Assessing Mandated Credit Programs: Case Study of the Magna Carta in the Philippines

Publication | November 2015
SHARE THIS PAGE

This paper examines the Magna Carta Law in the Philippines, which mandates banks to allocate 2% of their total loan portfolios to medium-sized firms and 8% to micro and small firms.

Three findings are highlighted. First, although total lending to micro, small, and medium enterprises (MSMEs) grew slightly, MSME loan shares declined drastically from 30% in 2002 to 16.4% in 2010. Second, there was a sharp rise in noncompliance after loan targets increased in 2008. Third, there is increased heterogeneity in optimal loan portfolio across banks. Most surprisingly, total MSME lending by rural and cooperative banks declined since 2008. Abolishing Magna Carta target for medium-sized enterprise loans would most likely yield little adverse effects.

Contents

  • Tables and Figures
  • Abstract
  • Introduction
  • Financing Micro, Small, and Medium Enterprises in the Philippines
  • Compliance to the Micro, Small, and Medium Enterprise Magna Carta
  • Assessing Bank Compliance to the Micro, Small, and Medium Enterprise Magna Carta
  • Recent Developments and Policy Implications
  • Conclusion
  • Appendix
  • Bibliography

Additional Details

Authors
Type
Series
Subjects
  • Finance sector development
  • Small and medium enterprise (SME) financing
Countries
  • Philippines
SKU
  • WPS157764-2
ISSN
  • 2313-6537 (Print)
  • 2313-6545 (e-ISSN)

Published Version

Jacildo, Ryan, Niny Khor, and Ruth Tacneng. 2016. "Assessing Mandated Credit Programs: Case Study of the Magna Carta in the Philippines." Journal of Governance and Regulation 5 (3): 34–49. https://doi.org/10.22495/jgr_v5_i3_p5.

Subscribe to our monthly digest of latest ADB publications.

Follow ADB Publications on social media.