Banks lend 5.2% more to MSMEs

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March 6, 2026 | 12:00am

MANILA, Philippines — Lending to micro, small and medium enterprises (MSMEs) rose by 5.2 percent to P574.8 billion as of end-December 2025, reflecting a modest expansion in credit support for the sector.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that total eligible investments of banks in MSMEs rose from P546.22 billion in the same period a year ago.

The increase was driven largely by higher lending to micro and small enterprises, which climbed by 9.8 percent to P238.45 billion from P217.12 billion previously. Loans to medium enterprises also inched up by 2.2 percent to P336.35 billion from P329.1 billion.

Despite the growth, MSME exposures remained a small portion of the banking system’s overall loan book. As of end-December 2025, banks’ total loan portfolio net of exclusions stood at P12.14 trillion, with MSME loans accounting for about 4.7 percent of the total.

Banks were previously required to set aside eight percent of their loan portfolio for micro and small enterprises as well as two percent for medium firms under Republic Act 6977 or the Magna Carta for Small Enterprises.

The mandatory credit allocation under the Magna Carta for MSMEs expired on June 16, 2018.

Based on BSP data, universal and commercial banks continued to account for the bulk of MSME lending.

As of end-December 2025, eligible investments of universal and commercial banks reached P429.19 billion. Of the total, P152.96 billion went to micro and small enterprises, while P276.23 billion was extended to medium enterprises.

This segment represented nearly three-fourths of the banking system’s total MSME exposures during the period, underscoring the dominant role of large banks in financing small businesses.

Thrift banks posted total MSME eligible investments of P87.98 billion as of end-December 2025. Lending to micro and small enterprises amounted to P49.01 billion, while loans to medium enterprises reached P38.97 billion.

Thrift banks, which traditionally cater to retail clients and small businesses, continued to serve as an important funding source for smaller enterprises outside the major commercial banking network.

Rural banks extended a combined P56.83 billion in eligible MSME investments as of end-December 2025. Of this amount, P35.75 billion went to micro and small enterprises and P21.08 billion to medium enterprises.