Banks move to squeeze purchase order lenders
Lewanika Timothy | Wednesday March 4, 2026 06:00
Industry insiders in the purchase order financing space have revealed to MonitorBusiness that they have experienced year on year decline in profits mainly driven by declining sales and intense competition from commercial banks that once upon a time didn’t care much about purchase order financing.
Commercial banks, backed by billions in deposit funding and broader client portfolios, are able to offer more competitive rates particularly to established Small and Medium Enterprises (SMEs) with government contracts putting pressure on independent lenders that traditionally filled gaps left by conservative bank products in the past.
A study into the market by MonitorBusiness found that all commercial banks in the country offered purchase order financing at competitive lending rates to those offered by purchase order financing firms, with some of them having budgets spanning over P200 million for purchase order financing to Small and medium enterprises.
The industry insiders also revealed to MonitorBusiness that they were experiencing pressure from international and local creditors to return invested amounts that are stuck in delayed government payments.
“The market has really been harsh. Every day we learn of a bank doing purchase order financing or making lending for purchase order financing cheaper. This was not a mainstream banking product before but now banks have coming in and are competing heavily with us,” one said.
“We also have been experiencing delayed payments on issued out capital mainly because of stalled payments from government purchase orders which have been delayed for the past two years.” The country’s largest commercial bank, First National Bank in its report to society this year disclosed that it was seeing a reduction in sales for its Purchase Order financing product which had a budget of P200 million but the bank could only distribute P84 million, underscoring weakening activity for local enterprises amidst growing economic headwinds . The bank attributed the low uptake to a slow economic activity marked by decreased government spending that had spillover effects to other microelements of the economy, such as businesses and households.
“Lending remained curtailed in the second half of the financial year owing to some significant economic headwinds, which severely impacted the government, a significant customer of SME,” the bank revealed.
Last year, government halted the issuance of Government Purchase Orders (GPO) as part of expenditure control measures amid mounting fiscal pressures. The pause in GPO issuance disrupted cash flow pipelines for many SMEs whose business models are structured around government contracts and invoice-backed financing.
While government has now moved to centralisng GPOs it is believed that the pace of issuance is now slower due to stringent third eye measures applied to every GPO.