Bank lending to MSMEs still short of mandated level

MANILA, Philippines — Bank lending to micro, small and medium enterprises (MSMEs) continued to grow in the first half, but remained far below the mandated threshold set under the Magna Carta for small and medium firms.

Data from the Bangko Sentral ng Pilipinas showed that loans extended to MSMEs rose by 10.8 percent to P540.92 billion as of end-June from P488.13 billion a year earlier.

Despite the increase, the banking sector’s overall compliance ratio stood at only 4.59 percent, less than half of the 10-percent quota required under Republic Act 6977, as amended by RA 8289 and RA 9501.

The law requires banks to set aside eight percent of their loan portfolio for micro and small enterprises as well as two percent for medium firms.

The industry’s total loan book, net of exclusions, climbed by 9.1 percent to P11.78 trillion from P10.8 trillion last year. This means MSME allocations should have reached about P1.18 trillion, more than double the actual disbursed amount.

By segment, loans to micro and small enterprises went up by 12 percent to P220.55 billion from P196.83 billion. However, this amount was just 1.87 percent of the industry’s loan portfolio – well below the mandated P942.63 billion or eight-percent share.

Meanwhile, credit to medium-sized enterprises increased by 10 percent to P320.37 billion from P291.30 billion. The amount exceeded the required P235.66 billion, translating to a 2.72-percent compliance ratio, above the mandated two percent.

Based on the type of bank, the compliance of universal and commercial banks with micro and small enterprises hit P152.43 billion in the first half, equivalent to only 1.42 percent of their P10.74-trillion loan portfolio.

Big banks’ compliance with medium-sized enterprises stood at P259.58 billion or 2.42 percent of their loan book.

The compliance of thrift banks with micro and small enterprises reached P34.17 billion or four percent of their P846.58-billion loan portfolio. But thrift banks exceeded the credit quota for medium enterprises as their compliance with the sector hit P40.41 billion or 4.77 percent of their loan book.

On the other hand, the total compliance of rural and cooperative banks with micro and small enterprises hit P33.35 billion by the end of June. This is equivalent to 20.5 percent of their P163.06-billion credit book and well above the minimum amount required by law.

Their compliance with medium enterprises stood at P20.31 billion or 12.5 percent of their loan portfolio.

The compliance of digital banks with micro and small enterprises reached P590 million, representing 1.71 percent of their P34.74-billion loan portfolio. The total compliance of digital banks with medium enterprises stood at around P60 million, or 0.18 percent of their loan book.