According to the Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, loans provided for by commercial and universal banks went up to P3.60 trillion from the P3.23 trillion last year. Although it is slower than the 13% growth recorded during the month of June this year, it still increased at a growth rate of 11.7%, which is still significantly good. Basing from the graph that follows, the gross total loan portfolio of commercial and universal banks grew at more than 10% for the past 3 years. With the entry of the month of July this year, the total loans still increased at a growth rate that is above 10%.

As one of the most important function of commercial and universal banks, the issuance of loans and credits to borrowers represent one of the major demand determinants of the industry. Banks, in general, provide loans to many types of consumers; from individual customers, business firms, corporations, or whole industries. Since 2005, banks have been offering much of its loans to auto loans, real estate loans, and consumer loans. In fact, the growth from 2009 until today is generally attributed to real estate loans, according to the BSP. In the data provided for by the BSP in the article, real estate loans were at P614.47 billion, the highest portion during the month of July this year. The high loans attributed to the real estate sector can be traced from the legislation of “The Act Providing Regulatory Framework for Real Estate Investment Trust” last 2009. The bill aims to stimulate the development of the real estate sector in the Philippines, which can be seen from the productivity of the sector in the past 5 years.

 Moreover, consumer loans also jumped up to P269.08 billion in July at a 12.3% increase from last year. Consumer loans are those that are provided to individual customers and business firms. In fact, this is also one of the main drivers of the demand for loans in the banking industry. When looking at the input-output table of the banking industry since the year 2000, personal consumption has always been at the top three most important destinations of outputs for banks. This means that most of the outputs, at this point it would refer to loans, go directly to personal businesses or transactions by ordinary consumers.

 The high growth rates of the bank lending this month of July only represents how strong the demand for banking services is. Moreover, it generally represents that the banking industry is already a strong industry. This smooth liquidity and flow of money could be the main support for the economic growth of the Philippines. This, of course, is to be monitored by the BSP closely to be able to relate to the central bank’s financial stability objectives.

Del Rosario, Keren Michelle P.
Desamparado, Lorenze Matthew G.
Somes, Elliane P.

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