Philippine banks expanded credit lines to micro, small, and medium enterprises (MSMEs) in the first quarter of 2026, yet the financial sector continues to fall short of regulatory minimums intended to support the country’s smaller firms.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that total outstanding loans extended to small businesses increased 5.1 percent to ₱574.8 billion in the three months through March, up from ₱546.8 billion in the same period last year.

Despite these nominal gains, the credit allocated to these businesses accounted for just 4.7 percent of the banking industry’s total ₱12.14 trillion lending portfolio. That remains less than half of the 10 percent mandatory credit allocation required under Philippine law.

Under the Magna Carta for MSMEs, local lenders are legally obligated to allocate eight percent of their total loanable funds to micro and small enterprises (MSEs), and an additional two percent to medium enterprises (MEs).

Broken down, loans disbursed to MSEs stood at ₱238.5 billion during the first quarter, an eight percent increase from the ₱220.8 billion level seen a year ago. However, this was equivalent to just two percent of the total loan book, falling well short of the prescribed eight percent ratio. BSP figures indicate that lenders should have set aside a minimum of ₱971.5 billion for MSEs.

Meanwhile, loans to medium enterprises (MEs) stood at ₱336.4 billion during the January–March period. This accounted for 2.8 percent of the total loan book, surpassing the two percent statutory ratio and marking a 3.2 percent increase over the March 2025 level of ₱326 billion.

By lender type, universal and commercial banks—the country's big banks—extended ₱153 billion in loans to MSEs during the first quarter, equivalent to 1.5 percent of their ₱11.03 trillion loan portfolio. Their loans to MEs amounted to ₱276.2 billion, or 2.5 percent of their total loan book.

Thrift banks lent ₱49 billion to MSEs, making up 3.9 percent of their ₱896.7 billion loan book, while their loans to MEs reached ₱39 billion, accounting for 4.4 percent of their portfolio.

In contrast, rural and cooperative banks continued to meet the overall MSME lending quotas. They disbursed ₱35.8 billion to MSEs, representing more than a fifth of their ₱177.6 billion portfolio. They also lent ₱21.1 billion to medium enterprises, translating to 11.9 percent of their total loans.

Digital banks' loans to MSEs stood at ₱740 million during the quarter, accounting for 1.7 percent of their ₱43.8 billion loan book, while their lending to MEs amounted to ₱70 million, or 0.2 percent of the total.