Lenders oppose BSP’s proposed credit quota for innovation development

THE CENTRAL BANK wants to require lenders to allocate credit for the development of new technologies and innovations for various services. — BW FILE PHOTO

CENTRAL BANK PROThe possibility of imposing a loan quota for the development of new technologies and innovations for various services will be affect negative to small lenders as they do not fit their market, according to the Rural Bankers Association of the Philippines (RBAP).

RBAP President Albert T. Concha, Jr. said he filed a joint motion for declaratory judgment with the Philippine Bankers Association and the Chamber of Savings Banks regarding the proposed credit allocation.

“We strongly oppose this mandatory credit allocation for innovation and technology because there are virtually no borrowers, if any, who would qualify for this category in areas where RBs (rural banks) operate,” said Mr. Concha in a Viber. message.

“We find that [proposal] oppressive as stiff penalties will be imposed on BRs when in fact non-compliance is already beyond the control of rural banks,” Mr. Concha said.

“While we recognize the need to support technology and innovation in our country, this should not come at the expense of rural banks,” he added.

The Bangko Sentral ng Pilipinas (BSP) issued a draft circular in March proposing that banks should allocate 4% of their loanable funds to innovation development credit.

Eligible loans that can be included as direct compliance under the proposal are those granted on a qualiIfed borrowers after August 6, 2019. These loans should have been used to develop new technologies and innovations for products, processes, organization and marketing.

Credits that may be considered as alternative compliance for innovative development will include loans to micro, small and medium enterprises that have e-commerce and supply chain related activities Ifnancing.

Banks’ investments in innovation bonds and those related to food security, blue economy, education, health, clean and renewable energy, climate change, infrastructure, development of the human capital, digital economy and transportation will also count as alternative compliance.

Finally, investments in shares of startups can also be considered compliance, subject to limits set by the central bank.

The proposal showed that BSP is also seeking to make innovative development loans an alternative mode of compliance with the compulsory allocation of credits for agriculture and agrarian reform.

Under the proposal, banks will face penalties equivalent to 0.5% of the minimum compliance requirement if they fail to meet the credit quota.

The sector-wide net profit of rural banks reached P4.241 billion in 2021, up 64% from P2.593 billion in 2020, based on BSP data.

Their accumulated assets increased by 10.6% to reach 287.03 billion pesos against 259.521 billion pesos a year earlier. — Noble LWT

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