In a move that could reshape financing for education, Philippine thrift banks are advocating caution regarding the Bangko Sentral ng Pilipinas' (BSP) recent decision to allow salary loans with repayment periods of up to seven years. While the change promises flexibility, industry leaders believe it is not suitable for all types of expenses.
A Cautious Approach to Extended Loan Terms
'You cannot do seven years of tuition fee, right?' said Manuel Santiago Jr., trustee of the Chamber of Thrift Banks.
Manuel Santiago Jr., Trustee of the Chamber of Thrift Banks
- Longer loan terms should be limited to non-recurring expenses.
- Thrift banks aim to prevent borrowers from becoming overburdened.
Santiago emphasized the need for thrift banks to carefully assess the purpose of loans before extending repayment periods. 'Our position is that it shouldn’t be for all,' he stated at the Chamber's annual convention.
Salary loans, which make up a significant portion of thrift banks' portfolios, are typically unsecured and rely on the borrower's income. The BSP's latest guideline, found in [BSP Circular No. 1239](https://www.bsp.gov.ph/Regulations/Issuances/2026/1239.pdf), allows banks to determine repayment terms based on the borrower's financial situation.
According to BSP Deputy Governor Lyn Javier, about 70% of loans from thrift banks are extended to individuals, with salary loans constituting over half of the individual loan portfolio. She noted that while the seven-year term offers flexibility, it must also promote the long-term financial well-being of borrowers.
Javier highlighted the importance of financial literacy, stating that banks should support borrowers with wellness programs that extend beyond lending.
As the industry adapts to these changes, the balance between providing access to credit and ensuring responsible borrowing remains a key focus for thrift banks.