Loans for MSMEs rise to P459.48 billion in Q1 2016
MANILA, Philippines – Small businesses in the country now have better access to capital, but more work still needs to be done to give them a boost.
Loans given to micro, small, and medium enterprises (MSMEs) by local banks and financial institutions hit P459.48 billion from January to March 2016, according to data released by the Bangko Sentral ng Pilipinas (BSP) on Monday, July 18.
The figure is P32.44 billion or 7.6% higher than the P427.04 billion booked in the first quarter of 2015.
The improvement comes amid a slew of government initiatives to boost MSMEs, which account for 99.6% of all registered firms in the country while contributing only 35.7% of GDP based on BSP data.
These initiatives include expanding the scope of micro-banking activities in the country to allow for more flexible micro-loans, as well as a new law creating a body to oversee financial services for low-income households as part of the National Strategy for Financial Inclusion (NSFI).
Target not yet met
Despite the increase in MSME loans, the country's financial sector as a whole still fell short of the BSP's target under the Magna Carta for MSMEs.
The financial sector hit a compliance ratio of 9.2%, slightly lower than the 10% mandated by the law which was last updated in 2008 through Republic Act No. 9051.
The law mandates that banks set aside 8% of their total loan portfolio for micro and small businesses and 2% for medium enterprises.
The financial sector exceeded the 2%, or P99.66 billion Q1 target for medium enterprises with a total of P267.28 billion in loans allocated for a compliance ratio of 5.36%.
Financial institutions fell short, however, in the micro and small enterprise loans target, with BSP data showing that only P192.2 billion was set aside, just 3.86% of the required 8% or P398.63 billion.
In a 2015 report, the Asian Development Bank highlighted the lack of reliable credit information as one of the key issues holding back MSME financing.
Addressing that information gap is the primary function of the newly active Credit Information Corporation (CIC), which began collecting credit data nationwide this year. The data is expected to be compiled by late 2016 or early 2017. – Rappler.com