PH banks report rise in household loan demand for Q2

Demand for both loans to households and enterprises rose, official data showed.

Loan demand from Philippine households rose in Q2, whilst demand from enterprises remained unchanged, data from the Bangko Sentral ng Pilipinas (BSP) showed.

A lower proportion of banks (57.9%) said that household demand remained unchanged in Q2 compared to Q1 (68.8%), according to the Q2 2024 Senior Bank Loan Officers’ Survey by the BSP.

Meanwhile, the diffusion index (DI) approach showed a higher net increase in household loan demand during the quarter compared to the previous quarter, the central banks said. 

This was thanks to banks' more attractive financing terms as well as higher household consumption and housing investment.

For loans extended to enterprises, the majority of banks (72.2%) said that there is unchanged overall demand for loans in Q2. 

Using the diffusion index (DI) method, more banks reflected a higher net increase in credit demand during the quarter, which the BSP said is due to increased inventory and accounts receivable financing needs, as well as improvement in economic outlook.

The Philippines’ central bank uses two methods to gauge credit standards: first is the modal approach, which looks at the option with the highest share of responses. BSP uses three options for its modal approach: tightening, easing, or unchanged.

The DI approach, meanwhile, is based on the proportion of banks who tightened their credit standards versus those that eased. A positive DI indicates that the proportion of banks that tightened their credit standards exceeded those that eased; whereas a negative DI indicates that more respondent banks have eased their credit standards compared to those that tightened.