Agri-agra MSME loans still below threshold

MANILA, Philippines — Philippine banks continued to fall short of the mandated threshold for agriculture and agrarian reform as well as micro, small and medium enterprises (MSME) loans in the first half of the year, data from the Bangko Sentral ng Pilipinas (BSP) showed.

The BSP reported the banking system was able to set aside a total of P543.96 billion of total loanable funds for agriculture and agrarian reform credit under Republic Act No. 10000 or the Agri-Agra Reform Credit Act of 2009 from January to June this year or 28.3 percent higher than the P423.94 billion disbursed in the same period last year.

The total loanable funds generated by the banking industry jumped 27.4 percent to P3.81 trillion as of end-June this year from P2.99 trillion in end-June last year.

Despite the increase, the combined allocation of loanable funds from agriculture and agrarian reform of 14.26 percent in the first semester was way below the minimum threshold set by the law.

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 P504.44 billion for 13.22 percent compliance ratio or below the required 15 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 P39.52 billion for a compliance ratio of 1.04 percent.

Data also showed banks continued to fall short of the mandated lending for MSMEs under RA 6977 as amended by RA 8289 and 9501 or the Magna Carta for SMEs.

Loans extended by banks to MSMEs reached P497.76 billion or 8.45 percent of total loan book but still below the mandated threshold of 10 percent.

MSMEs account for 99.5 percent of the country’s total establishments and employ about 61.6 percent of the workforce.

BSP Governor Nestor Espenilla Jr. earlier said he prefers banks to lend on a voluntary basis.

“Mandated lending is basically you require the lender ready or not, on a quota basis, to lend to a segment that creditor may or may not be ready to serve. So that is where the problem lies,” Espenilla said.