THE Bangko Sentral ng Pilipinas (BSP) said it is improving its rules, as well as its supervision and examination policies to encourage banks to lend more to the small and medium enterprise (SME) sector.

In a statement, the BSP said the International Finance Corp. (IFC) and the German Technical Cooperation (GTZ) would provide assistance to increase the central bank’s supervisory and regulatory capacity for SME lending.

“While there are many factors constraining lending to SMEs such as macro-economic factors, lack of the capacity on the part of the SMEs and even the lack of familiarity on the part of many banks with the SME business environment, there may also be some constraints coming from the policy and regulatory environment,” the BSP said.

The technical support from IFC and GTZ would help BSP in designing the appropriate training program particularly in the SME risk-based lending operations of banks.
Also, this will support the development of a manual of examination procedures for SME lending to complement the existing manual.

SMEs rely on banks for their funding, but formal financial institutions only allocated 11 percent to 15 percent of their total funding to the sector. This is low compared with the benchmark of 30 percent, according to the IFC’s study on Financing SMEs in the Philippines.

SMEs also rely on internally generated funds, loans from family or friends, and other informal lenders that may limit their capacity to grow.

SMEs play a key role in the country’s economic development, as the sector makes up 99.6 percent of total enterprises, generate 70 percent of total jobs and contribute 30 percent to 32 percent of gross domestic product (GDP).

SMEs contribute to exports, both as adaptive and flexible providers of specialized inputs or directly as niche suppliers of products, services and technologies. They are also the seedbed of entrepreneurial skills, innovation and new ideas.

aricel E. Burgonio