December last year set a limit on the loans that banks can release to MSMEs and large enterprises as RR compliance.

BSP Governor Benjamin E. Diokno said the limits are based on different simulations and should ensure that the use of loans as an alternative mode of compliance is in line with domestic liquidity conditions and projected growth.

The use of loans to MSMEs and large enterprises as alternative compliance with RR will be allowed until December 29, 2022, but “subject to early closure, if warranted and with prior notice,” said Diokno.

After 2022, the BSP will close the eligibility window on the use of these relief measures.

Source: Manila Bulletin (