I was deluged with reactions regarding my “Bad Banker” column of March 9, 2023 which was hugely critical of the state-owned Land Bank of the Philippines and its utter million failure to enrich the Filipino farmer-beneficiaries of land reform (a reformist project of the late president Ferdinand E. Marcos Sr.) and boost the country’s agriculture sector.
Apparently, there is a huge reservoir of resentment about LBP’s banking policies.
By sheer coincidence, after my March 9 column, America’s 16th largest bank, Silicon Valley Bank, collapsed. It had over $175-billion deposits and $200-billion assets. High interest rates and high inflation are blamed.
Why the high interest rates – today, the SOP of central banks, in the Philippines and abroad? Because of high inflation. Why the high inflation? In the Philippines, and elsewhere, it’s because of high prices of food. Why the high the prices of food? Because Philippine food production has always been short and the imported substitutes are priced so high, they are beyond the reach of the common man. Why is our food production bad?
Well, I blame government institutions like the Land Bank. Sixty years ago, LBP was set up precisely to finance agrarian reform and the agricultural sector.
Food production involves four basic elements – land, water, seeds and the farmer. In the Philippines, all four are defective or deficient in varying degrees of danger.
Agriculture’s share of total economic production or as a percent of GDP has declined precipitously, from its peak of 27.6 percent in 1974 (when we exported rice, 49 years ago) under Marcos Sr. to less than 10 percent today, under Marcos Jr.
I am not the first to sound critical of LBP. In his landmark Fourth State of the Nation Address in 2019, president Duterte singled out the LBP for having turned into a “commercial bank” when it should be prioritizing the financing of agriculture enterprises.
“That’s why itong (this) Land Bank na ito, ’pag hindi ito na...You know, you are called Land Bank but you are now the No. 1 commercial bank in the Philippines,” Duterte blurted out angrily, before the nation on radio, television and social media and the country’s ruling economic and political class assembled inside the hallowed halls of the Batasan nearly four years ago.
“What the heck is happening to you? You are supposed to finance agricultural enterprises and endeavors. Bakit wala (Why aren’t you doing it)? Bakit – why can’t you just buy a few wagons or whatever? Go to the countryside and ask the people if there are cooperatives, tulungan ninyo (help them) to form one,” the feisty, curse-prone chief executive demanded.
Duterte said Land Bank should “go back to land.” “Why are you mired in so many commercial transactions? Bumalik (Return) kayo where you were created for and that is to help the farmers,” Duterte said.
In 2019, the President gave the LBP end-July that year to reform – or perish.
“You better decide on that, I will give you until the end of July to give me a plan or else I will ask Congress to reconfigure you what-not,” Duterte warned.
If there is no viable plan for the farmers, Digong said then, Congress might as well “abolish” LBP and the money intended for it might go to the congressmen for their development funds.
As if his SONA badgering were not enough, Duterte gave a post-SONA presscon to explain his vitriolic language: “It’s called Land Bank. Primarily, it was a bank intended to serve people who are connected with lands, whether owners or tenants.”
He added: “So ’yang land reform na ’yan, nandiyan na (So that land reform, that’s there) – most of it. I’m going to complete the land reform whether the land owners like it or not because there are still tenants who are not in possession but the owners are still – the owners of the land control the – they produce and everything.”
Duterte said Land Bank was crafted “to serve enterprises or whatever there is banking needs of the people who cannot – who can barely negotiate with a bank.”
After Duterte’s famous harangue against LBP, did the bank really reform itself? No.
In 2021, the latest year for which LBP has an annual report, the Philippines’ second largest bank gave away P700 million in loans to agrarian reform beneficiaries numbering 10,170 farmers. This P700 million is a pittance. It is just 0.65 percent (65 centavos of every one peso) of its total loans of P1.074 trillion (P1,074 billion). The country has over six million rice and corn farmers.
And P1.074-trillion total loans granted are only 41 percent of LBP’s P2.567-trillion deposits, leaving P1.49 trillion of precious deposits lying idle and not helping move the economy.
Banks of LBP’s size like BDO routinely parlay 80 percent of their total deposits into loans – P80 for every P100 of deposit. In banking, there is this concept of gearing ratio. A bank must roll its deposits seven times to really help clients and the economy. BDO’s average gearing ratio: 6.7x deposits.
In 2016, his first year as president, Duterte gave away land titles to land reform beneficiaries.
“Land Bank is for farmers and yet it has rumbled on just like a commercial bank. It should be the bank that should reach out to you,” he stressed in one event in Davao.
He said agriculture, being the weakest link in the country’s economy, farmers should be given the most in terms of assistance.
“The Philippines is nothing without our farmers. I am one with the entire nation in recognizing this. I urge you to demonstrate solidarity in building a stronger economy,” Duterte said.
If he had his way, Duterte wanted farmers to be given their own tractors to help them in their production.
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