BSP Planning to Streamline Loan Applications for MSMEs

BSP Planning to Streamline Loan Applications for MSMEs

The Bangko Sentral ng Pilipinas (BSP) is planning to streamline the loan application process for micro, medium, and small enterprises (MSMEs) to increase its accessibility amid the COVID-19 pandemic in the Philippines. 

BSP Governor Benjamin Diokno stated that the development of a streamlined business loan application would permit the banking industry to support a simplified and borrower-friendly process for MSMEs. 

The measure is also aimed to improve turnaround time for loans as well as the risk assessment of banks in the Philippines. 

The concept note and initial discussions are currently being held by BSP with its proposed technical working group. 

BSP announced that the standard loan form along with the corresponding policies and guidelines will be crafted next year and would be institutionalized by 2022. 

Diokno expressed, “We all recognize the critical role of MSMEs as drivers of economic growth. The sector, however, has been constrained with access to formal finance.”

According to the World Bank, 81.2% of Filipino enterprises are financed internally and only 10% are financed by banks. 

Diokno added that the latest BSP data shows that MSME loans only account for 8.8% of total business loans and 6.1% of bank loans. 

Data showed the year-on-year growth in bank loans to total businesses declined steadily to 7.3%  in 2019 from 20% in 2014, of which MSME lending fell to 1.9% from 7.6% during the period. 

According to BSP, banks generally view MSMEs as unbankable due to limited information on operations and viability, leading to perceptions of “high-risk”. MSMEs are usually less likely to get approved for loans due to their lack of acceptable collaterals and credit histories. 

Diokno, however, revealed that BSP would conduct a nationwide survey by September 2021, to generate insights on MSME demand-side data to help with policymaking. 

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