Credit extended to micro, small and medium enterprises (MSME) posted a hefty improvement in terms of daily average, following the Bangko Sentral ng Pilipinas (BSP) extension of MSME loans as alternative compliance to reserve requirement ratio (RRR).
“As of the reserve week ending 29 October 2020, an average of P126.4 billion in MSME loans was used as compliance with the BSP’s reserve requirement, a substantial increase from the P8.7 billion in MSME loans reported in April 2020,” the BSP said.
The central bank earlier allowed MSME loans to form part of banks’ alternative compliance to RRR, a policy which was extended until 29 December 2022, to stimulate lending and renewal.restructuring of loans for the same.
Huge slash in RRR
RRR was trimmed by a total of 200 basis points to date, as monetary authorities granted the BSP to cut such by as much as 400 basis points this year to provide ample liquidity in the financial system.
The BSP injects about P100 billion in fresh liquidity for every 100 basis point reduction in RRR.
Still, the central bank decided to further lower its key interest rates, slashing by 25 basis points to bring such at only 2 percent, the lowest it has ever been, to further reduce borrowing costs.
Policy rates at record low
“The credit risk weight of MSME loans that are current in status was also reduced to 50 from 75 percent until end-December 2021. Meanwhile, loans that are guaranteed by the Philippine Guarantee Corp, the Agricultural Guarantee Fund Pool and the Agricultural Credit Policy Council were assigned a zero percent credit risk weight,” the BSP said.
“As a result of these measures, top 30 banks granted loans amounting to P40.6 billion during the initial ECQ (enhanced community quarantine) months of March and April 2020. In addition, P25.6 billion in MSME loans were renewed while P1.8 billion were restructured by the top 30 banks during the same period,” it added.