Agri-agra loans grow 11% to P714 billion in 9 Months

MANILA, Philippines — Loans extended by Philippine banks for agriculture and agrarian reform recorded a double-digit growth of 10.8 percent to P714.27 billion from January to September 2019 compared to P644.64 billion in the same period in 2018, but the figure remained below the threshold mandated by the law.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed the banking system was only able to allocate 12.9 percent of its total loanable funds during the nine-month period last year, way below the 25 percent mandated under Republic Act 10000 or the Agri-Agra Reform Credit Act of 2009.

The law retained the mandatory credit allocation in Presidential Decree 717 where 15 percent of banks’ total loanable funds are to be set aside for agriculture, while 10 percent should be made available for agrarian reform beneficiaries.

According to the BSP, the loans extended by banks to the agriculture sector amounted to P653.65 billion, for an 11.8 percent compliance ratio, which is below the required 15 percent.

The central bank said big banks or universal and commercial banks registered a compliance ratio of 11.8 percent after extending P615.92 billion to the agriculture sector, while the ratio of thrift banks only reached 7.23 percent after granting P18.25 billion.

Rural banks extended P19.49 billion to the agriculture sector for a compliance ratio of 22.4 percent.

Likewise, the compliance ratio of the banking system fell way short of the 10 percent threshold for agrarian reform credit as banks only extended loans amounting to P60.84 billion for a compliance ratio of 1.1 percent.

The compliance ratio of big banks for agrarian reform loans only reached 0.95 percent, while that of thrift banks settled at 0.93 percent as well as rural and cooperative banks with 10.34 percent.

BSP Governor Benjamin Diokno said the priority legislative measures the central bank is pursuing under the 18th Congress include reforms to agricultural financiing that seek to amend the Agri-Agra Reform Law and allow banks to merge their loan allocation to the farm measure to improve banks’ compliance rate.

Monetary Board member Bruce Tolentino had said fines collected by the BSP from banks that fail to reach the 15 percent agriculture and 10 percent agrarian reform to beneficiaries under the Agri-Agra Reform Law have reached P6 billion.

“Many of the banks prefer to pay the penalty rather than actually lend to farmers because farmers are poor credit risks, so they pay. I think over the last two years it has been something like P6 billion in penalties alone,” he said.