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Loans stream to MSME via BSP reserve rule

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.



Reserve requirement on commercial banks led to these financial institutions extending more loans to micro, small and medium enterprises (MSME).

Bangko Sentral ng Pilipinas (BSP) had used the regulation as a way to provide relief amid the lingering pandemic.

BSP Technology Risk and Innovation Supervision Department manager Jovelyn Hao said loans provided by 89 banks to MSME reached P175.6 billion as of April 22 which was equivalent to 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 the P8.7 billion in loans extended by 47 banks a year ago.

“We created a stimulus to the banking sector by allowing MSME 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 MSME since March of last year,” she added.

Hao indicated the inclusion of MSME in compliance with the reserve requirement rule is part of a package of 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.