Banks lend more to MSMEs, but still short of minimum

Local banks ramped up their lending to micro, small and medium enterprises (MSMEs) in the third quarter, but it remained below the prescribed credit allocation for the industry deemed as the backbone of the Philippine economy.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed total loans of the Philippine banking sector to MSMEs amounted to P500.81 billion in the three months through September, up by 3 percent on a quarter-on-quarter basis.

But that amount of loans only accounted for 4.6 percent of the industry’s P11-trillion lending portfolio as of end-September, well below the prescribed credit quota of 10 percent for MSMEs.

Under the law, banks must set aside 10 percent of their total loan book as credit that can be extended to MSMEs. Of this mandated ratio, banks must allocate 8 percent of their lending portfolio for micro and small businesses, while 2 percent must be extended to medium-sized enterprises.

But many banks have not been compliant and just opted to pay the penalties instead of assuming the risks that typically come with lending to MSMEs.

By size of lender, figures showed rural and cooperative banks were the only ones who met the minimum. These banks handed out P59.24 billion in credit to MSMEs, cornering 26.24 percent of their P225.79-billion loan book.

Thrift banks came close to meeting the credit quota after allocating P61.37 billion as loans to MSMEs, or equivalent to 9 percent of their P681.28 billion lending portfolio.

Meanwhile, big banks lent P379.73 billion to MSMEs in the third quarter. But it only accounted for 3.78 percent of their mammoth loan book that stood at P10 trillion.

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Minimum

To hit the 10 percent mandated loans for MSMEs last quarter, the local banking industry should have earmarked, at the very least, P879.26 billion as credit for micro and small businesses, and P219.82 billion for medium-sized firms.

This means total lending for MSMEs should have reached a minimum of P1.1 trillion in the three months ending in September.

But BSP data showed overall lending to micro and small firms only amounted to P204.89 billion in the third quarter, or just 1.86 percent of the sector’s total loan book.

Meanwhile, loans to medium enterprises only cornered 2.69 percent of banks’ entire lending portfolio to P295.92 billion.