MSME loans up 11% to P427 B in H1

MANILA, Philippines – Loans extended by banks to micro, small, and medium enterprises (MSMEs) posted a double-digit growth in the first half but the industry fell short of the compliance ratio set under the law, latest data from the Bangko Sentral ng Pilipinas (BSP) showed.

BSP data showed funds allocated to MSMEs grew 11 percent to P427 billion in the first half from a year ago level of P384.8 billion.

This resulted in the banking system’s overall compliance ratio of 9.8 percent, slightly lower than the required 10 percent mandated under RA 6977 otherwise known as the Magna Carta for SMEs.

The law mandates banks to earmark eight percent of their total loan portfolio for micro and small enterprises and two percent for medium enterprises.

The BSP data showed the banking system’s credit allocation of P239.1 billion to medium enterprises in the first half led to a compliance ratio of 5.5 percent, exceeding the required two percent.

On the other hand, the banking system’s credit allocation of P188 billion to micro and small enterprises resulted in a compliance ratio of only 4.3 percent instead of the required eight percent.

However, the BSP said 24.1 percent of the total loan portfolio of rural and cooperative banks has been allocated for micro and small enterprises, far exceeding the eight percent statutory floor.

BSP Governor Amando Tetangco Jr. earlier said the Philippines has been broadening and deepening the reach of the country’s financial system to get to the unserved and underserved.

The BSP has linked up with 12 other government agencies to craft and implement a National Strategy for Financial Inclusion (NSFI) to mainstream Filipinos as regular clients particularly MSMEs; overseas Filipinos and their beneficiaries; agriculture and agrarian reform sectors; indigenous peoples and cultural minorities; women; youth; and persons with disabilities.

Tetangco said the convergence through the Asia Pacific Economic Cooperation (APEC) and the Association of Southeast Asian Nations (Asean) are promoting financial inclusion.

“We have before us the opportunity to catalyze a quantum leap for financial inclusion in Asia Pacific and the world. Clearly, it is an ambitious goal; but the 1.2 billion people who remain unserved in our part of the world represent a billion compelling reasons to continue to escalate our efforts to bring financial inclusion to the excluded, to those who continue to live in poverty,” Tetangco said.

Finance secretary Cesar Purisima said MSMEs are the life-force of the regional economy, contributing to over 60 percent of total employment, over 40 percent to GDP and over 15 percent to total exports among APEC economies.

Purisima, however, lamented that about 40 percent of the financing needs of MSMEs are unserved.

“At the same time, we are fully convinced of the power of finance as a tool to reduce poverty. We are putting our money where our mouth is in putting more fuel to Asia-Pacific’s growth engine,” he said.

The Philippines is collaborating with leading international organizations to help transform financial systems in the Asia-Pacific, expanding the reach of credit and other financial-services for a more inclusive regional economy through the establishment of the Financial Infrastructure Development Network (FIDN).

The establishment of the FIDN is one of the deliverables under the Cebu Action Plan that has four pillars including financial integration; fiscal reforms and transparency; financial resilience; and infrastructure development and financing.