THE capping of the value of a security for a loan to only 60 percent should not unduly impact on lending growth this year, the Bank of the Philippine Islands (BPI), whose executives are some of the most conservative there are, said.
In fact, BPI Vice President and lead economist Emilio Neri Jr. said the banks anticipate continued growth in consumer lending, particularly home loans, despite the capping of the so-called loan-to-value (LTV) of such security by the Bangko Sentral ng Pilipinas (BSP). Neri particularly said the 60-percent cap on the LTV should help temper over enthusiasm in the property sector. According to him, loans to the property sector remain healthy.
“Despite the 60-percent LTV, this should not very abruptly stop the growth of the sector,” he said.
Under BSP Circular 855, only 60 percent of the market value of the security being offered as collateral will be considered when determining the level of security of any loan.
He said the 60-percent LTV is quite low as current market practice has banks lending about 80 percent of the value of the property. Neri said the BSP has very pure intentions when it put in place such regulation.
Jones Lang LaSalle Philippines country head David Leechiu said it is good that the BSP is trying to slow the pace of real-estate lending: “In cutting down the LTV to 60 percent, it compensates for the increase in property prices.”
Meanwhile, Neri said thrift banks must address the financing needs of micro, small and medium enterprises (MSMEs) whose operations are adversely affected by the impact of the Asean integration.
He said MSMEs will particularly feel the pain, especially those who have no access to financing.
He said loans to MSMEs grew in terms of peso amount, but that the share to total loans is shrinking.
“MSME loans in the Philippines are very low compared to the rest of the world. If you want the growth to be sustained through employment and earnings, you have to provide access and assistance to MSMEs,” he said.
As MSMEs have more access to financing and as financial literacy become more widespread, these will help generate strong employment and income and, therefore, help grow consumption, Neri explained.
“MSMEs will become losers if you do not help them. You should help customers while they are small so that when they become large institutions they will always borrow from us,” he said.