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MSME loans used as alternative reserve compliance hit P134.8B

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BANKS CONTINUED to increase their lending to small businesses in November, taking advantage of the central bank’s relief measure to consider these loans  part of their compliance with their reserve requirements (RR).

“MSME (micro-, small-, and medium-sized enterprises) loans used as alternative compliance with reserve requirements reached P134.8 billion as of Nov. 26. This represented a 9.8% share of total RR,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said in his speech at the virtual Kapihan sa Manila Bay on Wednesday.

Meanwhile, Mr. Diokno said loans to large enterprises used as reserve compliance reached P29.1 billion or 1% of total RR.

The BSP in April allowed MSMEs loans to be counted as part of banks’ reserve requirements in a bid to boost lending to the sector, which was hit severely by the pandemic crisis.

MSMEs accounted for 99% of the roughly one million business establishments in the country as of 2018, based on data from the Department of Trade and Industry. They also accounted for 5.7 million or 63.19% of new jobs in the same year.

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In May, the central bank began to count lending to pandemic-hit large enterprises as alternative compliance with banks’ reserve requirements. The relief measure is only applicable to credit disbursed to businesses with asset sizes of more than P100 million but are not part of a conglomerate.

The BSP in December capped credit to MSME and large enterprises that banks could utilize as alternate reserve compliance at P300 billion and P425 billion, respectively.

Mr. Diokno has said the caps were meant to ensure that bank loans used for alternate reserve requirements were in line with liquidity conditions.

The central bank last year reduced the reserve requirement ratios of banks by a total of 300 basis points (bps) as a relief measure to boost liquidity during the crisis.

Broken down, it lowered the reserve requirement of big banks by 200 bps to 12%, while the reserve ratios of thrift and rural lenders were trimmed by 100 bps to 3% and 2%, respectively. — L.W.T. Noble

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