The Philippine Star

MSME lend­ing grows 12% to P776 B in H1

- By LAWRENCE AGCAOILI MON­DAY Business · Finance · Banking · Bangko Sentral ng Pilipinas

Loans ex­tended by Philip­pine banks to mi­cro, small, and medium en­ter­prises (MSMEs) rose by dou­ble-digit rate of 12.4 per­cent in the first half, 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 P776.07 bil­lion from Jan­uary to June, P85.7 bil­lion higher than the P690.37 bil­lion in the same pe­riod last year.

This re­sulted in the bank­ing sys­tem’s over­all com­pli­ance ra­tio of 7.12 per­cent, slightly lower than 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 in­dus­try’s loan book grew by 12.5 per­cent to P7.76 tril­lion in the first se­mes­ter from a year-ago level of P6.9 tril­lion.

The BSP data showed the bank­ing sys­tem’s to­tal credit al­lo­ca­tion to medium en­ter­prises went up by 8.4 per­cent to P338.08 bil­lion from P311.97 bil­lion. This trans­lated to a com­pli­ance ra­tio of 4.36 per­cent, ex­ceed­ing the re­quired two per­cent.

Like­wise, the bank­ing sys­tem’s funds al­lo­cated to mi­cro and small en­ter­prises in­creased by 11.6 per­cent to P214 bil­lion from P191.72 bil­lion, but was short of the man­dated eight per­cent as it only ac­counted for 2.76 per­cent of the to­tal loan book ver­sus the re­quired eight per­cent.

The MSME sec­tor is a cru­cial driver of the econ­omy, mak­ing up 99.6 per­cent of the coun­try’s en­ter­prises or reg­is­tered busi­ness firms and gen­er­ates 61.6 per­cent of em­ploy­ment.

How­ever, MSMEs are un­able to reach their full po­ten­tial be­cause of dif­fi­culty of credit and fi­nan­cial ac­cess, prompt­ing MSMEs to suc­cumb to loan sharks or the “5-6” lenders who charge ex­or­bi­tant in­ter­est rates.

Other chal­lenges with MSME devel­op­ment also in­clude the lack of ac­cess to re­sources such as tech­nol­ogy, skilled la­bor, and in­for­ma­tion.

The BSP ini­ti­ated the credit surety fund (CSF) pro­gram in Au­gust 2008 as a credit in­no­va­tion de­signed to help those who can­not ac­cess bank credit due to lack of ac­cept­able col­lat­er­als and credit in­for­ma­tion.

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