Bank lending to MSMEs below required level

BANK lending to micro, small and medium enterprises (MSMEs) was still below the required level at the end of March this year, Bangko Sentral ng Pilipinas (BSP) reported.

The “Magna Carta for MSMEs”, also known as Republic Act 6977, provided funding of 875.56 billion pesos for MSMEs over time, but only 446.98 billion pesos was allocated to this end, according to the most recent data from the central bank.

The sum was well below the required minimum of 10%, at just 5.11% of total loanable funds of P8.75 trillion in the first quarter of this year.

Loans totaling 351.59 billion pesos were granted by large lenders, 48.52 billion pesos by savings institutions and 46.86 billion pesos by rural and cooperative banks.

The most recent data confirmed the results of the BSP’s survey of key bank loan officers conducted in the first quarter of 2022, which showed that banks tightened their lending standards for business loans between January and March. of this year.

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According to the banks surveyed, “the reported tightening of general lending standards was mainly due to the deterioration of the borrower profile and the profitability of the bank’s portfolio as well as reduced risk tolerance and a weaker economic outlook. favorable”, underlines the survey.

He also said the net tightening of overall lending criteria was represented in terms of specific credit standards by tighter collateral requirements and loan covenants, smaller lines of credit and increased use of interest rate floors. ‘interest. In the meantime, lower credit spreads and longer loan terms indicated a net easing of credit standards.

While a greater proportion of responding banks expect to maintain overall credit standards for business lending, the DI-based approach continued to show expectations of a net tightening of lending standards given increased uncertainty in the outlook for economic growth, reduced risk tolerance and deterioration in borrower profile. and banking portfolio for the second quarter, the survey notes.

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