There are roughly one million micro, small and medium enterprises (MSMEs) in the Philippines. They account for 99.6% of all registered businesses and employ the majority of the country’s workforce. Yet according to the Bangko Sentral ng Pilipinas (BSP), MSME loans represent just 4.7% of the banking industry’s total lending portfolio.
For lenders operating in the Philippines in 2026, this is not a crisis. It is an opportunity. The MSME lending market is underserved, loyalty is high, and digital adoption is accelerating. The question is not whether to pursue Philippine MSMEs but whether your technology infrastructure can help you do it at scale. Most of the barriers lenders face, such as slow approvals, high operational costs, limited product flexibility, trace back to a single root cause: a core banking system that was not built for the demands of today’s market.
This guide is written for lenders who want to grow their business customer portfolio in 2026 and may not yet realise that the biggest barrier to doing so is their core banking system.
What does the Philippine MSME lending opportunity look like?
The numbers are striking. MSMEs make up nearly the entire Philippine business ecosystem yet remain chronically underfinanced. Bank lending to MSMEs grew 5.2% to ₱575 billion in 2025, according to the BSP, but that figure still accounts for less than 5% of total bank lending. Furthermore, according to BSP data cited by the Philippine Finance Association, about 95% of banking system credit flows outside the MSME sector.
The barriers that have historically held lenders back are well documented in surveys by MSME lenders, and include:
- Risk concerns
- High per-loan processing costs
- Limited data on borrowers
- Lack of collateral
But beneath each of these barriers is often a technology constraint: without real-time data, automated decisioning, and flexible product configuration, it is simply too expensive and too slow to serve MSMEs profitably at scale.
That is the gap that modern core banking systems are designed to close.
Why does user growth depend on core banking modernisation?
It’s tempting to treat core banking modernisation as a back-office concern. As something that matters to IT teams but has little bearing on customer acquisition or portfolio growth. The evidence from lenders who have made the transition tells a different story.
The link between core infrastructure and user growth operates through several channels:
Approval speed
MSME borrowers in the Philippines do have options. If your approval process takes days or weeks, borrowers will find a lender who can move faster. Legacy systems, built around batch processing and paper-heavy workflows, are structurally unable to deliver the turnaround times that today’s market expects. A cloud-native core, by contrast, is designed for real-time processing, enabling loan approvals in hours rather than days and allowing loan officers to assess and approve applications simultaneously from any location.
Product agility
MSME lending is not a uniform product. Different businesses need different loan structures, repayment terms, interest rate configurations, and disbursement schedules. Legacy cores make product configuration slow, expensive, and often dependent on vendor intervention. A modern, API-first core allows your team to configure and launch new products in weeks rather than months, which means you can respond to market demand, match competitor offers, and tailor solutions to specific segments without a lengthy development cycle.
Scalability without proportional cost
One of the most persistent myths about MSME lending is that it requires a large branch network and a high headcount to service effectively. The most successful business lenders in the Philippines are proving otherwise. By digitising loan workflows, from client onboarding through to disbursement and collections, they are growing their portfolios without growing their cost base at the same rate. This is only possible on a modern core.
For a deeper look at how modern core systems enable this kind of growth, Oradian’s guide to core banking systems covers the key capabilities in detail.
What does good look like? The Esquire story
Few examples illustrate the connection between core banking transformation and SME portfolio growth more clearly than Esquire Financing Inc.’s journey with Oradian.
Esquire is the Philippines’ leading non-bank financial institution focused on growth-stage SME financing. Operating since 2011, the company has supported more than 30,000 entrepreneurs with flexible, non-collateral business loans. But despite its strong market position, Esquire’s legacy technology was creating bottlenecks that threatened its ability to scale. Loan approvals could take weeks. Paper-heavy workflows were slowing down staff and customers alike. The system simply could not support the growth the business was capable of.
After evaluating multiple providers, Esquire chose Oradian’s cloud-native core banking system as the platform for its next phase of growth. The implementation was completed in just three months. Within that same period, loan approval times dropped from weeks to hours. Esquire subsequently tripled its loan portfolio in under two and a half years, went fully paperless, and is now targeting a billion-dollar valuation.
CEO Rajan Uttamchandani has been clear about the philosophy driving that transformation: “The more you invest in technology, the less of a branch network you’ll need, and the less of a branch network you need, the fewer overheads you’ll have overall. When we’re thinking about the investment in technology, we’re not thinking about the cheaper solution but about which solution will help us to grow the fastest.”
That framing, of technology as a scale-maximisation strategy rather than a cost-cutting measure, is one that more SME lenders in the Philippines would do well to adopt.
The value of local expertise was also a decisive factor. As Uttamchandani noted: “None of the other providers we were talking to had local support. Having local support on the ground was really an advantage for us.” For lenders evaluating core banking partners in the Philippines, that kind of in-market presence and people who understand the regulatory environment, the competitive dynamics, and the realities of implementation, is worth weighing carefully alongside the technology itself.
Read about the full success story in Oradian’s Esquire Financing case study.
What should lenders look for in a core banking system for MSME lending?
Not all core banking systems are equivalent. For lenders targeting Philippine MSMEs specifically, a number of capabilities matter more than others.
Cloud-native architecture. There is an important distinction between cloud-native and cloud-enabled systems. A cloud-native core is built from the ground up to run in the cloud, delivering real-time processing, automatic scaling, and high availability as standard features. A cloud-enabled system is a legacy platform that has been partially migrated. It carries the limitations of its original architecture with it. For MSME lenders who need 24/7 availability, fast processing, and the ability to scale rapidly, this distinction is not a technical nicety. It is a business-critical consideration.
API-first design. The modern lending stack is not a single monolithic system. It is an ecosystem of integrated tools: loan origination systems, credit scoring engines, KYC providers, digital wallets, and more. A core banking system that is closed to integration will limit your ability to build that ecosystem.
Danny Boy Antonio, CEO of Agribank, found this firsthand: “Oradian offered us an open API layer straight out of the box. This meant we could easily integrate their core banking system with our existing loan servicing, origination, and loan officer mobile applications without needing to redevelop everything from scratch. This was a major factor in why Oradian was a good fit and won out in the end.”
Automated loan management. For MSME lenders processing high volumes of smaller loans, automation is not optional. Oradian’s loan management system automates the full loan workflow, from client creation and application through to evaluation, approval, disbursement, collection, and reporting. This eliminates paper handling, reduces human error, enables parallel processing of applications, and gives your team real-time visibility of the entire portfolio from any location.
Configurability. MSME lending demands product flexibility. Lenders need to be able to configure loan terms, repayment schedules, interest calculations, and fee structures without going back to a vendor every time. The ability to launch new products quickly, and adjust existing ones, is a meaningful competitive advantage in a market where borrower needs are diverse and fast-changing.
Country Funders Finance Corp.’s President and CEO Ana Alingog-Lazzari put it well: “We wanted a tech solution that is flexible, that will allow us to use these and will not force us to change the way we do things, but rather further enhance the processes or the practices that we believe are unique to us. So, with Oradian, we took the risk, and now we’re here.“ For lenders with established workflows and proprietary processes, that kind of adaptability is the difference between a system that serves your business and one that constrains it.
Compliance readiness. The Philippine regulatory environment, governed by the BSP, requires robust reporting, AML controls, and data governance capabilities. A modern core should make compliance an automated outcome of normal operations rather than a manual reporting burden.
What does the competitive landscape mean for Philippine lenders in 2026?
The Philippine financial services market is becoming more competitive, not less. Digital banks are entering the MSME lending space. Fintech lenders are deploying automated decisioning to approve loans in minutes. Non-bank institutions are leveraging technology to offer faster, more flexible products than traditional banks.
The lenders who will capture the MSME opportunity in 2026 are not necessarily those with the biggest balance sheets or the most branches. They are the ones who can move fastest, serve borrowers most efficiently, and iterate on their products most quickly. All those capabilities flow from the quality of the underlying technology.
This is not a future challenge. According to BSP data, banks are still falling well short of their MSME lending obligations, with analysts noting that better credit information, digital tools, and stronger risk-sharing mechanisms are needed for banks to lend with confidence at scale. The infrastructure gap is being recognised at every level of the market. banks are still falling well short of their MSME lending obligations, with analysts noting that better credit information, digital tools, and stronger risk-sharing mechanisms are needed for banks to lend with confidence at scale. The infrastructure gap is being recognised at every level of the market.
For lenders who act now, the rewards are significant. MSME borrowers in the Philippines, as Esquire’s CEO has observed, are a loyal segment. Once a lender has earned the trust of an MSME client, that relationship tends to be durable. The challenge has always been acquiring them efficiently enough to make the economics work. Modern core banking removes that constraint.
It is also worth noting that the Philippines is not the only Southeast Asian market where this dynamic is playing out. Salmon, one of the Philippines’ most innovative digital lenders, chose Oradian to power its launch in the country, citing the need for a core that could support rapid market entry and long-term growth simultaneously. Other Oradian customers across the Philippines, from Cantilan Bank in rural communities to Zurich Finance Corporation, which saw loan defaults fall by 50% after digitalising its operations, reflect the breadth of institutions that are already benefiting from modern core infrastructure.
So, where does growth really start?
If you are a lender in the Philippines and your ambition is to grow your MSME client base in 2026, the conversation needs to begin with infrastructure. Not with marketing strategies, not with product design, and not with sales headcount. Those things matter, but they will all underperform on a legacy core that cannot process fast enough, integrate broadly enough, or scale efficiently enough to match the opportunity.
The Philippine MSME market will not wait. There are millions of who need financing and are actively seeking lenders willing to serve them on modern terms. The gap between what they need and what most banks currently offer is not closing by itself, but it will be closed by lenders who invest in the technology to bridge it.
User growth, in that context, really does start with your core. If your current system is holding you back, it’s time to find out what a cloud-native, API-first alternative could unlock for your business.
Key takeaways
- MSMEs account for 99.6% of Philippine businesses but receive just 4.7% of bank lending
- The BSP mandates a 10% MSME lending ratio which banks have missed consistently since 2011
- Cloud-native core banking enables loan approvals in hours rather than weeks
- Esquire Financing tripled its SME loan portfolio in under 2.5 years after migrating to Oradian
- Core banking implementation on a modern platform can be completed in as little as three months
Ready to grow?
Our whitepaper, First Login to Lifelong Customer: The Growth Playbook for Banks, covers the full picture of how you can achieve effective, stable growth this year and beyond, from identifying your priority customer segments to designing the lifecycle that takes users from first login to long-term advocacy. It’s written for digital-aspirant financial institutions in dynamic markets and ends with a practical 90-day roadmap you can start immediately.
To learn more about how Oradian’s core banking platform supports SME lenders in the Philippines and across Southeast Asia, drop us an email at vanda.jirasek@oradian.com and we’ll connect you with one of our Philippines-based experts.
