Banks’ agra loans still below law’s mandate

MANILA, Philippines - Bank lending to agrarian reform beneficiaries remained below the level mandated by law during the first quarter, data from the Bangko Sentral ng Pilipinas showed.

Universal, commercial, thrift, rural, and cooperative banks extended only P26.937 billion to farmers granted lands by the government, P151.097 billion short of the required P178.034-billion allocation.

Borrowings for agriculture and fisheries, meanwhile, summed up to P296.816 billion as of March, higher than the needed P267.051-billion allotment.

Republic Act 10000 or The Agri-Agra Reform Credit Act of 2009 mandates banks to set aside 25 percent of their loanable funds for agriculture and fisheries, with 10 percent of this to be appropriated for agrarian reform beneficiaries.

Data from the central bank showed that throughout 2012 and 2013, banks have been unable to comply with the mandated 10 percent allocation for recipients under the various agrarian reform laws.

BSP Deputy Governor Nestor A. Espenilla, Jr. earlier this month said this is due to the weak demand for agri-agra loans.

Espenilla further noted that there should be an effort from the government to strengthen individuals from said segment in order to increase the credit demand.

Under the law, banks may lend to the sectors themselves or to accredited rural financial institutions (RFIs), which will re-lend the funds to the target markets.

Banks may also comply with RA 10000 through extending credit for the construction or rehabilitation of farm-to-market roads, post-harvest facilities, and other infrastructure for the agri-agra sector.

Of the total P323.753 billion loans extended to the agriculture sector and agrarian reform beneficiaries as of March, P181.120 billion was made through alternative compliance.

The borrowings made by the agri-agra sector in the first quarter were 53 percent higher than the P211.048 billion recorded in the same period last year.

In March this year, BSP Governor Amando M. Tetangco, Jr. has said the central bank is not “inclined” to support mandatory lending as banks become conflicted between lending to certain sectors and following safety standards on extending credit especially to segments that carry a lot of risk.

Aside from required lending to the agri-agra sector, banks are also mandated to set aside another 10 percent of their loan portfolio to micro, small, and medium enterprises under RA 9405 or the Magna Carta for MSMEs.