By Nicole Tigno

Small and medium scale enterprises bewail the fact that most banks still charge more than the government's recommended rate for interest loans.

Such loans are primarily based on the government treasury bonds or the 91 day T-bill rate.

To make way for the EDSA 1 commemoration holiday (Feb 25), banks held the weekly T-bill auctions today, Tuesday, instead yesterday.

The T-bill rate following a 7-week downward trend declined 18.6 basis points to a new 15-year low of 7.092 percent.

Bureau of Treasury chief Sergio Edeza that 7 percent was a realistic rate considering 5 percent rate over the T-bill benchmarks. " If we see (the 91-day T-bill rate stable at between 7 to 7.25 percent it's good he said.

Analysts say that this unprcendented lowering, has done nothing to boost the economy. This could in part be due to local bank's high lending rates. The manufacturing sector the coutry's ,mainstay in economic growth is seriously hampered by banks reluctance to lend to needy borrowers.

Small time enterprise bowerers complain that most banks still charge way above the Bankgo Sentral ng Pilipinas (Central Bank of the Philippines) recommended lending rate.

This rate is pegged 5% higher than the T-bill rate. Banks whose loan interests rates go higher than this 12.092% are penalized.

Some banks however, lend with an interest of 19%.

Unlike small business loans, large-scale businesses, considered less risky loans are charged only around 12%.

Last September BSP chief Rafel Buneventura called 12 banks to question for violating the lending rates that were set by government standards.

President Gloria-Macapagal Arroyo, Trade Secretary Mar Roxas and Finance Secretary Isidro Camacho have also been calling for banks to lower their lending rates.

The banks however, justify that they have a high -performing asset loan ration (bad loans) due to a distressed economy. Yet when annual reports to stockholders are turned in these same banks boast profits despite the hard economic times,

These banks also blame their overhead and administrative costs (around 100% of the costs of money) demmand that they raise ther lending rates.

In the long run, these banks are merely favoring the rich over the poor and hampering the countries entire economic growth by doing so. Small time businesses are hardly given the chance to profit if they maintain such high lending rates.

Some people suggest the democratization of banking. But what are the implications of opening our banking sector freely to foreign banks? This could mean that Filipinos will be putting their hard-earned pesos in other countries pockets.

Nevertheless, financial democratization would definitely lower present banking interest rates. Democratized banking would also encourage equal ground with big compnanies.

As this scenario is the forseeable effect of a globalization that is upon us, democratizing borrowing will most likely be the future of banking not only in the Philippines but all over the world.

(Tables of Local Lending rates to follow)