Agri-agra lending still short of target

MANILA, Philippines - Loans extended by Philippine banks for agriculture and agrarian reform continued to rise but still fell short of the threshold mandated under the law, data from the Bangko Sentral ng Pilipinas (BSP) showed.

According to the BSP, the banking system set aside a total of P393.6 billion in loanable funds for agriculture and agrarian reform credit under the Agri-Agra Reform Credit Act of 2009 in the first half, up nine percent from last year’s P361.1 billion.

However, the combined allocation of loanable funds from agriculture and agrarian reform of 16.8 percent in the first half was way below the minimum threshold set by the law.

The law retained the mandatory credit allocation in Presidential Decree 717 where 25 percent of banks’ total loanable funds are to be set aside for agriculture and fisheries in general, of which at least 10 percent should be made available for agrarian reform beneficiaries. 

The BSP reported the banking system’s 15.6 percent compliance ratio for other agricultural credits was above the required 15 percent but the compliance for agrarian reform credit was only 1.2 percent or lower than the mandated 10 percent.

Universal and commercial banks registered a compliance ratio of 0.8 percent while thrift banks booked a compliance rate of 10 percent but both fell short of the required 10 percent for agrarian reform credit.

However, the BSP said loans extended by banks for the agri-agra sectors continued to exceed the 25 percent requirement after it booked a 42.2 percent compliance ratio for the first half.

Data showed rural banks booked a compliance ratio of 17.1 percent for agrarian reform exceeding the 10 percent mandated as well as 34.1 percent for agricultural credit or more than double the 15 percent threshold.

It added rural banks extended more loans for the micro, small and medium enterprises (MSMEs)

“As such, despite its minimal share in the banking system’s total loan portfolio, the rural and cooperative banking industry was able to cater to the needs of agri-agra as well as MSME borrowers that may be underserved by larger banks,” the BSP said.

Loans extended by banks to MSMEs grew 11 percent to P427 billion.

This resulted to the banking system’s overall compliance ratio of 9.8 percent, slightly lower than the required 10 percent.

The law mandates banks to earmark eight percent of their total loan portfolio for micro and small enterprises and two percent for medium enterprises.

The BSP data showed the banking system’s total credit allocation to medium enterprises of P239.1 billion led to a compliance ratio of 5.5 percent exceeding the required two percent.

On the other hand, the banking system’s funds allocated to micro and small enterprises amounting P187.9 billion resulted to a compliance ratio of only 4.3 percent instead of the required eight percent.