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Bank loans to small businesses have surpassed P100 billion in August after Bangko Sentral ng Pilipinas (BSP) relaxed the reserve requirement rules for lenders.
In a statement over the weekend, the central bank reported that loans granted to micro, small and medium-sized enterprises (MIPYMES), as an alternative form of compliance with the banks’ reserve requirements, expanded to P106 billion from August.
The amount was a 1.039 percent expansion from P9.3 billion in April.
The BSP emphasized that in addition to the large commercial lenders, 64 rural and cooperative banks also used the relief measure to extend loans worth P2 billion to small businesses.
“This is a huge relief for small businesses,” said Bangko Sentral Governor Benjamin Diokno.
In April, the Central Bank’s Monetary Policy-making Board adopted a policy that recognizes new loans granted to MSMEs as an alternative form of compliance with the reserve requirements from April 24, 2020 to December 30, 2021.
It amended this policy the following month to allow lenders to count their large business loans as part of those requirements.
According to the Law of the Republic 6977 or the “Magna Carta for MSMEs”, banks are mandated to reserve 10 percent of their loan portfolio to grant loans to small businesses.
Last year, loans granted to the sector did not reach the required level. A total of P579.13 billion was set aside for loans last year to MSMEs, without reaching the threshold of P814.86 billion.
It was also equivalent to just 7.10 percent of the P8.14 trillion in total loanable funds for 2019, below the 10 percent threshold set by law.
However, loans to MSMEs last year were P31.34 billion more than the P547.78 billion granted in 2018.
Broken down, large banks set aside P463.53 billion in loans, followed by savings banks with P73.50 billion and rural and cooperative banks with P42.09 billion.
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