MSME lending slips to P463.13 billion in 2021

MANILA, Philippines — Loans extended by Philippine banks to micro, small, and medium enterprises (MSMEs) slipped by 3.6 percent to P463.13 billion in 2021 from P480.5 billion in 2020, as the sector has yet to fully recover from the impact of the pandemic, according to the Bangko Sentral ng Pilipinas (BSP).

The industry’s total loan book amounted to P8.57 trillion in 2021, which means allocations for the MSME sector should have reached P857.1 billion.

In 2020, the industry’s loanable funds amounted to P8.41 trillion.

The BSP data showed the banking system’s total credit allocation to micro and small enterprises reached P178.14 billion, still short of the mandated P685.68 billion or eight percent as it only accounted for a 2.08 percent compliance.

The banking system’s overall compliance ratio of 5.41 percent last year remained below the required 10 percent mandated under Republic Act 6977, as amended by RA 8289 and RA 9501, otherwise known as the Magna Carta for SMEs.

Funds allocated to medium enterprises amounted to P284.99 billion or higher than the required P171.42 billion. This translated to a compliance ratio of 3.33 percent, exceeding the required two percent.

Eric Luchangco, head of business banking at Ayala-led Bank of the Philippine Islands, said in a virtual forum on the new BPI BizKo digital platform that the listed bank’s MSME portfolio continues to perform well despite the health crisis.

Luchangco said MSMEs were more heavily affected by the pandemic than larger clients.

“We look to continue to grow our business. We think that, with many areas moving into Alert Level 1, we expect the business to continue to grow this year. And so we’re optimistic about our prospects for this year,” Luchangco said.

MSMEs contribute 35.7 percent of the total value-added to the Philippine economy, account for 99.5 percent of the total establishments and employ 62.8 percent of the total labor force.

However, MSMEs are unable to reach their full potential because of difficulty of credit and financial access, especially now that banks are risk averse due to uncertainties brought about by the pandemic.

BPI launched the simple, affordable, and convenient subscription-based digital banking platform to help MSMEs manage their business finances and provide an integrated online system for invoicing and collection.

The all-in-one online platform available via app and web offers MSMEs immediate access to their account information – to view balances, deposits, and payables, regularly pay employees, suppliers, utilities, and government dues, create digital invoices under their business name, get invoice number reminders to avoid duplication, and receive and monitor payments through its intuitive invoicing system.

Luchangco said the pandemic made running a business even more challenging for Filipino MSMEs.

“Aside from decreased profitability, entrepreneurs need to contend with heightened complexity, as issues like illnesses and lockdowns limited their mobility, made operations more expensive, and caused significant delays that bloated their overhead expenses,” Luchangco said.

Ana Sison, head of Transaction Services Division at BPI, said BizKo aims to provide individuals and businesses an efficient, inclusive, safe, and secure digital payments ecosystem to reinforce BPI‘s commitment to be the MSMEs’ partner-of-choice.