Loans to MSMEs fall short of quota

MANILA, Philippines —  Loans disbursed by banks to micro, small and medium enterprises (MSMEs) rose by 3.6 percent to P474.92 billion in the first quarter of the year from P458.59 billion in the same period last year, data from the Bangko Sentral ng Pilipinas (BSP) showed.

However, the banking sector’s overall compliance ratio stood at 4.41 percent as of end-March, still below the required 10 percent under Republic Act 6977, as amended by RA 8289 and RA 9501 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 industry’s total loan book, net of exclusions, grew by 9.3 percent to P10.77 trillion in end-March from P9.85 trillion in the same period last year. This means allocations for the MSME sector should have reached P1.08 trillion.

BSP data showed that Philippine banks’ disbursements to micro and small enterprises inched up by 2.3 percent to P191.28 billion from P187.05 billion. The amount remained short of the mandated P861.76 billion or eight percent, as it only accounted for a 1.78-percent compliance.

Likewise, funds allocated to medium enterprises rose by 4.5 percent to P283.65 billion from P271.54 billion. It also exceeded the required P215.44 billion, translating to a compliance ratio of 2.63 percent, higher than the mandated two percent.

Based on the type of bank, the compliance of universal and commercial banks to micro and small enterprises hit P132.43 billion in the first quarter, equivalent to only 1.33 percent of their P9.93-trillion loan portfolio.

Compliance to medium-sized enterprises by big banks stood at P235.05 billion or 2.37 percent of their loan book.

Meanwhile, the compliance of thrift banks to micro and small enterprises reached P21.38 billion or 3.4 percent of their P629.1-billion loan portfolio.

But thrift banks went beyond the credit quota for medium enterprises as their compliance to the sector hit P28.97 billion or 4.61 percent of their loan book.

On the other hand, the total compliance of rural and cooperative banks to micro and small enterprises hit P37.46 billion as of end-March.

This is equivalent to 17.74 percent of their P211.14-billion credit book and well above the minimum amount required by law.

Their compliance to medium enterprises stood at P19.62 billion or 9.29 percent of their loan portfolio.

The BSP also noted the compliance of digital banks to micro and small enterprises reached P180 million, representing 1.02 percent of their P17.94-billion loan portfolio.

The total compliance of digital banks to medium enterprises stood at around P10 million, or 0.07 percent of their loan book.

MSMEs play a very important role, accounting for 99.5 percent of the total establishments and providing around 65 percent of employment to the Philippine workforce.

However, MSMEs are unable to reach their full potential because of difficulty of credit and financial access.