BSP, IFC, GTZ team up to increase supervisory, regulatory capacity for SME lending

MANILA, Nov. 6 – The Bangko Sentral ng Pilipinas (BSP) recently signed a technical assistance agreement with the World Bank (WB) and the German government to further enhance the central bank’s supervisory and regulatory capacity on small and medium enterprises (SME) lending.

The assistance was extended by WB’s International Finance Corporation (IFC) and the German Technical Cooperation, otherwise known as Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ).

BSP, in a statement, said the assistance will provide regulators training programs that will help them further improve their supervisory capacity with regards to the SME lending operation by banks.

The aid is also aimed at supporting the development of a manual examination procedures for SME lending.

“Much as the Bangko Sentral has had some success in the promotion of microfinance to cater the needs of microenterprises, it is necessary for the Bangko Sentral to similarly evaluate and modify, if necessary, its policies, supervision and examination procedures with regard to SMEs,” the central bank said.

Domestic SMEs’ access to credit from banks remain low and is estimated to be around 11-21 percent of their total funding requirements, far lower than the 30 percent benchmark around the world.

The usual funding of SMEs in the country come mostly from loans from family or friends and other informal lenders, thus, it provides them little window to further their growth.

BSP said contribution of micro, small and medium enterprises (MSMEs) to the growth of the domestic economy is pegged at about 30-32 percent since it makes up 99.6 percent of the country’s total enterprises and generate about 70 percent of total jobs.

Amid the major contribution of the sector to the economy’s growth its access to credit remain low, thus, the government continue to make efforts to address this problem.

BSP also noted that “there may also be some constraints coming from the policy and regulatory environment.”

It pointed out that the pact with IFC and GTZ “is a significant step in further enhancing the enabling policy and regulatory environment for sound and sustainable SME lending within the banking sector.”

“Ultimately, the development of the MSME financial market, through sound, coherent and enabling policies, will lead to robust and long-term growth and the creation of a truly inclusive financial sector,” it added. (PNA)

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