Bangko Sentral ng Pilipinas Gov. Nestor Espenilla Jr. PDI FILE PHOTO / JOSEPH AGCAOILI
The new governor of the Bangko Sentral ng Pilipinas (BSP) on Friday wants financial institutions to make more loans available to credit-starved small entrepreneurs whose businesses are the pillar of growth for the local economy.
In a speech in Makati City, BSP Governor Nestor Espenilla Jr. assailed the lack of risk appetite among banks for granting loans to more micro, small and medium enterprises (MSMEs), which he blamed on the “asymmetric” distribution of information about these would-be borrowers.
The country’s top banking regulator told a gathering of credit managers that the’ MSME sector accounts for 99.5 percent of the country’s total establishments and employ around 61.6 percent of the workforce. Of these workers, 54.7 percent are employed by micro and small enterprises.
“MSMEs are diverse representing a wide range of industries, including 60 percent of the country’s exporters,” Espenilla said. “And yet, despite this sector’s potential as an enablers and critical engine of development, MSMEs consistently cite ‘access to finance’ as a challenge.”
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The BSP chief pointed out that banks’ bias for lending to large corporations — despite the relatively lower interest rates that they could earn from — is a factor of the lack of a comprehensive picture on the risk profile of local small businesses.
This “asymmetric” distribution of information works against small borrowers which either have to shoulder higher loan rates from risk averse banks or are shut out of the formal financial system altogether.
