‘Salary loan reforms a boon to thrift bank lending’

MANILA, Philippines — Mid-sized banks expect lending growth to remain steady this year as demand for credit continues to rise, but the industry wants safeguards on longer salary loan terms to prevent borrowers from becoming overburdened.

Chamber of Thrift Banks (CTB) chairman and City Savings Bank president Manuel Santiago Jr. said the sector expects to sustain the same pace of growth in 2026, supported mainly by financial inclusion and continued demand for credit from households and small businesses.

“We’re expecting the same growth level (this year),” Santiago told reporters on the sidelines of the CTB’s 52nd annual convention. “The basic driver is financial inclusion. There’s a lot of new services that are being offered and there is a need for credit.”

Santiago said thrift banks’ total loan volume has already reached the P1-trillion mark, while the industry grew by 25 percent last year.

“We continue to see this as a continuing trend,” he said.

Based on central bank data, the thrift banking sector’s total loan portfolio grew by 13.4 percent to P1.07 trillion in the first quarter from P939.67 billion a year earlier.

One key area for the sector is salary-based lending, after the central bank extended the maximum repayment period for salary-based consumption loans to seven years. The longer tenor is meant to make loans easier to repay, but thrift banks said safeguards are needed to ensure borrowers do not take on unsustainable debt.

Santiago said the industry fully supports the extension, but said the longer repayment period should not be applied to all salary loans.

“We want to avoid overburdening the borrowers,” Santiago said. “We are very careful in making sure that the teachers or the salary loan people are not overburdened.”

He said one possible control is to limit six- or seven-year loans to specific purposes such as hospitalization, home repairs, car purchases or car repairs. “We need to balance the purpose of where the six- and seven-year loans are going to be applied.”

Salary loans remain a major product for several thrift banks. Santiago said the share of salary loans in a bank’s portfolio varies widely, ranging from about 30 percent for those with diversified consumer loan products to as high as 80 percent for members where salary loans are the main driver.

On transfer fees, Santiago said some CTB members have followed the lead of universal banks in waiving fees for digital fund transfers.

“I think you will see sooner rather than later that most of our member banks are going to be waiving their fees as well,” he said.

While this would reduce fee income, Santiago said the impact is not expected to be material, as higher transaction volumes could help offset the loss in transfer fee revenues.

Despite elevated inflation, Santiago said thrift banks have not seen an uptick in loss rates and do not expect additional provisioning at this point. He also said non-performing loans are expected to remain at current levels.

In his speech, CTB and Equicom Savings Bank president Jaime Valentin Araneta said thrift banks deserve “a strong and constructive voice at the table” as the industry deals with digital transformation, cybersecurity, artificial intelligence, payments modernization, financial inclusion and regulatory reform.

“Our responsibility is not merely to respond to change, but to help shape it,” Araneta said.

This year’s convention carries the theme “CTB@52: Staying True to Customer Relevance,” reflecting the sector’s push to remain relevant in a rapidly evolving financial landscape.