Big banks fail to meet MSME lending quota
BIG BANKS again failed to meet the required lending for smallscale firms in 2016, which came despite a double-digit increase in available credit, latest central bank data showed.
Only rural and cooperative banks fully complied with the credit quota set under Republic Act 6977 or the Magna Carta for micro-, small-, and medium-scale enterprises ( MSMEs), which requires the financial entities to set aside a tenth of their loanable funds for these small firms.
The law seeks to boost financial support to MSMEs through improved access to credit. However, some lenders simply opt to pay fines for noncompliance rather than take the risk of loaning to MSMEs which are deemed as risky borrowers, central bank officials have previously said.
Across the entire Philippine banking system, total lending failed to meet the minimum P546.219 billion for MSME funding, as the sector received just a cumulative P505.082- billion credit line. This came despite a 16.2% jump in the amount of loanable funds held by the banks, which grew to P5.462 trillion from P4.703 trillion in 2015.
At least 8% of banks’ total loan portfolio or P436.975 billion
must be set aside for micro and small enterprises.
However, local banks only extended P207.992 billion to these firms last year. Relative to total loans, its share dropped to 3.81% from 4.35% a year prior, according to the Bangko Sentral ng Pilipinas (BSP).
On the other hand, banks allotted more funds for medium-scale firms at P297.09 billion, which is nearly triple the P109.244 billion required by law. The amount accounted for 5.44% of total loans, which is well above the 2% standard but lower than the 6.19% share logged in 2015.
Under the Magna Carta for MSMEs, banks are penalized P500,000 a year for noncompliance. If a bank falls short of the credit quota, the penalty will depend on how close they were to meeting the percentages.
BSP Governor Amando M. Tetangco, Jr. said in a speech last month that the central bank is looking to put up a lending framework for MSME value chains, which will help relax requirements on the small firms to secure bank loans. Regulatory perks may also be dangled to spur increased lending to this segment.
Universal and commercial banks posted the lowest compliance rate in 2016, with loans to micro and small- scale firms accounting for just 3% of its total loan portfolio. Still, total credits ticked higher to P139.995 billion from P132.559 billion, data showed.
Thrift banks also missed the 8% lending requirement for small firms, with actual credits hitting just 6.59% of the total at P45.686 billion, lower than the P55.441-billion minimum.
In contrast, rural and cooperative banks posted the strongest compliance rate, with total loans hitting 22.01% or P22.31 billion, almost three times the P8.109-billion requirement.
The small lenders also breached the 2% required lending for medium-sized firms, having set aside a tenth of its cash supply to fund P10.167 billion in loans. This is higher than the P9.743 billion in total credit extended in 2015.
Thrift banks likewise met the credit quota for medium- scale firms at P43.686 billion or 6.29% of its loan portfolio, while big banks lent out P243.237 billion to these businesses, accounting for a 5.21% share.
Philippine MSMEs account for 99% of local firms and 60% of employment but contribute only 36% of gross value added, according to the May 2016 Investment Policy Review of the Organization for Economic Cooperation and Development.