Banks outside NCR lending below PH average

A large amount of liquidity in the banking system outside the National Capital Region remains untapped, showing missed opportunities to spur economic growth and reduce poverty in the countryside.

This was according to a report from the National Statistical Coordination Board, which said banks outside Metro Manila had been lending much less as a proportion of deposits compared with their counterparts in the capital.

Citing data obtained from the Bangko Sentral ng Pilipinas covering 2003 to 2012, the NSCB said the loan-to-deposit ratio in areas outside NCR averaged only 24.9 percent compared with 81.36 percent in the NCR.

This difference was consistent with what economists described as a wide disparity between economic activity in the NCR and the provinces.

Weak business activity in rural areas, where more of the country’s poor reside, has been cited as one of the reasons for the relatively high poverty incidence in the country.

Of the P5.67 trillion worth of bank deposits in the country, about a third were in areas outside NCR.

“The low and decreasing loan-to-deposit ratios in the regions outside NCR is one concern that could be addressed to help steer economic development and inclusive growth in these areas,” the NSCB said in the report authored by Secretary General Jose Ramon Albert.

The report also showed the loan-to-deposit ratio in areas outside NCR had dropped during the decade from 29.5 percent in 2003.

The decline came about as growth in loans failed to keep pace with the rise in bank deposits.

According to the NSCB, the poor performance of banks in terms of utilizing available liquidity for loans could be traced to various factors. These include lack of appetite for lending by banks, lack of willingness among individuals to take risks and lack of entrepreneurial skills among Filipinos, more so of those in rural areas.

The NSCB said measures must be taken to encourage banks to lend more and to promote entrepreneurship.

“Banks clearly play a vital role in the regional economy since they serve as the major sources of funds for economic production activities and for the consumption of goods and services,” the NSCB said.

The falling loan-to-deposit ratio, however, was not peculiar to areas outside NCR. The 80.8 percent for Metro Manila last year was lower than the 89.8 percent recorded in 2003.

Based on the figures, the NSCB said, there was room for banks in the country to lend more and help sustain the economy’s robust growth. Faster growth in lending also would help address the problem of non-inclusive growth of the Philippines.

The Philippines since last year has become one of the fastest growing economies in Asia. Nevertheless, the country still suffers from one of the highest poverty rates in the region.

Economists said this indicated that economic expansion was due largely to rising incomes of the rich and the middle class, and less progress was being made in poverty reduction.