Philippine Thrift Banks Project Continued Lending Growth as Industry Seeks Responsible Salary Loan Reforms

 

Philippine Thrift Banks See Strong Lending Momentum While Calling for Responsible Salary Loan Policies

Philippine thrift banks are entering 2026 with confidence as rising demand for financing continues to fuel expansion across the sector. Industry leaders believe the growth trajectory remains intact, driven by broader financial inclusion initiatives and the increasing credit needs of households and small enterprises. At the same time, banks are urging regulators to adopt safeguards for longer salary loan repayment terms to ensure borrowers remain financially secure.

The Chamber of Thrift Banks (CTB) expects lending activity to maintain last year's momentum after the industry recorded a 25 percent expansion. According to CTB Chairman and City Savings Bank President Manuel Santiago Jr., the steady appetite for loans reflects a broader shift toward greater access to financial services rather than temporary market conditions.

The sector has now surpassed a significant milestone, with its combined loan portfolio exceeding ₱1 trillion. Data from the Bangko Sentral ng Pilipinas further reinforces this positive trend, showing thrift banks' outstanding loans climbed 13.4 percent during the first quarter to ₱1.07 trillion, compared with ₱939.67 billion during the same period a year earlier.

For thrift banks, expanding access to credit remains essential because many Filipino families and entrepreneurs continue to rely on affordable financing to cover education, business expansion, emergencies, and daily financial needs. As more consumers enter the formal banking system, institutions expect lending activity to remain resilient.

One of the industry's biggest priorities is the implementation of the Bangko Sentral ng Pilipinas' decision to extend the maximum repayment period for salary-based consumer loans to seven years. While banks support the measure, they believe its application should be carefully managed instead of becoming a universal standard.

Longer repayment periods can reduce monthly amortizations, making loans more manageable in the short term. However, extending repayment without considering the purpose of the loan could leave borrowers carrying debt for years longer than necessary. Industry leaders argue that affordability should be measured not only by monthly payments but also by the total financial obligation over time.

To strike that balance, Santiago proposed limiting six- or seven-year salary loans to essential expenses such as hospitalization, home improvement projects, vehicle purchases, or necessary vehicle repairs. By reserving extended repayment periods for high-value and long-term needs, banks believe borrowers can benefit from lower monthly costs without encouraging unnecessary debt accumulation.

Salary-based lending continues to represent one of the most important business segments for thrift banks. Depending on each institution's business model, salary loans account for roughly 30 percent of loan portfolios in diversified banks and can reach as much as 80 percent among lenders that primarily specialize in salary financing.

The industry is also preparing for a more competitive digital banking environment. Following the lead of several universal banks, many thrift banks are expected to eliminate digital fund transfer fees in the near future. Although this move may reduce income generated from transaction charges, industry leaders anticipate that higher transaction volumes will largely compensate for the decline in fee-based revenue while improving customer convenience.

Despite persistent inflationary pressures, thrift banks continue to report stable asset quality. Santiago noted that institutions have not experienced a meaningful increase in loan losses, and there are currently no expectations of additional provisioning. Likewise, non-performing loan levels are projected to remain largely unchanged, signaling continued financial stability across the sector.

Beyond lending performance, thrift banks are positioning themselves to play a more influential role in shaping the future of Philippine banking. CTB President and Equicom Savings Bank President Jaime Valentin Araneta emphasized that the industry must actively participate in discussions surrounding digital transformation, cybersecurity, artificial intelligence, payment modernization, financial inclusion, and regulatory reform.

Rather than simply adapting to changes within the financial system, thrift banks aim to contribute to the development of policies and innovations that strengthen customer trust while expanding access to banking services.

This vision aligns with the theme of the Chamber of Thrift Banks' 52nd Annual Convention, CTB@52: Staying True to Customer Relevance, underscoring the sector's commitment to evolving alongside consumer needs while maintaining responsible lending practices and long-term financial sustainability.