PHILIPPINE BANKS failed to hit the mandated quota for small business loans in the first half of the year, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Loans extended by the banking industry to micro-, small-, and medium-sized enterprises (MSMEs) amounted to P461.387 billion as of June or just 4.71% of their total loan portfolio of P9.8 trillion.

This was 3.1% higher than the P447.69 billion in loans they extended to the sector in the same period in 2022.

Lenders are mandated by the Republic Act No. 6977 or the Magna Carta for MSMEs to allocate 10% of their credit portfolio for small businesses to boost the sector — 8% for micro and small enterprises (MSEs) and 2% for medium-sized enterprises.

However, banks have long opted to incur penalties for noncompliance instead of taking on the risks associated with lending to small firms.

Broken down, MSE loans extended by banks amounted to P189.08 billion in the first quarter, comprising just 1.93% of their total loan portfolio and well below the 8% quota, central bank data showed.

On the other hand, lending to medium-sized enterprises stood at P272.307 billion in the period, equivalent to 2.78% of these banks’ credit book and beyond the 2% minimum ratio required under the law.

Based on the type of bank, universal and commercial banks disbursed P126.885 billion in credit to MSEs, equivalent to only 1.48% of their P9.02-trillion loan portfolio, BSP data showed.

Meanwhile, their lending to medium-sized enterprises hit P229.03 billion or 2.54% of their loan book.

Thrift banks were also unable to meet the quota for MSE credit as they only extended P26.037 billion or 3.54% of their P566.94-billion loan portfolio to the sector.

Still, these lenders went beyond the credit quota for medium enterprises as their loans to the sector hit P25.319 billion or 4.5% of their portfolio.

Meanwhile, rural and cooperative banks extended loans worth P36.116 billion to MSEs, equivalent to 18.59% of their P192.67-billion credit book, well above the minimum amount required by law.

These banks’ lending to medium enterprises hit P17.958 billion or 9.32% of their loan portfolio.

The central bank has also started tracking the loans granted by digital banks  to the MSME sector.

Digital banks disbursed P40 million in credit to MSEs in the first half, less than 1% of these lenders’ P14.29 billion-loan portfolio. These banks didn’t lend at all to medium enterprises.

The BSP allowed banks to count MSME loans as alternative reserve compliance during the coronavirus pandemic to help prop up the sector. This relief measure expired on June 30.

In April, the central bank launched the Credit Risk Database Scoring Model, which is expected to serve as an additional tool that lenders can use to analyze the creditworthiness of MSMEs, especially those without credit history or enough collateral. — K.B. Ta-asan

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