Banks fail to hit MSME credit quota in 1st quarter

BIG AND THRIFT banks did not meet the required lending for small businesses in the first quarter, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Loans extended by the banking industry to micro-, small-, and medium- sized enterprises ( MSMEs) reached P534.767 billion in the first quarter versus their total loan portfolio worth P8.433 trillion in the period.

Republic Act 6977, also known as the Magna Carte for MSMEs, mandates lenders to allocate at least 10% of their loan book for small businesses to boost the sector — 8% to micro and small enterprises ( MSEs) and 2% to mediumsized enterprises. Big banks often opt to pay penalties for noncompliance instead of taking on the risks of lending to small firms.

Broken down, credit extended to MSEs amounted to P208.301 billion or just 2.47% of banks’ loan portfolio.

Meanwhile, lending to medium-sized firms reached P326.466 billion or 3.87% of their loan book, higher than the 2% quota.

For universal and commercial banks, credit granted to MSEs amounted to P145.473 billion or only 1.92% of their P7.58-trillion loan portfolio. Meanwhile, they disbursed P275.93 billion in loans to medium- sized enterprises or 3.64% of their entire lending book.

Thrift banks also fell short of the required lending for MSEs as their loans to the segment reached P34 billion, equivalent to only 4.64% of their portfolio worth P732.063 billion.

For medium enterprises, thrift banks disbursed loans totalling P35.656 billion or 4.87% of the total.

On the other hand, rural and cooperative banks were able to comply with the lending quotas as their credit to MSEs reached P28.826 billion or 23.8% of their loan portfolio worth P121.101 billion.

These smaller lenders also disbursed P14.88 billion in loans to medium- sized enterprises, equivalent to 12.29% of their credit book.

Earlier this year, the central bank provided regulatory relief measures to encourage lending to small businesses amid the coronavirus pandemic. These include allowing banks to count MSME loans as alternative reserve compliance and the reduced credit risk weight for loans extended to the sector.

MSMEs account for 99% of the roughly one million business establishments in the Philippines in 2018, data from the Department of Trade and Industry showed. They also accounted for 5.7 million or 63.19% of the new jobs during the year.