BSP lowers risk weighting for loans to boost MSMEs
MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) has amended its policy to allow for higher risk when lending money to micro and small enterprises (MSMEs).
In statement on Friday, November 3, the BSP said that its “Monetary Board approved the amendments to the risk-based capital adequacy framework for banks by assigning a lower risk weight of 20% on performing loans to MSMEs to the extent guaranteed by a qualified "Credit Surety Fund (CSF) Cooperative”.
The current regulations provide that a 75% risk weight shall be applied to a qualified MSME portfolio.
“The policy,” the BSP noted, "intends to facilitate the increased flow of funds to MSMEs that will translate to the further growth of the sector and of the domestic economy”.
A qualified CSF Cooperative refers to a cooperative that is organized under the provisions of the Credit Surety Fund Cooperative Act of 2015.
The BSP further noted that CSF cooperatives will now “have an initial leverage ratio of 3, which means a CSF Cooperative can guarantee MSME loans up to 3 times of its capital. The leverage ratio can be subsequently increased subject to review of the performance of the CSF Cooperative”.
The central bank first launched the CSF program in 2008 with the end goal of enhancing the creditworthiness of MSMEs
It was created by pooling together contributions of cooperatives, non-governmental organizations, local government units, and partner institutions such as the Land Bank of the Philippines and Development Bank of the Philippines.
New BSP Governor Nestor Espenilla Jr has made boosting MSMEs through increased financial inclusion a priority under his watch pushing, among other things, the National Retail Payment System. – Rappler.com