BSP urges banks: Expand lending for agriculture financing

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is urging banks to open up their loan portfolio to agricultural financing as the ‘severely limited’ access to finance remains one of the major hindrances to the flourishing of the sector.

BSP Deputy Governor Chuchi Fonacier said in her speech during the Agriculture Value Chain Forum that the regulator continues to promote agricultural financing through the improvement of cost efficiency in the delivery of financial services and leverage on digital technology, strengthening the financing infrastructure through legislation, and the promotion of innovative financing models.

“Opening the gates to agricultural financing will do more than just boost businesses. If accorded equal priority and sufficient resources, agriculture value chains can have a dramatic, transformative effect for our smallholder farmers – better access to credit, technologies and methods, production standards and efficiency, and bigger and ready markets – that amount to an improved quality of life for them and their communities,” she said.

Agriculture accounts for nine percent of gross domestic product (GDP).

Data from the Agricultural Policy Credit Council (ACPC) showed the credit gap in the agriculture sector stood at P367 billion as of end-2016 as the percentage of loans for agriculture along with fisheries and forestry was at a paltry 2.9 percent of total loans, significantly lower compared to the respective shares of consumer and real estate loans at 17.5 percent and 19.9 percent.

“These opportunities are why the BSP works hard to promote the country’s agricultural industry. We believe that the attainment of inclusive development and broad based growth requires nurturing sectors in most need. It is, in fact, our strategic imperative,” Fonacier added.

She pointed out agriculture still accounts for 27 percent of total employment in the country with approximately 11 million Filipinos engaged in agricultural labor.

However, the BSP official said banks remain unable and averse to catering to the credit needs of the agriculture sector despite the implementation of Republic Act 1000 or the Agri-Agra Reform Credit Act of 2009 mandating banks to allocate 25 percent of their total loanable funds for agriculture and agrarian reform.

“I am sure that you are all aware that the issue at hand is not the lack of loanable funds, so much as the need for banks to manage risks properly, and understand the sector’s actual inner workings and why innovative models like agriculture value chain financing are capable of providing the opportunities for banks to delve effectively and successfully into agricultural financing,” she said.

Danilo Fausto, president of the Philippine Chamber of Food and Agriculture Inc., earlier urged the banking industry to allot P1.1 trillion for agro-industrial activities to support industrialization and poverty reduction.