Lending to MSMEs falls short of target, says BSP

MACTAN, Cebu—Banks fell short last year of the mandated lending to micro, small and medium enterprises (MSMEs) sector, the development of which is deemed crucial in fighting poverty, to the tune of nearly P80 billion.

Data from the Bangko Sentral ng Pilipinas showed that the banking industry’s total outstanding loans to MSMEs settled at P185.1 billion in 2013, short of the P264.8 billion it should have lent in compliance with the Magna Carta for Micro, Small, and Medium Enterprises.

Under the law, at least 8 percent of the banks’ total loan portfolio should be lent to micro and small enterprises, and at least 2 percent to medium enterprises.

A micro enterprise is defined as a company with assets of a maximum of P3 million.

A small enterprise, meanwhile, has assets of from P3 million to P15 million while a medium enterprise has assets of between P15 million and P100 million.

“Banking industry as a whole is compliant with prescribed [credit] allocation for medium enterprises, but lending is lower than prescribed for micro and small enterprises,” BSP Deputy Governor Diwa Guinigundo said in a seminar for economic journalists on Friday night.

Outstanding loans to micro and small enterprises accounted for only 5.6 percent of total loan portfolio of banks, he said, thus short of the minimum requirement by 2.4 percentage points.

The Magna Carta for MSMEs is aimed at achieving inclusive economic growth, or growth that translates into poverty reduction.

MSMEs account for 99.6 percent of total registered enterprises in the country and employ 62 percent of the country’s workforce.

However, the sector just contributes 35.7 percent to the country’s gross domestic product.

The implementing rules and regulations of the law impose penalties on non-compliant banks.

However, Guinigundo said, many banks prefer to just pay the fines rather than risk lending to micro and small enterprises.

Banks that have no loans to MSMEs are slapped a fine of P500,000 per quarter.

Those that miss the lending requirement for micro and small enterprises are imposed a penalty of P400,000 multiplied by the percentage of under-compliance.

On the other hand, banks that fall short of the mandated lending for medium enterprises are charged a fine of P100,000 multiplied by the percentage of under-compliance.