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Big banks fail to meet required MSME lending

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PHILSTAR

BIG BANKS remained stingy in providing loans to small firms as they continued to miss the mandated credit quotas provided by law, latest data from the Bangko Sentral ng Pilipinas (BSP) showed.

The banking industry extended P549.887 billion to these small businesses as of June, which is below the P690.371 billion which they should have lent out as provided under the Magna Carta for Micro, Small and Medium Enterprises (MSMEs).

This represented roughly eight percent of the total P6.904 trillion loan portfolio, according to central bank data. However, the amount increased by 10.5% from the P497.767 billion credit extended during the same period in 2017.

Passed into law in 2008, Republic Act No. 9501 prescribes that banks must set aside 8% of their total loanable funds for micro and small firms while 2% should be allotted for medium-sized lenders, with the goal of boosting MSMEs by handing them credit for production and expansion.

The Philippines had 915,726 registered enterprises in 2016. Of these, 89.6% were classified as micro-sized, 5% small and 4% medium, and 0.4% large, according to the Organisation for Economic Cooperation and Development.

Universal, commercial and thrift banks largely missed the minimum loan lines for micro and small firms. Broken down, the big players only provided P152.411 billion credit, which stood at just 2.54% of the P5.99 trillion loanable funds they held as of the first semester.

Thrift lenders also handed out P44.135 billion to small businesses, accounting for 5.45% of their loanable funds versus the eight percent standard. Only rural and cooperative banks met the requirement as they provided 21.9% of their loanable funds to micro and small players worth P22.98 billion.

Micro enterprises are those with less than 10 employees and assets worth P3 million or lower, while small firms have between 10-99 workers with assets less than P15 million. Meanwhile, medium-sized firms are those with 100-199 employees and assets worth up to P100 million.

All lenders were able to fulfill the lending threshold for medium-sized firms. Total loans to these relatively bigger companies amounted to 4.79% of their loan funds worth P330.361 billion, well above the two percent minimum level and up by a tenth from a year ago, according to BSP data.

Big banks extended P268.153 billion to these firms, which stood at 4.48% of their available funding. Thrift lenders also handed out P51.404 billion for medium-sized companies which accounted for 6.35% of their loanable funds. Rural banks posted the highest compliance rate at 10.31%, equivalent to P10.803 billion.

Last year, the central bank relaxed banking rules and assigned a 20% risk premium to credit surety fund availments, a substantial drop from a 75% weight assigned to debts extended to MSMEs.

Still, the latest Banking Sector Outlook Survey published by the central bank showed that big banks said it was difficult for them to comply with the credit quotas. Often, big banks choose to pay penalties for non-compliance rather than take on this riskier segment compared to the corporate sector.

“Financing is key” in terms of developing the MSME sector, Trade Secretary Ramon M. Lopez as he signed an agreement with financial technology firm First Circle in opening a fresh P1.5-billion credit line for small businesses last week.

First Circle started operations in 2016 by offering fully-digital loan application and processing for small firms within Metro Manila. To date, the non-bank lender has received a cumulative P3.4 billion in total loan applications and served over 2,000 customers. — Melissa Luz T. Lopez