Agri-agra loans post 2-digit growth in Q1

MANILA, Philippines — Loans extended by domestic banks for agriculture and agrarian reform recorded a double-digit growth of 10 percent to P765.92 billion in the first quarter from P696.35 billion in the same quarter last year, according to the Bangko Sentral ng Pilipinas (BSP).

Despite the double-digit growth, however, the banking industry continued to fall short of the mandated threshold for agri-agra loans.

Preliminary data from the BSP showed the banking system was only able to allocate about 10.59 percent of its total loanable funds from January to March, way below the 25 percent mandated under Republic Act 10000 or the Agri-Agra Reform Credit Act of 2009.

The total loanable fund generated by the banking industry jumped by nearly 25 percent to P7.23 trillion in end-March from P5.81 trillion in the same period last year.

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.

The BSP said loans extended by banks to the agriculture sector increased by 9.2 percent to P699 billion in the first quarter from P640 billion a year ago.

Despite the improvement, however, this only resulted in a compliance ratio of 9.66 percent, far below the required 15 percent.

The central bank said big banks or universal and commercial banks registered a compliance ratio of 9.73 percent after extending P664.09 billion to the agriculture sector, while the ratio of thrift or mid-sized banks only reached5.88 percent after granting P17 billion.

Rural banks extended P17.54 billion to the agriculture sector for a compliance ratio of 15.3 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 P67.22 billion or 18.9 percent higher than last year’s P56.53 billion for a compliance ratio of 0.93 percent.

The compliance ratio of big banks for agrarian reform loans only reached 0.77 percent, while that of thrift banks settled at 1.09 percent, as well as rural and cooperative banks with 9.81 percent.

BSP managing director Lyn Javier earlier told the Senate Committees on Agriculture, Food and Agrarian Reform, as well as Banks, Financial Institutions and Currencies, that the regulator has collected P13.4 billion worth of fines from banks that failed to comply with the mandate from 2011 to 2018.

The BSP is pushing further amendments to the mandated loan threshold for agri-agra activities to push the country into the next stage of development post COVID-19 pandemic.

BSP Governor Benjamin Diokno said the pending agri-agra bill would strengthen rural development by providing a holistic approach in addressing the financing needs of the broader agricultural financing ecosystem.

House Bill 6134   principally tackles the persistent challenges in agriculture financing that emanate from both the borrowers’ side and the banks’ and lending institutions’ side.

The proposed amendments  enhance access by rural communities to private sector financing through the expansion of the modes of compliance by banks, creation of a special fund managed by an Agricultural and Fisheries Finance and Capacity-Building Council to finance organizational, capacity and institution-building programs and activities of rural agricultural and fisheries households.

The BSP together with the Department of Agriculture (DA) and the Department of Agrarian Reform (DAR) have approved the amendments to the implementing rules and regulations (IRR) of the Agri-Agra Law in March as an interim measure pending the passage of the proposed amendments.