Bank loans to MSMEs do not reach the threshold

The Bangko Sentral ng Pilipinas (BSP) said bank loans to micro, small and medium enterprises (MSMEs) still did not meet the mandatory threshold as of September 30, 2021.

According to the most recent central bank data, 440.34 billion pesos was set aside for MSME financing during the period, below the 826.64 billion pesos required under the law of the Republic 6977, also known as the “Magna Carta for MSMEs”. The amount was only 5.21% of the total loanable funds of 8.44 billion pesos in the third quarter of last year, well below the 10% threshold of the law.

Loans were made by big banks worth 330.93 billion pesos, savings banks for 64.38 billion pesos and rural and cooperative banks for 445.02 billion pesos.

The most recent data echoes findings from the Q3 2021 BSP survey of senior bank loan officers, which found that banks tightened lending criteria for business loans in July-September of. last year.

“The banks interviewed indicated that the reported tightening of global lending standards was mainly due to a deterioration in borrower profiles and the profitability of the banks’ portfolio, a less favorable economic outlook and reduced tolerance for risk, among others. factors, ”he stressed.

According to Bangko Sentral, the reduction in line of credit amounts, tighter collateral requirements and loan covenants, and increased use of interest rate floors indicate a sharp tightening in overall lending standards.

In contrast, longer loan maturities indicated some relaxation in loan requirements.

The central bank’s Monetary Council has approved prudential measures to help MSMEs, BSP Governor Benjamin Diokno previously noted.

The regulatory capital treatment of MSME exposures was changed at this time to temporarily reduce the risk weights of MSME loans. The updated risk-based capital structure for banks has also been postponed from the end of 2021 to the end of 2022.

Diokno further mentioned that the deadline for reporting past due and non-performing loans from borrowers affected by the pandemic has been extended to December 31, 2021, compared to the original deadline of March 8, 2021, subject to reporting. at Bangko Sentral.

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