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BSP approved monetary loans for MSMEs affected by COVID-19

The Bangko Sentral ng Pilipinas (BSP) approved financial loans for MSMEs affected by the COVID-19 pandemic.

As the coronavirus disease 2019 (COVID-19) continues to shatter big and small business, the Bangko Sentral ng Pilipinas (BSP) has approved a monetary loan aiming to help micro and small and medium enterprises (MSMEs) lessen financial crisis.

Benjamin Diokno, Bangko Sentral ng Pilipinas Governor formally announced on Thursday (April 16, 2020) the approved package. “In particular, loans granted to MSMEs shall be counted as part of the bank’s compliance with reserve requirements,” said Diokno.

Earlier, the BSP has also released a statement regarding the Regulatory Relief for Banks. “In order to alleviate difficulties faced by the general public, we at Bangko Sentral issued guidelines which will encourage our supervised FIs to provide relief to their relief customers, corporate clients and employees affected by the outbreak of the COVID-2019,” said the statement. “This is part of our efforts to assist the Filipino people in these trying times,” the statement added.

“The BSP will subsequently issue the detailed guidelines on this and other related measures,” added Diokno.

The reserve requirement (RR) is the total amount of funds a bank must have on hand each night. It is a percentage of the bank’s deposit. Bank’s RR ratio stands at 12 percent, following the 200-basis-point (bp) cut implemented by the central bank in March.

This move by the central bank followed Thursday’s 50-bps cut in key policy rates, which leads to overnight borrowing, deposit and lending rates to 2.75 percent, 2.25 percent and 3.25 percent, respectively.

According to Nicholas Antonio Mapa, ING Bank Manila Senior Economist, the measures could effectively release P360 billion in additional liquidity into the financial system. He also said that the fund can be used for fresh lending and then some, as any further loans to this sector could eat into the P1.2 trillion set aside in the BSP’s virtual vaults.

He also said that the new measures looks like a de facto RR reduction as it frees up more money for banks to lend out to the greater public who will be needing cash to fight off the fallout from COVID-19.

Following the announcement from BSP, on Friday (April 17, 2020), the Department of Finance (DoF) issued the mechanics, details and eligibility criteria for the government’s P 51-billion wage subsidy program for small business employees (SBWS) affected by the pandemic.

“The national government is providing a wage subsidy for affected employees of small businesses to help mitigate the impact of the quarantine in Luzon and various local government units. This wage subsidy shall be given for up to two months so that affected small businesses are able to retain their employees during the quarantine period,” stated DoF.

“Under the Small Business Wage Subsidy (SBWS) measure, the government, through the Social Security System (SSS), shall provide a wage subsidy of between 5,000 to 8,000 pesos (based on the regional minimum wage) per month per eligible employee,” DoF added.

According to DoF, applications will be completed by the employer on behalf of their employee. 

The Department of Finance has also indicated eligible criteria for small businesses:

The business must meet two eligibility criteria: size of business and impact of the enhanced community quarantine (ECQ) on the small business’ operations. The small business must meet both criteria.

Businesses that have been compliant with the regulations of the Bureau of Internal Revenue (BIR) and SSS will be prioritized.

  • Size of business: The small business — whether a corporation, partnership, or sole proprietorship — must not be in the BIR’s Large Taxpayer Service (LTS) list.
  • Impact of the enhanced community quarantine (ECQ): Small businesses under both Category A (non-essentials) that are forced to stop operations (i.e., temporary closure or suspension of work) and Category B (quasi-essentials) that are allowed to operate a skeleton force can apply for the wage subsidy for employees who are not able to work and did not get paid during the ECQ. Employers in areas where other forms of quarantine have been put in place by the LGU may also qualify.
  • The following small businesses will be prioritized:
  1. BIR-registered and complying with tax obligations during the past three years, up to January 2020.
  2. SSS-registered and have paid SSS contributions for the past three years up to January 2020 (the last recorded contribution).
Here are the eligibility criteria for employees
Conditions featured image
Eligibility criteria for employees (https://www.dof.gov.ph/)
CONDITIONS TO AVAIL OF THE PROGRAM

To qualify for the program, the following conditions must be fulfilled:

  1. Small businesses must maintain the employment status of all eligible employee beneficiaries before the ECQ and throughout the SBWS period. This will be checked during the monitoring and evaluation stage. Non-compliance with this condition shall result in the employer refunding to the government the wage subsidy amount.
  2. Employees cannot resign during the ECQ period.

 For more information, please visit https://www.dof.gov.ph/

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