A woman arranges bottles of vinegar at a food exhibition. — PHILIPPINE STAR/JOHN RYAN BALDEMOR

PHILIPPINE BANKS failed to meet the mandated quota for small business loans 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) amounted to P474.922 billion as of end-March.

This made up only 4.41% of their total loan portfolio of P10.77 trillion, well-below the mandated 10% quota.

Under Republic Act No. 6977 or the Magna Carta for MSMEs, banks are required to allocate 10% of their total loan portfolio for small businesses. Of this, 8% of loans should be allocated for micro and small enterprises, while 2% should go to medium-sized enterprises.

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

As of end-March, BSP data showed lending to micro and small enterprises stood at P191.276 billion, equivalent to just 1.78% of their total loan portfolio and well below the 8% quota.

On the other hand, loans for medium-sized enterprises amounted to P283.646 billion, accounting for 2.63% of their total credit book.

By type of bank, universal and commercial banks disbursed P122.523 billion in loans to micro and small enterprises in the first quarter. This was only 1.33% of their total loan book.

Big banks’ loans to medium-sized enterprises stood at P235.213 billion or 2.37% of their total lending.

Thrift banks extended loans to micro and small enterprises worth P30.263 billion or 3.4% of their loan portfolio, falling short of the quota.

Thrift banks’ loans to medium enterprises hit P28.811 billion, equivalent to 4.61% of their total lending.

Meanwhile, rural and cooperative banks exceeded the quota for lending to MSMEs. They extended loans to micro and small enterprises worth P38.49 billion, equivalent to 17.74%.

Their loans to medium enterprises hit P19.622 billion or 9.29% of their loan portfolio.

Loans granted by digital banks to the micro and small enterprise sector stood at P180 million in the first quarter, comprising 1.02% of their credit book.

Digital banks disbursed P10 million to medium enterprises, equivalent to 0.07% of their portfolio.

During the pandemic, the BSP allowed banks to count MSME loans as alternative reserve compliance with the reserve requirements to help support the sector.

This relief measure expired on June 30, 2023. However, it was extended to thrift banks as well as rural and cooperative banks until Dec. 31, 2025. — Luisa Maria Jacinta C. Jocson