PHL banks fail to meet end-December mandated MSME lending quotas

PHILIPPINE BANKS failed to meet the mandated loan quotas for micro, small, and medium enterprises (MSMEs) in 2023, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

At end-December 2023, credit extended by the banking industry to MSMEs amounted to P502.209 billion, accounting for only 4.83% of their total loan portfolio of P10.38 trillion.

In 2022, banks extended P493.503 billion in loans or 5.24% of their entire loan book.

Under Republic Act No. 6977 or the Magna Carta for MSMEs, banks are required to allocate 10% of their total loan portfolio for small businesses to support the sector. Broken down, 8% of loans must go to micro and small enterprises and 2% to medium-sized enterprises.

However, banks have long opted to incur penalties for noncompliance instead of taking on the risks associated with lending to small businesses.

BSP data showed that banks’ loans to micro and small enterprises amounted to P200.787 billion last year. This comprised just 1.93% of their loan book and was well below the 8% minimum quota.

Meanwhile, lending to medium-sized enterprises stood at P301.422 billion, equivalent to 2.9% of banks’ loan portfolio and above the 2% quota for the sector.

By type of bank, universal and commercial banks disbursed P131.926 billion to micro and small enterprises as of end-December, equivalent to only 1.47% of their P9.56-trillion loan portfolio and below the minimum ratio. 

Big banks’ loans to medium-sized enterprises stood at P248.165 billion or 2.59% of their loan book.

On the other hand, thrift banks’ loans to micro and small enterprises reached P30.38 billion or 3.74% of their P610.092-billion loan portfolio. Loans to medium enterprises hit P34.275 billion or 5.68% of their loan book.

Meanwhile, rural and cooperative banks extended loans worth P38.313 billion to micro and small enterprises, equivalent to 19.23% of their P192.783-billion credit portfolio and well above the minimum amount required by law.

Their loans to medium enterprises amounted to P18.977 billion or 9.84% of their portfolio, also above the credit quota.

Lastly, digital banks disbursed P170 million in credit to micro and small enterprises in 2023, representing 0.89% of their P19-billion loan portfolio.

They extended P10 million worth of loans to medium enterprises or 0.03% of their total loan book.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said banks missed the MSME lending quotas after the BSP ended a regulatory relief measure implemented during the coronavirus pandemic, which allowed them to use their loans to the small firms as alternative compliance with reserve requirements.

“There is still a lot of potential to further grow MSME loans, such as the availability of more credit information on MSMEs to be shared among banks through centralized credit bureaus to reduce asymmetric or limited credit information for MSMEs and encourage and increase confidence of banks in lending to MSMEs,” he said in a Viber message.

“More credit guarantees for MSMEs would also help encourage more bank lending for MSMEs. These would also reduce the credit risks for MSME loans,” Mr. Ricafort added. — Luisa Maria Jacinta C. Jocson