Micro-entrepreneurs can expect better funding access from formal channels in the future as the central bank moves to better understand their credit situation and create policies improving the banks’ relationship with micro, small and medium enterprises (MSMEs).
In its Resolution No. 893, the Bangko Sentral ng Pilipinas’ (BSP) Monetary Board has approved the revision of banks’ microfinance report requirements in a bid to “improve the quality of data being submitted by banks which serve as inputs in formulating policies to further enhance the present regulatory environment in support of MSME lending.”
Following the approved revisions, the monthly report titled “Report on Microfinance Loans Outstanding,” shall be renamed “Report on Microfinance Products” to cover more micro finance services such as micro deposits and wholesale micro finance loans, while the quarterly report titled “Income Statement on Microfinance Operations,” shall be renamed “Income Statement on Retail Microfinance Operations” to make it clear that the report will only cover the banks’ retail operations.
The move comes on the heels of an earlier report from the BSP that the total outstanding loans of banks to the MSME sector last year was P80 billion short of the P264.8 billion guidance in accordance with the Magna Carta for MSMEs—the law which mandates banks to set aside 8 percent of their total loan portfolio for micro and small enterprises and 2 percent for medium enterprises.
The central bank attributed the credit gap to the reluctance of banks, particularly the universal and commercial banks, to lend to microenterprises. Understandably, each banking group holds a specific niche and it will be quite difficult for one to venture into a market that is beyond its expertise. Banking is a business, after all.
The responsibility of supporting microenterprises therefore falls to the arena of rural banks as the champions of microfinance and rural development. To this end, the industry has consistently done its part and played its role. In fact, in 2012, rural banks set aside a total of P11.7 billion for MSME funding, more than beating the minimum required of the sector under the Magna Carta for MSMEs.
The Rural Bankers Association of the Philippines (RBAP) also introduced the Microenterprise Access to Banking Services (MABS) program that has improved the knowledge and capabilities of the industry on microfinance lending.
The MABS program—which ran for 15 years—increased the competence of rural banks as microfinance institutions by providing technical assistance and training to improve their operations and services. It also guided banks in maximizing the use of technology and developing products that are well suited to the needs of their clients.
So far, rural banks have earned over one million new microfinance borrowers and approved 3.2 million applications amounting to P43.1 billion in microloans.
Given its presence in the countryside where small businesses usually begin, the rural banking industry is one of the pillars of MSME growth. It fully supports the central bank in its efforts to grow the micro-sector and, similarly, cheers the passage of a bill that would make it easier for small businesses to register and start their operations.
The Go Negosyo Act, which has been transmitted by Congress to Malacañang for the president’s approval, mandates the creation of Negosyo centers in every locality to expedite the registration of small businesses.
All these developments confirm that the MSME sector is receiving the attention it needs. It is a noble act to serve despite the high risks attendant, but addressing the need of the MSMEs is critical in spurring growth in the countryside and attaining the government’s goal of financial inclusion.