Bank Lending Rises 11.3% in May, BSP Monitors Risks

By Francis Allan L. Angelo

Bank lending in the Philippines continued to expand in May 2025, with loans from universal and commercial banks (U/KBs) growing by 11.3 percent year-on-year, driven by both business and consumer demand, according to preliminary data from the Bangko Sentral ng Pilipinas (BSP).

The latest figure is a slight increase from the 11.2 percent growth reported in April, reflecting continued economic activity despite lingering global uncertainties.

Seasonally adjusted data showed that outstanding loans increased by 0.9 percent month-on-month, indicating consistent credit appetite across sectors.

Loans to residents expanded by 11.8 percent year-on-year, nearly matching April’s 11.9 percent, while loans to non-residents fell by 6.6 percent in May, continuing the 10.0 percent decline from the previous month.

Business loans—accounting for the bulk of credit issued—grew by 10.2 percent, slightly down from 10.3 percent in April due to slower growth in key sectors such as real estate (8.7 percent), retail and vehicle trade (9.8 percent), and transport and storage (14.0 percent).

The manufacturing sector saw a contraction in lending at -3.0 percent, marking continued weakness in industrial production amid high input costs and supply chain challenges.

Consumer loans to residents surged by 23.7 percent, only marginally lower than April’s 24.0 percent, fueled by strong demand for car loans, credit cards, and salary-backed financing.

The BSP considers bank lending a core transmission channel of monetary policy, influencing liquidity, spending, and inflation trends.

“The BSP will ensure that domestic liquidity and bank lending conditions remain aligned with its price and financial stability objectives,” the central bank said in a statement.

Domestic liquidity (M3)—the broad measure of money circulating in the economy—grew by 5.5 percent in May to PHP18.4 trillion, down slightly from 5.8 percent in April.

After seasonal adjustments, M3 rose 0.7 percent month-on-month, supported by sustained claims on the domestic sector and government borrowing.

Claims on the private sector increased by 10.9 percent year-on-year in May, led by rising bank credit to households and private firms, while net claims on the central government rose 9.1 percent, reflecting greater fiscal borrowing.

Meanwhile, net foreign assets (NFA) declined by 4.6 percent year-on-year, with the BSP’s NFA down 4.4 percent due to peso appreciation and reduced foreign currency-denominated holdings.

Banks also recorded a drop in NFA, primarily from increased foreign currency-denominated bills payable.

These trends matter to ordinary Filipinos because bank lending growth signals stronger business activity, more hiring, and greater access to personal credit.

For workers and entrepreneurs, more loans mean better chances of financing new businesses, expanding shops, or covering essential needs like education, transportation, and healthcare.

At the same time, the 23.7 percent rise in consumer loans indicates that households are borrowing more—either to support spending or manage financial pressures.

While borrowing can be helpful, economists warn that rising consumer credit also requires careful budgeting, as future interest rate hikes could make repayments harder.

On the business side, the drop in manufacturing loans suggests potential weakness in factory output, which could affect jobs in production, logistics, and trade-related sectors.

Liquidity data, such as the PHP18.4 trillion circulating in the economy, are critical to price stability, as too much money could trigger inflation and erode consumer purchasing power.

The BSP, which has kept its policy rate at 6.5 percent, said it remains committed to keeping lending conditions supportive of sustainable growth without letting inflation overheat the economy.

For Filipino families, this means watching how credit, inflation, and policy rates evolve in the coming months will be essential to managing household budgets, debt, and future financial decisions.