Bad banking (5)

Responding to my recent columns, a dear friend and a social worker, Maribel Ongpin, related her experience with Land Bank. Excerpts:

I speak of the LandBank of the Philippines and its dubious claims to help small and medium, even micro businesses, specially those affected by Covid-19.

It is billed as a government financial institution that strikes a balance in fulfilling its social mandate of promoting countryside development and having the means to do so. Supposedly, its profits from commercial banking are used to finance programs and initiatives for farmers, fishers and the micro, small and medium enterprises.

An affordable medical clinic engaged in health services, from maternal and child care to treating common medical conditions like diabetes, hypertension, respiratory diseases plus vaccinations and corporate health services for more than 20 years now, was negatively affected by the pandemic.

The social enterprise which is a foundation is also recognized as a quality partner of government in reducing unmet needs of family planning and recently making accessible affordable mental health services via mindfulness-based programs. (Disclosure: I am a founding member and current chairperson of this foundation.)

(We are) a social enterprise engaged in providing social services; we are a non-profit successfully engaged in the medical field for over two decades now with clinics in Metro Manila, Rizal and Davao. We were doing well as an independent medical service facility serving lower middle-class families who had the ability to pay affordable prices and thus, keep government hospitals less crowded.

Recently, the Cebu clinic had to be temporarily closed because a highway was built near it, disrupting walk-in traffic on which we depend. The same thing with the Lagro clinic which was temporarily disrupted by MRT-7 construction. This latter was being transferred to a better location. (Then), the pandemic hit.

We scaled down, closing the aforesaid clinics, reducing the work force, delaying payments to suppliers and even salaries to the top executives within reason. And we needed help, help LandBank seemed to promise.

The usual procedural demands were made by LandBank – disclosure of financial statements, rationalization of management moves, presentation of audited papers by an established accounting firm and a host of other requirements, all of which were complied with.

We were requesting a P20M loan, had collateral (a condominium in Davao City where our clinic is located) independently appraised in 2021 at P33M and plans to reopen the Lagro clinic in Novaliches in a few months. We also had to get new equipment, pay our suppliers and get on with putting clinics back in operation. We were also coming close to pre-pandemic financial health in the operating clinics we had in Cubao, Masinag and Davao.

LandBank came back with a shocking demand to us, bereft of working capital as we were – a demand for us to produce P3M for the P20M loan to be put into the proposed Novaliches clinic, restrictions on most of the loan itself which affected working capital that would get us nowhere towards a better situation.  Meanwhile, our P33M collateral value was diminished by LandBank to a mere P13M.

Puzzled, we asked knowledgeable finance persons who said that was a practice of commercial banks. They want “skin,” i.e. for us to put equity in the mix. Except in our present straitened finances, doing so would starve our operating clinics and personnel. It was a no-go for us.

We removed the planned expansion to Novaliches, and requested a mere P10M to tide us over as operating clinics were showing much improved results.

In answer, LandBank began by second guessing what we did to stem our problems, questioning why we did not close clinics right away which we could not do due to lease arrangements and medical service commitments.

LandBank also demanded a 10-year forecast. Upon delivery of the forecast, LandBank summarily turned the loan application down. Reason given was that our pre-2020 results were not good enough.

So, why did they ask for the 10-year forecast if it was to be overruled by the pre-2020 results, which was really just a P3M loss?

LandBank was acting like a commercial bank, not a development bank. Nothing wrong with a commercial bank if it bills itself thus.

But a social development bank, supposed to uplift those who cannot meet commercial bank demands? It showed that there is no so-called “balancing act” that the LandBank website states between commercial and social development.

In our case, we experienced the purely commercial when we are not. And we were affected by the pandemic, not anything else, for which their website said it had a mandate to help.

LandBank is a commercial bank with perhaps token loans to a fisher or farmer here and there. Or, a politician’s favorite project (from recent photos in the papers with a political heavyweight).  But its major and crucial loan portfolio is not in these areas but in commercial enterprises.

One finance person suggested that we dare LandBank to reveal its top ten borrowers which, of course, they won’t because it is pretty clear they will be the top corporations of this country.

LandBank’s mandate and how it is delivered cries for a management audit. Particularly its credit committee, which seems to be in a pawnshop mode (diminishing collateral by 40 percent is a pawnshop maneuver).

Only pawnshops truthfully say what they are, LandBank does not. If LandBank cannot change, which seems to be the case, they should be privatized and be the commercial bank that they have been in disguise as for these many years.

Taxpayers will be better served and so will the public by not raising their hopes only to disappoint. Au revoir, Land Bank, hope never to meet you again in your present form.

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