Banks prefer granting loans to employees

Banks today are more willing to lend to the consumer-based clientele or the employees market, rather than giving in credit assistance to the corporate market, specifically the Small and Medium Entrepreneurs (SMEs).

Rizal Commercial Banking Corporation (RCBC) vice president and area head for Central Eastern Visayas Area Prudencio Gesta said banks are still conservative in lending to SMEs because of the unpredictable economic movement in the country, thereby putting "unsure" performance of the SMEs.

Employees on the other hand, are the fixed clientele, which means that whatever happens, workers' income is fixed.

However, he said that banks are moving to offering its arm once again to the SMEs, but banks can't go full blast because they (banks) are still observing the economy.

"If we lend more to SMEs when the economy is unstable, banks will also be affected because SMEs would not be able to pay their loans," he added.

Former National Economic and Development Authority (NEDA) secretary Cielito Habito in his recent visit to Cebu told Cebuano SMEs that hopefully banks would lend more to SMEs to address the financial needs of the sector, which comprises 99 percent of the country's economy.

Habito who also currently sits as one of the board members of one of the biggest universal banks in the country, admitted that banks in general in the Philippines are still reluctant to open their arms to the SMEs in terms of lending.

After the mid 1997 economic crisis, more and more banks had shifted their lending priorities from offering credit access to corporations, specifically to SMEs, to individual loan products, such as housing loans, auto loans, and salary loans, among others.

Most, if not all players in the banking industry today is taking advantage of the dollar earner Filipinos or the Overseas Filipino Workers (OFWs) for their consumer loan products such as housing, auto loans, credit cards, and others.

Gesta said lending to consumers with fixed salaries entails lesser risk because the clients can be easily traced through their employers.

It is also easy to determine how much credit line the banks could grant the clients based on the client's income and capacity to pay.

"While with SMEs, it is difficult to determine their capacity to pay," he added.