By Beting Laygo Dolor, Contributing Editor

The country’s private banks have made it harder to avail of loans, even for their regular clientele.

This, after the government-ordered moratorium on loan payments issued last April began took its toll on banks and other lending institutions.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that non-performing loans skyrocketed by 60 percent to PHP364.67billion (about US$7.597 billion) as of end-September, compared to PHP227.6 billion (US$4.72 billion) for the same period last year.

As of end-August, this year, the non-performing loans were pegged at PHP304.99 billion (US$6.354 billion) , or a 20 percent hike month-on-month.

Non-performing loans are described as loans that have not been paid for at least 30 days after due date. The non-payment of loans prevents banks from extending new loans, slowing down their growth.

In a statement, the BSP said, “The general decline in bank growth partly reflects the banks’ reduced tolerance for risk, decline in loan demand due, in turn, to weak business and income prospects, and observed shift by non-financial corporates to alternative sources of funds.”

In general, however, resorting to “alternative sources of funds” means higher interest rates and shorter paying periods demanded by the lenders.

With the high volume of unpaid loans and no end in sight for the surge, even the country’s biggest banks have been wary of extending loans despite the government’s efforts for them to resume the same level of extending credit prior to the coronavirus pandemic, which began to take hold in mid-March.

BSP Gov. Benjamin Diokno even took the bold step of pushing down interest rates to record lows in the third quarter, to no avail.

Businesses and consumers were still unable to source funds from their banks, leading to a slowing down of big ticket purchases such as cars and condominium units for the latter, and expansion of operations for the former.

An economist for one of the country’s biggest insurance companies said, “The third quarter looks bad and doesn’t indicate if the loan trend will change as of now.”

So dire is the situation in the banking industry that S&P Global recently downgraded the sector as “a very high risk” to the lending industry.

In S&P Global’s latest Asia-Pacific Financial Institutions Monitor for the fourth quarter, a copy of which was made available to local media, the credit watchdog said the economic risk trend of banks in the Philippines had landed in negative territory.

In its key banking sector risk assessment, S&P said the Philippines’ once respected economic resilience had become the biggest risk for banks in the years to come.

Other countries in the region were now rated at “very high risk” including Bangladesh, Cambodia, Sri Lanka, and Vietnam.

BSP Deputy Gov. Chuchi Fonacier, however, predicted that the slowdown in lending has already bottomed out, and that the lenders will resume their activities “in the final two months of the year.”

The decline in bank lending posted in September was the sixth consecutive month of the slowing down of the key economic indicator.

Prior to the lockdowns spurred by the pandemic, bank lending actually expanded by 13.5 percent in March, when the Philippines along with most of the world were forced to take extreme measures to battle the pandemic, ultimately resulting in economies to shrink.

The Philippines imposed what is considered the strictest lockdown and quarantine rules in the region.

The Duterte administration’s supporters in Congress are taking new steps to ease credit to businesses. Last week, legislators passed the Financial Institutions Strategic Transfer Act, which seeks to absorb lenders’ bad loans in order to spur renewed lending.

The government will also make available to small and medium-sized industries a fresh PHP42.3 billion (US$881 million) credit guarantee facility via the Philippine Guarantee Corp.