Loans to MSMEs up 7.6% in Q1

MANILA, Philippines - Loans extended by Philippine banks to microfinance and small medium enterprises (MSMEs) inched up 7.6 percent in the first quarter amid the efforts of the Bangko Sentral ng Pilipinas (BSP) to develop the sector to help drive economic growth.

Data released by the central bank showed loans extended to MSMEs reached P459.48 billion from January to March, P32.44 billion higher than the P427.04 billion recorded in the same period last year.

This resulted in the banking system’s overall compliance ratio of 9.2 percent, lower than the required 10 percent mandated under RA 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 BSP data showed the banking system’s total credit allocation to medium enterprises of P267.28 billion in the first quarter of the year led to a compliance ratio of 5.36 percent exceeding the required two percent.

This was higher than the mandated level of P99.66 billion for the first quarter.

On the other hand, the banking system’s funds allocated to micro and small enterprises amounting P192.2 billion resulted in a compliance ratio of only 3.86 percent instead of the required eight percent.

The amount was short of the P398.63 billion required loans for micro and small enterprises from January to March.

MSMEs are often dubbed the backbone of the Philippine economy because they continue to dominate the business sector in terms of the number of establishments and jobs creation.

About 99.6 percent or 940,886 of the total registered firms nationwide are classified as MSMEs leaving only a small portion at 0.4 percent to large enterprises.

MSMEs also employ about 65 percent or almost two out of three of the entire workforce.

However, in terms of contribution to gross domestic product, MSMEs only accounted for about one-third of total output or 35.7 percent.