Bank loans to MSMEs fall short of required level

According to the Bangko Sentral ng Pilipinas (BSP), bank lending to micro, small and medium enterprises (MSMEs) remained below the prescribed level in the first half of this year.

The latest central bank data showed that 454.84 billion pesos was set aside for MSME financing during the period, below the 835.03 billion pesos specified by Republic law 6977 or the “Magna Carta for MSMEs”.

For the first six months, the sum was only 5.344% of the total loanable funds of 8.35 trillion pesos, well below the 10% threshold of the law.

The big banks granted P342.57 billion in loans, the savings banks P67.51 billion and the rural and cooperative banks P44.74 billion.

The most recent data matches the findings of the central bank’s second quarter 2021 survey of top bank loan officers, which showed that banks tightened lending terms for business loans from April to June. .

“As interviewees noted, the reported tightening of global credit standards was largely due to deteriorating borrower profiles and bank portfolio profitability, reduced risk tolerance, as well as a more uncertain economic outlook, among other factors, “the central bank noted.

In terms of specific credit rules, there has been a marked tightening in overall credit standards, as evidenced by lower amounts of credit lines, higher collateral requirements and loan covenants, and increased reliance on loans. interest rate floors. In the meantime, there has been some easing of the terms of the tighter lines of credit and longer credit maturities.

There is also a marked tightening in overall credit requirements for household loans, particularly for mortgage, auto and personal / salary loans, while the results of credit card loans show a clear easing of standards.

“The banks interviewed cited the following as contributing to the general tightening of credit standards for consumer loans: a deterioration in the borrower profile and the profitability of the bank’s portfolio; lower tolerance for risk; and a more uncertain economic outlook, ”the stressed BSP.

In terms of specific credit standards, the overall net tightening of consumer credit standards has resulted in smaller lines of credit, tighter loan covenants, and higher collateral requirements. However, there has been some relaxation in credit requirements for household loans, as evidenced by lower lines of credit and longer loan maturities.

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