Loans disbursed by banks operating in the country to micro, small, and medium enterprises (MSMEs) grew by 5.8 percent to P488.13 billion in the first half of the year from P461.39 billion in the same period last year, data from the Bangko Sentral ng Pilipinas (BSP) showed.

However, the banking sector's overall compliance ratio stood at 4.52 percent as of end-June, still below the required 10 percent under Republic Act 6977, as amended by RA 8289 and RA 9501 otherwise known as the Magna Carta for SMEs.

The law mandates banks to earmark eight percent of their total loan portfolio for micro and small enterprises, and two percent for medium enterprises.

As of end-June, the industry's total loan book, net of exclusions, jumped by 10.2 percent to P10.8 trillion from P9.8 trillion a year ago. This means allocations for the MSME sector should have reached P1.08 trillion.

Philippine banks' disbursements to micro and small enterprises stood at P196.83 billion in the first half, 4.1 percent higher than the P189.08 billion last year. However, the amount remained short of the mandated P864.379 billion or eight percent, as it only accounted for a 1.82 percent compliance.

Meanwhile, funds allocated to medium enterprises rose by seven percent to P291.29 billion from P272.31 billion and exceeded the required P216.09 billion. This translated to a compliance ratio of 2.7 percent, higher than the mandated two percent.

Based on the type of bank, the compliance of universal and commercial banks to micro and small enterprises hit P134.09 billion in the first half, equivalent to only 1.35 percent of their P9.91-trillion loan portfolio.

Compliance to medium-sized enterprises by big banks stood at P235.81 billion or 2.38 percent of their loan book.

The compliance of thrift banks to micro and small enterprises reached P24.6 billion or 3.74 percent of their P658.62-billion loan portfolio. But thrift banks went beyond the credit quota for medium enterprises as their compliance to the sector hit P35.53 billion or 5.39 percent of their loan book.

On the other hand, the total compliance of rural and cooperative banks to micro and small enterprises hit P37.88 billion as of end-June. This is equivalent to 17.61 percent of their P215.08-billion credit book and well above the minimum amount required by law.

Their compliance to medium enterprises stood at P19.92 billion or 9.26 percent of their loan portfolio.

The central bank also noted the compliance of digital banks to micro and small enterprises reached P250 million, representing 1.41 percent of their P17.79-billion loan portfolio.

The total compliance of digital banks to medium enterprises stood at around P30 million, or 0.16 percent of their loan book.

MSMEs play a very important role, accounting for 99.5 percent of the total establishments and providing around 65 percent of employment to the Philippine workforce.

However, MSMEs are unable to reach their full potential due to difficulties in credit and financial access.

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