Agri-agra loans post double-digit growth in the first quarter

Lawrence Agcaoili (The Philippine Star) – June 30, 2021 – 12:00 am

MANILA, Philippines – Loans from national banks for agriculture and land reform saw double-digit growth of 10% to 765.92 billion pesos in the first quarter, from 696.35 billion pesos in the same quarter of last year, according to the Bangko Sentral ng Philippines (BSP).

Despite double-digit growth, however, the banking sector still has not met the prescribed threshold for agri-agricultural lending.

Preliminary data from the BSP showed that the banking system was only able to allocate about 10.59% of its total loanable funds from January to March, well below the 25% mandated under the Bank Act. Republic 10,000 or the Agri-Agra Reform Credit Act 2009.

Total loanable funds generated by the banking sector jumped nearly 25 percent to reach 7.2 trillion pesos at the end of March, compared to 5.81 billion pesos in the same period last year.

The law retained the mandatory credit allocation in Presidential Decree 717, according to which 15 percent of total bank loanable funds should be earmarked for agriculture, while 10 percent should be made available to beneficiaries of agrarian reform.

BSP said bank loans to the agricultural sector rose 9.2 percent to 699 billion pesos in the first quarter, from 640 billion pesos a year ago.

Despite the improvement, however, this only resulted in a compliance rate of 9.66 percent, well below the required 15 percent.

The central bank said that major banks or universal and commercial banks recorded a compliance rate of 9.73 percent after granting 664.09 billion pesos to the agricultural sector, while the ratio of savings banks or medium-sized only reached 5.88% after granting 17 billion pesos.

Rural banks granted 17.54 billion pesos to the agricultural sector for a compliance rate of 15.3 percent.

Likewise, the compliance rate of the banking system is well below the 10% threshold for land reform credit, as banks have only granted loans in the amount of 67.22 billion pesos, or 18 , 9% more than 56.53 billion pesos last year for a compliance rate of 0.93%. .

The compliance rate of large banks for land reform loans was only 0.77 percent, while that of savings banks stood at 1.09 percent, as well as rural banks and cooperatives with 9.81 percent.

BSP chief executive Lyn Javier earlier told Senate committees on agriculture, food and land reform, as well as banks, financial institutions and currencies, that the regulator collected 13.4 billion pesos in fines from banks that failed to meet the mandate from 2011 to 2018.

The BSP is proposing new amendments to the compulsory loan threshold for agro-agricultural activities in order to push the country to the next stage of development after the COVID-19 pandemic.

BSP Governor Benjamin Diokno said the pending agribusiness bill would strengthen rural development by providing a holistic approach to meet the funding needs of the broader farm finance ecosystem.

Bill 6134 primarily addresses the persistent challenges in financing agriculture that emanate from both the borrower side and the side of banks and credit institutions.

The proposed changes improve the access of rural communities to private sector financing through the expansion of compliance modes by banks, the creation of a special fund managed by a Council for the financing of agriculture and fisheries and capacity building to finance programs to strengthen organizations, capacities and institutions and the activities of rural farming and fishing households.

In March, the BSP, the Ministry of Agriculture (DA) and the Ministry of Agrarian Reform (DAR) approved the amendments to the implementing rules and regulations (IRR) of the Agri-Agra law as an interim measure. pending the adoption of the law. proposed amendments.

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