Thrift banks push for changes in mandatory lending for SMEs

MANILA, Philippines - The Chamber of Thrift Banks is pushing for amendments on the implementation of mandatory lending for small businesses and to the agricultural sector as banks gear up for the Southeast Asian integration.

CTB president Jose Teodoro Limcaoco said thrift banks will have to realign their assets in preparation for the financial integration of the Association of Southeast Asian Nations (Asean).

“We still have member-banks who find it difficult to comply with the required credit allocation simply because the MSME is not their niche market,” Limcaoco said.

The new Agri-Agra law mandates banks to set aside 25 percent of their loan portfolio to the farm sector. The RA 9405 or the Magna Carta for micro, small and medium enterprises (MSME), meanwhile, requires banks to allocate 10 percent of their credit portfolio for small businesses.

“Rather than imposing penalties,

the government should provide a window for other alternative compliance, so that under-complied banks will not be heavily burdened by penalties which small banks may not be in a position to handle given their limited capital or resources,” he said.

Currently, the law requires banks to set aside eight percent of their loan portfolio for micro and small enterprises, and two percent for medium-sized companies.

With regard to the mandated lending for the agri-agra sector, Limcaoco said banks may see increasing non-performing loans due to exposure to riskier sectors.

The government should instead work on making the agriculture sector more efficient and competitive in terms of products, the CTB president said.

“The agri sector may not be fully prepared to accept and pay back the magnitude of funds earmarked for the sector under the law, since there are a number of infrastructure issues that should be addressed first such as lack of storage, lack of farm-to-market roads, among others,” Limcaoco said.

Limcaoco urged thrift banks to develop better products aimed at SMEs especially as that industry promises a lot of potential given the country’s robust economic growth.

The chamber’s proposal for an action regarding mandatory lending has been echoed by the Bangko Sentral ng Pilipinas.

BSP Governor Amando M. Tetangco Jr., also speaking at the same event, said “the BSP is not really inclined to support anything on mandatory lending.”