MSME loans counted as alternate reserve compliance reach P80B

THRIFT LENDERS have disbursed P80 billion in loans to micro-, small-, and medium-sized enterprises (MSMEs) that qualify as alternate reserve requirement compliance, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Tuesday.

“As of end-July 2020, thrift banks were able to provide a total of P80 billion loans to MSMEs. These were used as alternative compliance of thrift banks with the reserve requirements as of end- September 2020,” Mr. Diokno said at the 2020 Chamber of Thrift Banks (CTB) Convention held virtually on Tuesday.

The central bank in April allowed lenders to use credit to MSMEs as part of their reserve requirement compliance as part of its regulatory relief for banks and to provide support to small businesses amid the pandemic.

Mr. Diokno said the MSME sector has a role to play in the country’s recovery trajectory amid the coronavirus pandemic as they account for 99% of enterprises across the country.

CTB President Cecilio D. San Pedro said the thrift banking industry is in the process of standardizing and simplifying required MSME loan documents in line with the central bank’s goal to boost small businesses’ access to credit.

“We have formed a CTB Technical Working Group for this project which will be working closely with the BSP team,” Mr. San Pedro said.

Thrift lenders are also seeking further relief measures as the pandemic stretches on, including the extension of the reduced minimum liquidity ratio (MLR) beyond December. The BSP has slashed the MLR for stand-alone thrift and rural lenders to 16% from 20% until yearend.

“So there is a request and we will we reassess this level based on prevailing market conditions, as well as capacity of thrift banks to effectively manage exposures. I can assure you that we will revisit the current policy towards more relaxation,” Mr. Diokno said.

Thrift lenders also asked Mr. Diokno about the possibility of upsizing the maximum insurance coverage under the Philippine Deposit Insurance Corp. (PDIC) currently at P500,000 to boost banking clients’ trust in lending institutions during the pandemic.

While the insurance coverage is mandated under the PDIC’s charter, Republic Act No. 3591 allows a window to revisit the amount under certain circumstances, Mr. Diokno said.

“This decision would require a collegiate policy decision — the PDIC Board — and it has to be approved by the President of the republic. I can assure you I will bring this up to the PDIC,” the BSP chief said yesterday.

The thrift banking industry’s gross nonperforming loan ratio stood at 6.64% at end- August from the 6.09% seen a year ago.

The sector’s net income declined 15.8% to P6.459 billion in the second quarter from the P7.673 billion booked in the April to June 2019 period. — L.W.T. Noble