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MB Approves Easing Of Loan Documentary Requirements For MSEs

09.02.2008

The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas (BSP), has provided micro and small enterprises (MSEs) with another three-year window for the easing of documentary requirements and bolstering their further development.

To spur the MSEs’ economic activity, the Monetary Board previously exempted MSEs from the standard regulatory requirement of including the latest income tax return (ITR) as part of the documents to be furnished when securing a bank loan.  This sector-specific exemption was however set to expire in November 2008.  With the three year extension accorded by the latest Monetary Board  decision, MSEs not only continue to enjoy an easing of the usual documentary requirements but are likewise provided with the opportunity to further improve their know-how in finance and financial  management,  including   relevant formal practices in accounting and records management.  These skills are essential to making the business enterprise sustainable within the fast-evolving financial market. 

The BSP’s policy move is consistent with its longstanding support of entrepreneurs as vital partners in the development of the financial market and of the broad economy.  Cognizant of prior bottlenecks, the BSP has initiated several incentives that were aimed at broadening the credit channels available to entrepreneurs.  These initiatives include the partial lifting of the moratorium on the establishment of new banks in favor of those to be established catering to micro-enterprises.  Such policies have greatly contributed to the expansion of the pool of credit made available to micro-entrepreneurs which stands at more than Php 6.3 billion as of March 2008. 

In a related development, the Monetary Board also allowed banks to accept payslips as supporting documents of loan applicants who derive income solely from compensation.  Prior to the new policy, these loan applicants were also required to submit the latest copies of their Employer’s Certificate of Compensation Payment/Tax Withheld (BIR Form 2316).  

The BSP clarified, however, that notwithstanding the easing of loan documentary requirements, banks are still expected to adhere to sound credit underwriting standards.

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