Agri-agra loans grow 23% in 2018

MANILA, Philippines — Loans extended by Philippine banks for agriculture and agrarian reform jumped by more than  23 percent last year but remained below the threshold mandated by the law.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed the banking system was able to set aside a total of P707.4 billion of total loanable funds for agriculture and agrarian reform credit under Republic Act 10000 or the Agri-Agra Reform Credit Act of 2009 in 2018 from P573.69 billion in 2017..

The total loanable funds generated by the banking industry amounted to P4.96 trillion last year.

Despite the increase, the combined allocation of loanable funds from agriculture and agrarian reform of 14.25 percent was way below the minimum threshold set by the law. This was better than the 12.83 percent compliance in 2017.

RA 10000 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 loans extended by the banks to the agriculture sector amounted to P649.42 billion for a 13.1 percent compliance ratio or below the required 15 percent.

The central bank said big banks or universal and commercial banks registered a compliance ratio of 13.2 percent after extending P612.59 billion to the agriculture sector while the ratio of thrift banks only reached 7.48 percent after granting P17.55 billion.

Rural banks extended P19.28 billion to the agriculture sector for a compliance ratio of 24 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 P57.98 billion for a compliance ratio of 1.2 percent.

The compliance ratio of big banks for agrarian reform loans only reached 0.99 percent while that of thrift banks settled at 1.3 percent as well as rural and cooperative banks with 11.2 percent.

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 over the last two years.

“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.