"While SMEs have always been a major part of our market, we intend to increase our lending activities in this segment in line with government’s medium-term development plan. We can contribute P3 billion this year in support of government’s target of P10 billion in additional funds to SMEs in the first half of the year," said incoming CTB president Susan Figueras, who is also concurrent president of Insular Savings Bank.
CTB is made up of savings banks, private development banks, and savings and loans associations. It also has one member engaged in microfinancing.
"We plan to encourage more of our member-banks to engage in the field of microfinancing. This way, we can reach out to more micro-enterprises, which are very viable at a 99% repayment rate," Figueras said.
Government data show that SMEs account for 90% of registered business firms and employ 66% of the country’s labor force. SMEs also contribute about 32% to the country’s gross national product.
"SMEs are higher credit risks than large companies because they are more financially vulnerable to adverse economic developments. That is basically the reason why loans to this sector are priced a bit higher than the other market segments," said CTB director and auditor Reynato Sarmiento.
To help reduce the risk, CTB has worked closely with the SMED Council in creating a data base of qualified SME borrowers, which member-banks can tap or access.
"Eventually, the database, which has been initiated by the Department of Trade and Industry, will evolve into an interactive program so that banks and these companies can transact business on-line," said CTB executive director Suzanne Felix. "The SMED Council is also pursuing initiatives to establish a credit bureau and credit scoring system for micro, small and medium enterprises. This way, banks will have the necessary information to decide on whether or not to lend to MSMEs and to enhance the delivery of credit to these sectors."
"We are currently working with the Bangko Sentral and subdivision developers towards the standardization of the contract to sell as a regular banking product. This will ensure sustainable house financing as banks which purchase the CTS (or the loan portfolio of the housing developers to home buyers) will be able to avail of incentives from the Bangko Sentral such as a lower risk weighting on the said portfolio," said Sarmiento.
Asset growth was driven primary by the substantial 9.9% growth in loans. This compared favorably with the average growth of 5.2% in 2001 and 2000 and the 3.2% contraction in 1999.
During the same period, total liabilities grew substantially by 11.5% to P213.8 billion. The growth in liabilities was boosted by the substantial 16.5% growth in deposits, an indication of heightened public confidence in thrifts banks and an increased role of thrift banks in deposit mobilization.
On profitability, return on equity as of June 2002, stood at 1.1% compared to the negative numbers of 0.3% in 2001 and negative 2.3% in 2000.
As of August 2002, NPLs was 13.6% higher than the 12% posted as of end-2001. The level of ROPOAs also remained high at 10.2% of total assets as of August 2002 despite a slight decline from the end-2001 level of 10.7%.