PHL banks’ loans to micro, small and medium businesses up 5% at end-2025

By Katherine K. Chan, Reporter

PHILIPPINE BANKS disbursed more loans to micro, small and medium enterprises (MSMEs) at end-2025 versus the prior year, Bangko Sentral ng Pilipinas (BSP) data showed.

As of end-December 2025, bank lending to MSMEs reached P574.8 billion, rising by 5.23% from P546.22 billion in the previous year. This was also 7.14% more than the P536.51 billion recorded at end-September 2025.

However, this accounted for just 4.73% of the industry’s P12.143-trillion loan book, which is net of exclusions.

“The data show that banks are lending more to MSMEs, which is a positive sign, but the bigger message is that MSMEs are still underfinanced,” Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said in a Viber message.

“At just 4.73% of total bank loans, this is far below their importance to jobs and growth.”

He said risks associated with lending to MSMEs limit their access to financing.

“What’s holding banks back are risk concerns, higher costs, and limited data — many MSMEs lack collateral and formal financial records, making lending harder to scale.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort also noted that while the growth in MSME loans outpaced the Philippine economy’s expansion last year, this was well below the increase in overall bank lending.

“The slowdown in growth could reflect business challenges on MSMEs to cope up with higher prices, weather-related disturbance, greater competition with bigger players, imports, online or digital commerce,” he added.

Banks were previously required to allocate 8% of their loan portfolio to micro and small enterprises, and 2% to medium-sized businesses, under Republic Act No. 9501 or the Magna Carta for MSMEs.

The mandated credit allocation lapsed in June 2018, or 10 years after the law was passed. However, the BSP continues to monitor banks’ lending to MSMEs as part of its supervisory oversight and policy development.

Loans granted by the banks to micro and small enterprises amounted to P238.45 billion as of December, making up 1.96% of their total loan portfolio.

This was 9.82% above the P217.12 billion extended at end-2024 and 5.9% higher than the P225.17 billion at end-September.

Meanwhile, banks’ loans to medium enterprises reached P336.35 billion, climbing by 2.2% year on year from P329.1 billion and by 8.03% from the P311.34 billion a quarter earlier.

Broken down, universal and commercial banks lent P152.96 billion to micro and small enterprises at end-December, equivalent to 1.52% of their P11.025-trillion loan book.

For medium enterprises, they disbursed P276.23 billion or 2.5% of their portfolio.

Central bank data also showed that thrift banks’ loans to micro and small businesses jumped by nearly 30% to P49.01 billion at end-2025 from P37.7 billion the prior year. This was equivalent to 3.88% of the sector’s P896.72-billion loan portfolio.

The sector also lent P38.97 billion to medium enterprises, up 3.53% year on year and equivalent to 4.43% of its loan book.

On the other hand, micro and small enterprises got P40.91 billion in loans from rural and cooperative banks at end-2025, down 12.61% from the P35.75 billion logged a year prior.

However, their loans to medium enterprises went up by 1.79% to P21.08 billion from P20.71 billion previously.

These comprised 20.13% and 11.87% of rural and cooperative banks’ P177.59-billion total loan portfolio, respectively.

Lastly, digital banks’ loans to micro and small enterprises soared by 68.18% to P74 million in 2025 from P44 million a year earlier. This was 1.69% of their P43.8-billion loan book.

Their loans to medium enterprises stood at P7 million, or 0.15% of the total, increased by 40% from the P5 million recorded at end-December 2024.

Mr. Ravelas said better credit data and risk-sharing mechanisms would encourage Philippine banks to lend more to small businesses.

“To move closer to the 10% target, we need better credit information, more digital tools, and stronger risk-sharing mechanisms, so banks can lend with confidence and MSMEs can grow faster.”

MSMEs account for more than 99% of Philippine businesses and contribute around 40% of the country’s economic output.