Banks shun loans to small businesses  

The government, specifically the Senate and the House of Representatives, passes financial laws mandating banks to support  agriculture, small businesses and rural cooperatives by giving them loans.

In the case of the agriculture sector, a certain percentage of the banks’ loan allocations should be given to the farmers.

But this is seldom observed, with banks giving priority to condominium developers and other big businesses.

The latest data from the Bangko Sentral ng Pilipinas (BSP) showed that micro and small enterprises (MSEs) have been denied their share in loans, actually below the mandated levels, during the third quarter of the year.

Only rural and cooperative banks complied with the lending quotas, with loans to MSEs reaching P34.3 billion or 20.3 percent of their P168.6-billion portfolio, while credit to medium enterprises stood at P20.7 billion or 12.3 percent, the BSP data confirmed.

Banks are required to set aside at least 8 percent of their total loan portfolio for MSEs and at least 2 percent for medium enterprises (MEs).

Based on a total loan portfolio of P12.05 trillion, banks should have lent P963.92 billion to MSEs and P240.98 billion to MEs.

Banks, however, lent only P225.17 billion to SMEs, P738.74 billion short of the required minimum, but lent P311.34 billion to medium enterprises or an excess of P70.37 billion.

Universal and commercial banks, which accounted for the bulk or P10.98 trillion of the industry’s total loan portfolio, were supposed to lend P878.39 billion to MSEs and P219.60 billion to MEs.

Their compliance as of September was at P158.57 billion for micro and small firms, P734.12 billion short, while P253.35 billion was lent to medium firms — P34.47 million more than required.

Thrift banks, meanwhile, lent P45.94 billion to MSEs as of end-September, equivalent to 5.3 percent of their total loan portfolio of P859.55 billion. Credit to medium enterprises amounted to P36.51 billion — 4.33 percent of their lending book.

Digital banks, meanwhile, extended just P660 million in loans to MSEs, or 1.6 percent of their P40.9-billion loan portfolio. Lending to medium enterprises was at P70 million, a mere 0.2 percent of the total.

It was observed that many banks continue to defy the law, choosing instead to pay penalties, because they assume that they have a good chance of making money on loans to big businesses rather than farmers and small traders.

Firms with assets not exceeding P3 million are classified as microenterprises. Small businesses, meanwhile, are those whose assets do not surpass P15 million, while medium-sized enterprises have these in the range of over P15 million to P100 million.

Banks are required to submit quarterly reports of released loans to the BSP. Penalties are based on the percentage of under compliance, and these can go up to P500,000 for zero compliance.