|
Thursday, November 17, 2005
Banks wary of lending to SMEs
AS FAR as banks are concerned, it is riskier and more complex to lend money to small and medium enterprises (SMEs) than to employees with fixed salaries.
According to Prudencio Gesta, former Cebu Bankers Club (CBC) president and area head for Central and Eastern Visayas area of Rizal Commercial Banking Corp. (RCBC), one of the reasons banks are still conservative in lending to SMEs is the instability of the country’s politics, which has negative effects on SMEs and the economy as a whole.
“Banks are moving to this direction (lending to SMEs). But we can’t go full blast because we are just observing the economy. If we lend more to SMEs and the economy is unstable, banks will also get hurt because SMEs would not be able to pay their loans,” he told Sun.StarCebu.
Risks
During an SME forum at the Cebu City Marriott Hotel, former National Economic and Development Authority secretary Cielito Habito expressed hope that banks would lend more to SMEs to address the financial needs of the sector, which comprises 99 percent of the country’s economy.
“Why is there still reluctance from big banks to serve the financial needs of the SMEs when they are already offering consumer loans to end-consumers? Lending to consumers is riskier and more tedious because it has more volume than lending to the SMEs,” he said.
But on the contrary, Gesta said lending to consumers with fixed salaries entails lesser risk because the clients can be easily traced through their employers. It is also easy to determine how much credit line the banks could grant the clients by basing it on the client’s income and capacity to pay.
“While for SMEs, it is difficult to determine their capacity to pay,” he said.
Wealth Development Bank president Sabiniano Villamor supported Gesta’s statement, saying there are lots of things to consider when lending to SMEs.
Viability
“We have to determine the track record of the company and the viability of their specific business and the industry they are in,” he said in a separate interview.
Banks could also not impose on SMEs high interest rates on loans to consumers.
“The rates on consumer loans are higher because (the principle is) the good ones (clients) subsidize the bad ones. This lessens the risk. But banks could not slap the high interest rates on SMEs because they will use their loans for their businesses,” Villamor said.
Metro Gaisano-controlled Wealthbank is active in lending to SMEs, especially subcontractors of exporters and manufacturers.
The bank, like RCBC, also offers consumer loans such as housing loans, car financing and salary loans. (JBN)
(November 17, 2005 issue)
Write letter to the editor. Click here.
Join the Sun.Star message board. Click here.
|
|
[return to top]
[home]
[network page]
|
LOCAL NEWS
BUSINESS
OPINION
SPORTS
LIFESTYLE
FEATURE
SUPERBALITA
WEEKEND
|
