BSP's scrapping of mandatory loan to agrarian reform: Just appropriate

In a country where politicians, when crafting laws, are just so concern about “dole-outs” provisions for purposes of winning future elections, it is refreshing that there are agencies in the bureaucracy that go for pronouncements that are really appropriate and worthwhile. 

As it pushes for the scrapping of the mandatory loan allocation to agrarian reform, the Bangko Sentral ng Pilipinas (BSP) cited problems banks (privately owned) have had in catering to the sector. Apparently disagreeing with Presidential Decree 717 or the agri-agra law (which mandates that a quarter of bank’s loanable funds must go to the agriculture sector, of which 10% must be directed to agrarian reform beneficiaries), the BSP (through BSP Governor Amando M. Tetangco, Jr) declared that, though it recognizes that agriculture is a very important sector of the economy it is not in favor of the mandatory credit sub-allocation of 10% intended for the agrarian reform beneficiaries. 

Notably, in simple math, such provision imposed a mandatory credit allocation of 2.5% (10% of 25%) to the agrarian reform beneficiaries of the bank’s loan portfolio. Considering the number of banks we have in the country, the aggregate loan portfolio is enormous. The truth is, as of October 2009, BSP’s data showed that loans of universal and commercial banks excluding their placements in the central bank reached P2 trillion, of which P303.78 billion went to the agriculture sector. 

Should Presidential Decree 717 be strictly implemented, the total amount of loan that should be poured into the agricultural sector is P500 billion (25% of P2 trillion). As important as the agricultural sector, there is nothing bad about it. What is a big concern is the amount that should be allocated to the agrarian reform beneficiaries which could be in an incredibly enormous P50 billion (10% of P500 billion). Such amount is unbelievably huge for the agrarian reform sector to absorb. 

If that is too much, everyone should be aware that just last month, the Land Bank of the Philippines has earmarked P198 million for loans to agrarian reform beneficiaries in the next three years. The project dubbed, Agri-enterprise Credit and Agri-finance Services (agriCASH), is reportedly “aimed to provide financial services to agri-based enterprises in Agrarian Reform Communities (ARCs) through selected countryside financial institutions, ARC cooperatives, LandBank-assisted cooperatives, and other lending conduits”. Through this project, LandBank intend to release up to PhP198 million in loans from 2009 to 2012. It is also expected to “mobilize savings and generate share capital totaling PhP33 million for the three-year period. 

Notably, we can’t help but agree with LandBank’s president and chief executive officer Gilda E. Pico who said that the project could “further help sustain the improvements on increased incomes, agribusiness employment opportunities, and empowerment of agrarian reform beneficiaries and farmer organizations in ARCs”.

Despite all these and previous supports that are running through decades, the agrarian reform sector remained impoverished. Set aside money issues because there is an overdose of it. In fact, some of it (like those funds channeled through the Department of Agrarian Reform) even went to non-agrarian reform beneficiaries’ pockets. What we truly need now are programs or supports that are really appropriate. These can come in a combination of programs that directly involve the beneficiaries and infrastructure.

First, this government must consider abolishing the Department of Agrarian Reform. They are no better than just plain spenders. They are wasting taxpayers’ money.

Secondly, government planners must realize that banks lend money to bankable borrowers. It simply means that banks lend their depositors’ money to straightforward borrowers who have viable projects. Absolutely, they won’t indiscriminately lend money to those borrowers with unmitigated risks.   That’s common sense, these aren’t banks’ money after all.

Thirdly, to make the agrarian reform borrowers bankable, this government must equip these beneficiaries with sound entrepreneurial skills through the able support of the Department of Trade and Industries. Let us train them also on new farming technologies through the guidance of the technical experts from the Department of Agriculture. It might sound absurd but the government must even entertain the idea of hiring psychologists/psychiatrists to reorient these beneficiaries. They should be told to abandon the mentality of slaves and bury the attitude of mendicants. They are now free to till the land they own and be successful entrepreneurs. More importantly, as entrepreneurs, they should be informed that the land they till isn’t just for their own food subsistence, it shall also be its source for other needs like their kids’ education.

Fourth, in abolishing the Department of Agrarian Reform, the government must consider shifting its budget allocation to the much-needed infrastructures. Infrastructures can come in irrigation projects, post-harvest facilities, farm-to-market roads, transport facilities, etc. With these developments, these beneficiaries’ projects would look viable before the eyes of the lenders. Therefore, there is no need for our lawmakers to even pass laws that shall impose upon lenders to set aside an amount for such sector. With the beneficiaries’ projects’ viability, the banks will willingly lend to them. After all, that’s the way banks do business.

Once and for all, let us seriously look into this major concern of the agrarian reforms beneficiaries today. Then, we shall see if we do or don’t have programs that are supposedly designed to address them. Knowing that these crises are either man-made or due to man’s negligence or out of politicians’ insatiable greed, probably, we can even come up with fresher ideas to reinforce what had been done so far.

In doing so, expect a lot of differing opinions. These are differing opinions that could mean diverse preferences; diverse preferences that demand tough choices; and tough choices that could even lead to personal animosities and wild altercations. In all these exercises, however, we hope that our democratic upbringing prevails and we will wholeheartedly accept the pill that tastes bitter in the short run but heals us in the long run. 

For your comments and suggestions, please email to [email protected].