The Philippines is set to secure $1.5 billion in fresh loans from the World Bank and the Asian Development Bank (ADB) to deepen its financial markets, broaden access to capital, and mobilize more private-sector financing.

The larger financing is the forthcoming $1-billion Philippines Private Capital Mobilization and Competitiveness Enhancement Development Policy Loan (DPL) 1 from the Washington-based World Bank, while the Manila-based ADB has included in its indicative pipeline a separate $500-million loan for its host country’s Promoting Financial Market Deepening and Innovation Program, Subprogram 1.

According to a program information document (PID) disclosed last Aug. 6, the World Bank’s proposed DPL would support the Philippines in mobilizing additional private capital at scale and boosting its economic competitiveness.

A World Bank DPL provides budget support to governments undertaking policy and institutional reforms aimed at achieving agreed development objectives.

The Department of Finance (DOF) will be the borrower for the DPL, which is targeted for World Bank board approval on Feb. 26 next year.

The World Bank said the DPL would pursue reforms under three pillars: strengthening trust in the financial sector, broadening and deepening financial markets, as well as expanding access to capital.

These include reforms covering bank secrecy and anti-money laundering (AML) rules, cybersecurity and deposit insurance, digital payments and corporate debt, crowdfunding, micro, small and medium enterprise (MSME) financing, as well as agricultural insurance.

According to the World Bank, developing the financial sector and mobilizing private capital at scale would be critical for the Philippines to escape the middle-income trap, noting that the country’s level of financial-sector development remains low among emerging Asian economies.

The lender cited that private credit was equivalent to 41.4 percent of gross domestic product (GDP) in 2023, lower than China’s 115.1 percent, Thailand’s 92.3 percent, Malaysia’s 74.2 percent, Vietnam’s 58.2 percent and Indonesia’s 42.9 percent.

It also noted that small and medium enterprises (SMEs) account for more than 99 percent of registered Philippine businesses as well as 67 percent of employment but continue to face significant challenges, including limited access to financing.

The proposed financing would add another $1-billion operation to the World Bank’s Philippine lending pipeline, alongside the Second Growth and Jobs DPL as well as Sixth Disaster Risk Management DPL with a Catastrophe Deferred Drawdown Option (CAT DDO) both scheduled for approval this coming December, following the recently approved $1-billion loans for agricultural modernization as well as energy and water security.

Meanwhile, the ADB is lining up its own policy-based loan, which is expected for board approval this year.

ADB documents published last May identified the DOF as the executing agency for this upcoming loan, while the Bangko Sentral ng Pilipinas (BSP) and the Securities and Exchange Commission (SEC) were identified as key implementing agencies.

Subprogram 1 forms part of a three-stage programmatic approach comprising indicative policy-based loans of $500 million each for Subprograms 1, 2 and 3, potentially bringing the ADB’s total financing under the program to $1.5 billion.

The three subprograms are tentatively scheduled for 2026, 2028 and 2030, respectively, with the first establishing the policies, frameworks, as well as regulatory and institutional foundations for succeeding reforms.

According to the ADB, the program would support reforms to deepen and broaden capital markets, promote a sustainable and resilient financial sector, as well as strengthen regulation and safeguards for innovative and inclusive finance.

The lender said the Philippine financial system remains bank-centered despite previous reforms, while the private sector and the public still face constraints in raising long-tenor or permanent capital.

It noted that total bonds outstanding increased to 48.9 percent of GDP in 2025 from 36.6 percent in 2013, but the corporate bond market declined to five percent of GDP in 2025 after reaching nearly 10 percent in 2020.

The ADB’s separate sector assessment also showed that bank loans accounted for 84.7 percent of total corporate borrowings, while only about one-third of Filipinos aged 15 and older had an account at a financial institution.