April 24, 2019
Banks are still not providing enough loans to micro, small and medium enterprises (MSME) sector, data from the Bangko Sentral ng Pilipinas (BSP) showed.
A total of P547.785 billion was set aside for lending last year, short of the P749.549 billion mandated under the Magna Carta for MSMEs.
It was also equivalent to just 7.3 percent of the P7.945 trillion in total loanable funds for last year, below the 10-percent threshold set by the law.
Nevertheless, MSME lending in 2018 was P10.147 billion higher than the P537.638 billion extended in 2017.
Broken down, big banks extended P452.759 billion in loans, followed by thrift banks (P82.398 billion), and rural and cooperative banks (P39.627 billion).
The central bank has noted that banks tightened credit standards for MSMEs in the fourth quarter of 2018, attributing this to perceptions of stricter financial system regulations and reduced tolerance for risk.
Also, the BSP said in a recent report that underserved sectors such as agriculture and MSMEs were finding it difficult to obtain credit from banks, which usually require real property as collateral.
“The preference for fixed assets as collateral can be attributed to the absence of a legal framework to govern the use of movable collateral,” the central bank added.
That said, the BSP said it continued to support legislative reforms to encourage MSME lending.
Republic Act 11057, also known as the Personal Property Security Act, was enacted into law in August 2018.
The law sets the legal and institutional framework to facilitate the use of movable property such as industrial and agricultural equipment, vehicles, inventories and sales contracts, among others, as collateral.
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