Loans disbursed by banks to micro, small and medium enterprises (MSMEs) in the Philippines have increased by 3.6 percent to P474.92 billion in the first quarter of the year from P458.59 billion in the same period last year, according to data from the Bangko Sentral ng Pilipinas (BSP).
However, the overall compliance ratio of the banking sector stood at 4.41 percent as of end-March, which is still below the required 10 percent under Republic Act 6977, as amended by RA 8289 and RA 9501, also known as the Magna Carta for SMEs.
The law mandates banks to allocate eight percent of their total loan portfolio for micro and small enterprises, and two percent for medium enterprises.
The total loan book of the industry, net of exclusions, grew by 9.3 percent to P10.77 trillion at the end of March from P9.85 trillion in the same period last year. This indicates that allocations for the MSME sector should have reached P1.08 trillion.
Philippine banks’ disbursements to micro and small enterprises increased by 2.3 percent to P191.28 billion from P187.05 billion. However, this amount fell short of the mandated P861.76 billion or eight percent, only accounting for a 1.78-percent compliance.
Funds allocated to medium enterprises rose by 4.5 percent to P283.65 billion from P271.54 billion. This exceeded the required P215.44 billion, resulting in a compliance ratio of 2.63 percent, higher than the mandated two percent.
Different types of banks showed varying levels of compliance to the mandated credit quotas for MSMEs. Universal and commercial banks had a compliance of 1.33 percent to micro and small enterprises, while compliance to medium-sized enterprises stood at 2.37 percent.
Thrift banks went beyond the credit quota for medium enterprises with a compliance of 4.61 percent, but fell short for micro and small enterprises at 3.4 percent.
Rural and cooperative banks surpassed the minimum compliance for both micro and small enterprises, with a compliance of 17.74 percent and 9.29 percent for medium enterprises.
Digital banks also showed compliance to micro and small enterprises at 1.02 percent and compliance to medium enterprises at 0.07 percent.
MSMEs are crucial to the Philippine economy, accounting for 99.5 percent of total establishments and providing around 65 percent of employment to the workforce. Despite their importance, MSMEs often face challenges in accessing credit and financial resources, hindering their full potential.
