Bank loans to agriculture-agrarian increase in the 1st half

Lawrence Agcaoili – The Filipino Star

September 21, 2022 | 00:00

MANILA, Philippines — Loans disbursed by banks in the Philippines for agriculture and land reform rose 11.1 percent to 847.95 billion pesos in the first half, but still below the prescribed threshold for both sectors .

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed that the banking system was only able to allocate about 10.31% of its total loanable funds during the six-month period, well below of the 25% mandate provided by Republic Act 10000 or Agri-Agra. Reform of the credit law of 2009.

The law maintained the compulsory credit allocation in Presidential Decree 717 where 15% of the total loanable funds of banks must be reserved for agriculture, while 10% must be made available to land reform beneficiaries.

However, the central bank has now committed to implementing RA 11901 or the Strengthening Agriculture, Fisheries and Rural Development Finance Act 2022, which now provides a comprehensive financing framework for the development of the agriculture and fisheries sector and of rural communities.

Total loanable funds generated by banks rose 10.8 percent to 8.22 trillion pesos at the end of June this year, from 7.42 trillion pesos at the end of June last year.

According to the BSP, loans granted by banks to the agricultural sector increased by 11.6% to reach 783.77 billion pesos, for a compliance rate of 9.53% or below the required 15%.

The central bank said that major banks or universal and commercial banks or major banks recorded a compliance ratio of 9.66 percent after granting 746.43 billion pesos to the agricultural sector, while the ratio of compliance banks was 9.66 percent. savings or medium-sized reached only 5.8% after granting 19.59 billion pesos. .

Rural banks granted 17.74 billion pesos to the agricultural sector for a compliance rate of 11.43%.

On the other hand, loans for agrarian reform decreased by 10.3% to 64.18 billion pesos at the end of June. The ratio fell below the mandatory 10% with a compliance rate of only 0.78%.

The compliance rate of large banks for land reform loans reached only 0.65% while that of savings banks and rural and cooperative banks stood at 0.93 and 7, 01%, respectively.

BSP Governor Felipe Medalla said earlier that the central bank is committed to effectively implementing the new law on agricultural and rural finance which aims to improve access for rural communities and farming households and fisheries, including their micro, small and medium-sized enterprises (MSMEs), to much-needed financial services and programs.

“The new law has been a priority legislative measure for BSP because it considers the demands of beneficiaries from rural communities from a holistic perspective, taking into account their changing social networks and complex needs,” Medalla said.

Banks are no longer required to reserve 10% of their loan portfolio for land reform beneficiaries and 15% for agricultural activities.

Instead, this new law provides banks with greater flexibility in allocating the combined 25% compulsory credit quota to a range of borrowers in the agriculture, fisheries and land reform sectors. .

In addition, banks that are unable to lend directly to beneficiaries in rural communities can contribute in other ways, such as debt and equity investment, agricultural value chain financing and granting loans to agribusinesses to finance agricultural and community activities.

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