Bangko Sentral: MSMEs on the road to recovery

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THE Bangko Sentral ng Pilipinas (BSP) has reported green shoots of recovery in the micro, small and medium-sized enterprises (MSMEs) sector amid the ongoing Covid-19 pandemic.

Ellen Suficiencia, director of financial inclusion in PASB’s strategic communications and advocacy unit, said that in March 2021 they had already seen a higher percentage of MSMEs return to full activity as well as a higher percentage of MSMEs returning to full activity. decrease in companies reporting slower sales.

“In June 2021, only about half of companies reported lower sales compared to two-thirds compared to the end of the previous quarter,” she said during the virtual program of the BSP regional macroeconomic conference series. in the Central Visayas on Tuesday, September 28, 2021.

Suficiencia said early signs of recovery are supported by accelerating vaccine deployment, allowing more of the economy to safely reopen and “strengthening our collective sense of certainty and confidence in an economy. post-pandemic “.

Fewer closures

Based on the series of surveys conducted by the Ministry of Trade and Industry, around 28% of MSMEs closed their businesses while 58% were able to partially operate in June 2020.

Fewer business closures were reported from July to August 2020, Suficiencia said.

BSP said that 99.5% of total business enterprises in the Philippines are MSMEs, which account for nearly 63% of total employment in the Philippines, equivalent to 5.4 million jobs created in 2020.

It also contributed 35.7% of total value added, with the manufacturing sector having the largest share with 6.9%.

The Central Visayas are among the best regions in terms of the geographic distribution of MSMEs.

The region accounts for over 65,000 or nearly seven percent of the total number of MSME establishments in the country and has contributed to over 415,000 jobs, or about eight percent of the total jobs generated by the MSME sector.

It is the fourth largest among the regions.

Suficiencia said that while the sector has long been recognized as an engine of inclusive economic growth, MSMEs’ access to formal finance has long been limited.

According to a World Bank survey in 2015, a significant number of Philippine companies are 81.2% financed internally, of which only 10% are financed by banks.

“Although there is no more recent data from the survey, it is no exaggeration to think that the situation has not changed significantly,” she said.

BSP data showed that in the first quarter of 2021, loans to MSMEs accounted for only 4.6% of total loans and 7.8% of the total business loan portfolio of banks.

This is down from the 7.9% and 11.9% shares of total bank loans and total business loans in 2015, respectively, she said.

“We also note that loans to MSMEs in the Central Visayas amounted to 5.5 billion pesos, representing 1.2% of banks’ loans to MSMEs in the second quarter of 2021,” she said.

Since 2015, the annual growth of loans to MSMEs has fluctuated between seven and eight percent. But in 2019, it dropped significantly to 1.9%.

Surprisingly, in 2020, loans to MSMEs decreased by 17.1% year-on-year.

“We are also seeing the same trend for total bank business loans which fell 9.1% in 2020. Unfortunately, the trend has not yet reversed for the first half of 2021, but we hope to see a rate of very moderate decline this year, “she said.

Funding challenges

After steadily growing 23% year-on-year for two years, before Covid, loans to micro-businesses recorded the largest decline in 2020 but have already managed to recover with growth of 5.9% in the first half of This year.

Small business loans, however, continued to post negative double-digit growth at 11.1%.

She said it’s worth noting that small business loans showed minute-over-minute growth even before the pandemic, even falling to 7.1% in 2019.

“This may reflect the unique financial challenge faced by small businesses whose lending needs may be too great for microfinance but not enough for corporate bank loans. These observations would require further evaluation. Anticipating the exacerbated challenge of accessing finance for MSMEs, PASB was quick to issue bold regulatory relief measures to boost bank lending to MSMEs in the context of the ongoing pandemic, ”he said. she declared.

Boost loans

PASB said it reacted quickly by deploying time-limited identification measures to boost lending to the MSME sector.

Suficiencia said PASB assigned a zero percent risk weight to loans to MSMEs covered by government programs to encourage banks to lend to MSMEs, especially those in the agro-fisheries sector.

It also applied a temporary reduction in credit weights of loans to MSMEs, while new loans to MSMEs were also included as part of banks’ compliance with reserve requirements.

BSP said there was also relief regarding the reporting of delinquent and non-performing loans from borrowers severely affected by the pandemic. (JOB)


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