BSP: Bank lending to MSMEs gains traction

BANK lending to small businesses in the country has improved after monetary authorities relaxed reserve requirement rules for lenders, the Bangko Sentral ng Pilipinas (BSP) reported on Thursday.

“There has been [a] positive response on the part of banks with respect to this relief measure, especially on the use of loans to micro, small and medium enterprises (MSMEs) as an alternative compliance with the reserve requirements,” BSP Governor Benjamin Diokno said during a briefing.

His remarks come after the central bank’s policymaking Monetary Board adopted in April a policy recognizing new loans granted to MSMEs as a form of alternative compliance with reserve requirements effective April 24 this year until December 30 of next year.

This policy was amended the following month to allow lenders to count their loans to large enterprises as part of their reserve requirements.

“Around 88 banks, mostly rural banks, have started using loans to MSMEs as an alternative mode of compliance with the reserve requirement ratio,” Diokno said.

Citing latest data, he said about P44.2 billion in MSME loans were used in compliance with the reserve requirement. This is larger than the P9.9 million in MSME loans used by 55 banks immediately after the measure took effect on May 29.

But the Bangko Sentral chief added that there had been limited takeout on the same use of loans to qualified large enterprises as an alternative mode of compliance.

“Only 14 banks have utilized

P534 billion in loans” for such businesses, he said.

Besides providing leeway to encourage bank lending, Diokno also said the central bank supported the enactment of a bill that would strengthen the capacity of government financial institutions, such as the Philippine Guarantee Corp., the Land Bank of the Philippines and the Development Bank of the Philippines to provide the needed assistance to MSMEs and other strategically important firms.