Banks lending more to small businesses

Loans extended by banks to micro, small and medium enterprises (MSMEs) have shown significant growth compared to a year ago, but the sector continues to fall short of the mandatory thresholds.

- By KEISHA TA-ASAN

Data from the Bangko Sentral ng Pilipinas (BSP) showed that loans disbursed by banks to MSMEs jumped by 35.8 percent to P500.81 billion from January to September against the P368.78 billion released in the same period last year.

However, the banking sector's overall compliance ratio of 4.55 percent as of end-September was still below the required 10 percent under Republic Act 6977 or 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 industry's total loan book net of exclusions also rose by 18.9 percent to P10.99 trillion during the nine-month period versus the previous level of P9.24 trillion. This means allocations for the MSME sector should have reached P1.1 trillion.