banking finance

Big banks fail to meet MSME credit quota

June 2, 2021

BIG AND thrift banks failed to hit the quota for small business loans required by law in the first three months of 2021, data from the Bangko Sentral ng Pilipinas (BSP) showed.      Loans extended by these banks to micro-, small-, and medium-sized enterprises (MSME) amounted to P448.458 billion in the January to March period or just 5.24% of their total loan portfolio of P8.564 trillion.      This was also 16% lower than the P534.767 billion in loans they extended to the sector in the same period in 2020.      Lenders are mandated by the Republic Act 6977 or the Magna Carta for MSMEs to allocate 10% of their credit portfolio for small businesses to boost the sector — 8% for micro and small enterprises (MSEs) and 2% for medium-sized enterprises.      However, banks have long opted to incur penalties for noncompliance instead of taking on the risks associated with lending to small businesses.      Broken down, MSE loans extended by banks amounted to P174.925 billion in the first quarter, which was just 2.04% of their total loan portfolio and well below the 8% quota.      On the other hand, lending to medium-sized enterprises stood at P273.533 billion in the period, equivalent to 3.19% of these banks’ credit book and beyond the 2% minimum requirement by law.      Based on the type of bank, BSP data showed universal and commercial banks disbursed P113.748 billion in credit to MSEs, equivalent to only 1.47% of their P7.719-trillion loan portfolio.      Meanwhile, their lending to medium-sized enterprises hit P227.447 billion or 2.95% of their loan book.      Thrift banks were also unable to meet the quota for MSE credit as they only extended P31.498% or 4.36% of their P722.079-billion loan portfolio to the sector.      However, these lenders went beyond the credit quota for medium enterprises as their loans to the sector hit P32.027 billion or 4.44% of their portfolio.      Meanwhile, rural and cooperative banks extended loans worth P29.679 billion to MSEs, equivalent to 24.11% of their P123.077-billion credit book, well above the amount required by law. These banks’ lending to medium enterprises hit P14.059 billion or 11.42% of their loan portfolio.      To help prop up the MSME sector during the coronavirus pandemic, the central bank last year allowed banks to count MSME loans as alternative reserve compliance. Loans extended to the sector likewise were also given reduced credit risk weight.      The BSP has also been working with the Japan International Cooperation Agency for a credit risk database project meant to help banks evaluate the creditworthiness of small businesses.

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BSP sees May average inflation at 4.4%

June 2, 2021

PHILIPPINE monetary officials eye rate of price increases to average at 4.4 percent for May 2021, with the range projected between 4-4.8 percent, driven by higher meat prices.       Aside from higher meat prices, the elevated domestic petroleum prices, as well as uptick in power rates in areas being serviced by the Manila Electric Company (Meralco), are also expected as upside risks to the inflation rate in the fifth month this year, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno told journalists in a Viber message on Monday.      However, Diokno said these factors are seen to be countered by the drop in the prices of rice, vegetables, and fish due to improved supply conditions along with the appreciation of the peso.      “Moving forward, the BSP will remain watchful of economic and financial developments to ensure that the monetary policy stance remains consistent with the BSP’s price stability mandate,” he added.       Last April, inflation was steady at 4.5 percent relative to the previous month’s level.       Average inflation in the first four months this year stood at 4.5 percent, above the government’s 2-4 percent target band until 2024.      Inflation breached the government’s target band last January when it accelerated to 4.2 percent from last December’s 3.5 percent.       Its highest so far this year was in February when it surged to 4.7 percent.       Monetary officials see an elevated inflation rate until the third quarter of this year but the full-year average is expected to be around 3.9 percent. (PNA)

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DOF exec cites need to further push for fiscal reforms

May 27, 2021

A DEPARTMENT of Finance (DOF) official has cited the need to further push for fiscal reforms, noting its benefits for the government and the people during the pandemic.      In an economic bulletin on Friday, Finance Undersecretary Gil Beltran said “the fiscal reforms adopted by the Duterte administration boosted the tax effort to its highest first-quarter level in history”.      “These reforms made the country one of the few emerging economies to maintain investment-grade rating and avoid a credit rating downgrade which would have pushed up interest rates and delayed nascent economic recovery,” he said.      He said the pandemic has increased the need for government to hike expenditures given the need to address the impact of the virus-induced crisis.      Bureau of the Treasury (BTr) data showed that government spending rose by 19.86 percent year-on-year in the first quarter this year to P1.017 trillion.      However, revenues by the national government fell by 8.73 percent during the same period to P696.5 billion.      This resulted in a budget gap of P321.5 billion, up 273.11 percent against the P86.2 billion deficit in end-March 2020.      Amid the drop in revenues, Beltran noted the rise in tax revenues during the same period.      Tax revenues jumped by 7.09 percent year-on-year in March this year to P190.1 billion while it rose by 0.87 percent year-on-year in the first quarter this year.      He attributed the first quarter results to the 0.18 percent year-on-year rise of Bureau of Internal Revenue’s (BIR) collection during the period and the 2.66 percent expansion in collections by the Bureau of Customs (BOC).      He said “other taxes which include motor vehicle taxes and forestry charges also rose by 10.8 percent” but “non-tax revenues declined by 50.6 percent as dividend remittances normalized after last year’s huge dividend remittances from GOCCs (government-owned and controlled corporations) as mandated by Bayanihan to Heal as One Act and Treasury income was reduced by lower interest rates.”      He said that while revenue effort fell by 1.14 percentage points to 16.03 percent from 17.16 percent in the first quarter of 2020 because of non-recurrent revenues, this was offset by the improvement in tax effort.      He said tax effort posted its record-high of 14.41 percent in the first quarter this year after it rose by 0.44 percentage points from 13.96 percent same period last year.      “Robust collections from BIR and BOC were boosted by the implementation of tax reforms,” he said.      He, thus, stressed the need for the government to “continue to adopt fiscal reforms, particularly tax reforms still pending in Congress, to sustain these fiscal gains.”      “Due to fiscal reforms, the country was able to fund the unprecedented fiscal requirements imposed by the pandemic and, at the same time, protect its strong macroeconomic fundamentals,” he added. (PNA)

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BSP tightens bank employee screening policies

May 10, 2021

THE Bangko Sentral ng Pilipinas (BSP) has adopted a more stringent and risk-focused screening policy for BSP supervised financial institutions (BSFIs) to ensure the banking sector’s integrity and improve operational risk management.      In a virtual briefing Thursday, BSP Governor Benjamin Diokno said around 7,500 names are currently in the watchlist of dismissed BSFI employees but clarified that the list does not cover those disqualified to work on banks alone.      With the issuance of Circular No. 1112, or the know-your-employee (KYE) rules, he said it will be hard to predict if there will be 100-percent compliance on the circular, adding “if there continues to be some bad behavior on the part of the workers, it (the list) will continue to increase.”      He said the regulator “subscribes to the principle that the ‘tone of good corporate governance should come from the top’ thus, the KYE rule will not only address fraud and irregularities due to weak operational risk management but also foster confidence in the banking system.      “People are the very heart of every institution, especially in banking which is built on trust. Robust know-your-employee procedures foster a stable banking system by weeding out unprincipled personnel who may cause reputational risk to a bank and the financial system,” he said.      Lawyer Florabelle Santos-Madrid, BSP Financial System Integrity Department director, said the central bank’s watchlist database is updated every time the central bank receives new information from banks regarding disqualification of certain individuals.      She said reports of bank employees’ participation in financial system-related crimes is among the red flags for the issuance of KYE rules.      “One of the primary reasons that we are tightening the rules on KYE is to prevent these cases from happening. So definitely, if there will be bank personnel involved in money laundering cases, that will be a red flag in terms of the robustness of their KYE processes,” she added during the same briefing. (PNA)

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PhilGuarantee loans to MSMEs rise to P1.47B in end-March

May 10, 2021

THE Philippine Guarantee Corporation (PhilGuarantee) has continued to grow its program for viable but pandemic-hit micro, small and medium enterprises (MSMEs) for the third straight month since its launch in December 2020, with a total of P1.47 billion in loans guaranteed as of end-March this year.      The guaranteed loans represent a remarkable 612-percent increase from the P207 million pilot guarantee portfolio achieved at the launching of the MSME Credit Guarantee Program (MCGP) in December, PhilGuarantee president-chief executive officer Alberto Pascual said in a report to Finance Secretary Carlos Dominguez III.      Pascual informed Dominguez the number of MSME beneficiaries grew by an impressive 312 percent to 12,122 enterprises in March 2021 from 2,948 that were reported to have availed of its guarantee program as of December 2020.      He said the implementation of improved processing and evaluation parameters starting this year led to the increase in the number of beneficiaries under MCGP.      From the start of the MGCP's implementation last year, the PhilGuarantee Governing Board chaired by Dominguez thus far approved a total of P37.7 billion in credit guarantee facilities to 34 banks.      “Majority of the MSMEs covered were from the wholesale and retail sector which accounted for 67.26 percent of the total, or P503.5 million with 9,113 MSMEs assisted,” Pascual said.      Pascual said the second-biggest group with guarantee coverage was the manufacturing sector, which accounted for 7.77 percent or P58.17 million with 1,048 assisted MSMEs.      The agriculture sector was the third biggest sector that have benefited from the MGCP, with 158 MSMEs assisted through guarantees amounting to P33.91 million, which is 4.53 percent of the loans covered so far under this program, he said.      In the severely affected hotel and restaurant sector, Pascual said 573 MSMEs were assisted with guaranteed loans amounting to P28.45 million, while the personal services sector accounted for guarantees amounting to P31.82 million.      The MGCP grants a 50-percent guarantee for working capital loans and a guarantee of up to 80 percent of the amount for term loans of up to seven years for capital expenditures.      The average loan size under the MGCP is less than PHP1 million, with the minimum loan amount set at P100,000, which can be availed mostly by micro-businesses borrowing from thrift banks and rural banks.      “In terms of geographical distribution, all regions of the country had received assistance under the MGCP,” Pascual said.

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Landbank okays P60-B to UCT beneficiaries

May 3, 2021

THE Land Bank of the Philippines (Landbank) has released P60.36 billion in unconditional cash transfers (UCTs) as of December 2020 to beneficiary-households of the Duterte administration's social mitigation program under the Tax Reform for Acceleration and Inclusion Act (TRAIN).      These disbursements were from the program funds for the UCT program released from March 2018 up to December last year, Landbank president-chief executive officer Cecilia Borromeo said in a statement Thursday.       From March 2018 to December 2020, a total of P22.53 billion was disbursed by the Landbank to UCT beneficiaries from the UCT program funds under the 2018 General Appropriations Act (GAA)      Another P23.71 billion under the FY 2019 UCT program funds was released from July 2019 to December 2020, and P14.12 billion from the 2020 UCT program fund in December last year.       Borromeo submitted her report on the usage of the UCT funds transferred by the Department of Budget and Management (DBM) and the Bureau of the Treasury (BTr) to Landbank to Senate President Vicente Sotto III.       Finance Secretary and Landbank chairman Carlos Dominguez III was furnished a copy of the report.       Under the TRAIN, up to 30 percent of the incremental revenues from the law is earmarked for social mitigation measures, such as the UCTs, while 70 percent is earmarked for President Duterte's centerpiece program “Build, Build, Build."      Republic Act (RA) No. 10963 or the TRAIN Law, which also slashed personal income tax (PIT) rates for 99 percent of salary earners, was implemented starting January 2018.       RA 10963 benefits salary earners because the hefty cuts in their PIT tax payments translates into extra income for these taxpayers equivalent to about a one-month take-home pay.      This law also adjusted the excise taxes on fuel, which prompted the inclusion of the social mitigation program to ease the initial impact of the adjustments on the poorest 50 percent of the population.       For 2018, the law provided a UCT of P2,400 each for some 10 million targeted households.        For the succeeding years of 2019 and 2020, each beneficiary-household received P3,600.       The UCT fund for 2018 of P24.488 billion covered the P24 billion in cash grants for 10 million beneficiaries.       While P22.53 billion in UCT funds were disbursed, around P1.47 billion has yet to be distributed because the Landbank is still waiting for the submission by the Department of Social Welfare and Development (DSWD) of the remaining payroll files of beneficiaries under the UCT program.      Under the 2019 national budget, the UCT fund amounted to P36.488 billion, of which P6 billion have yet to be downloaded by the BTr to Landbank, leaving it with P30.488 billion for the implementation of the program.        Of the P30.488 billion, P23.71 billion was released to UCT beneficiaries.       About P6.29 billion in funds have yet to be disbursed, pending the DSWD submission of the beneficiaries’ payroll files.        A total of P5.5 billion of this UCT fund was transferred to the BTr on April 1, 2020, to help fund the government’s coronavirus disease 2019 (Covid-19) response programs, and was returned to the fund on December 29, 2020.      For 2020, the total UCT fund under the GAAs was P36.488 billion, of which P13.19 billion have yet to be downloaded to the Landbank.       The downloaded sum of P23.3 billion covered the P14.12 billion disbursed so far to UCT beneficiaries in December last year, while PHP8.9 billion have yet to be released pending the submission by the DSWD of the beneficiaries’ payroll files. (PR)

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