Loans to MSMEs up 9.3% in H1

Loans extended by Philippine banks to microfinance and small medium enterprises (MSMEs) went up by 9.3 percent in the first half of the year but still fall short of the mandated amount for the sector.

Latest data released by the Bangko Sentral ng Pilipinas (BSP) showed loans extended to MSMEs reached P467.19 billion from January to June this year or P39.64 billion higher than the P427.55 billion booked in the same period last year.

This resulted to the banking system’s overall compliance ratio of 9.29 percent, slightly lower the required 10 percent mandated under Republic Act 6977 as amended by RA 8289 and RA 9501 otherwise known as the Magna Carta for SMEs.

The law mandates banks to earmark eight percent of their total loan portfolio for micro and small enterprises and two percent for medium enterprises.

The BSP data showed the banking system’s total credit allocation to medium enterprises of P267.98 billion in the first half of the year led to a compliance ratio of 5.33 percent exceeding the required two percent.

This was higher than the mandated level of P199.56 billion for the first half of the year.

On the other hand, the banking system’s funds allocated to micro and small enterprises amounting P199.2 billion resulted to a compliance ratio of only 3.96 percent instead of the required eight percent.

The amount was short of the P402.22 billion required loans for micro and small enterprises from January to June this year.

MSMEs are often dubbed the backbone of the Philippine economy because MSMEs continue to dominate the business sector in terms of the number of establishments and jobs created.

About 99.6 percent or 940,886 of the total registered firms nationwide classified as MSMEs leaving only a small portion at 0.4 percent to large enterprises.

MSMEs also employ about 65 percent or almost two out of three of the entire workforce.

However, in terms of contribution to gross domestic product (GDP), MSMEs only accounted for about one-third in total output or 35.7 percent.

The Philippines has been broadening and deepening the reach of the country’s financial system to get to the unserved and underserved.

The BSP has linked up with other government agencies to craft and implement a National Strategy for Financial Inclusion (NSFI) to mainstream Filipinos as regular clients particularly MSMEs; overseas Filipinos and their beneficiaries; agriculture and agrarian reform sectors; indigenous peoples and cultural minorities; women; youth; and persons with disabilities.