Banks miss 2021 lending quota for land reform and agrarian sectors

PHOTO BY CINDY S. REYES, DEPARTMENT OF AGRICULTURE – PHILIPPINE RICE RESEARCH INSTITUTE

PHILIPPINE BANKS failed to meet the minimumcompulsory loans for agriculture and agrarian reform (agri-agra) sectors in 2021, according to the central bank.

Lenders disbursed loans worth 851.76 billion pesos at the end of December in these sectors, according to preliminary data from Bangko Sentral ng Pilipinas (BSP).

This is below the required minimum credit allocation of 1,997 billion pesos against their loanable funds worth 7,992 billion pesos.

Under Republic Act No. 10000 or the Agricultural Credit Reform Act of 2009, banks must allocate 10% of their total loanable funds to the land reform sector and 15% to agriculture.

Credit extended to the agricultural sector reached P776.436 billion in 2021, only 9.71% of their total loanable funds.

Large savings and rural banks Ifloans financed to the agricultural sector amounting to P740.281 billion, P18.141 billion and P18.014 billion respectively.

On the other hand, loans to the agrarian reform sector amounted to 75.319 billion pesos, or 0.94% of their total loanable funds.

Loans granted by large savings banks and rural banks reached 61.584 billion pesos, 3.194 billion pesos and 10.541 billion pesos respectively, all below the minimum requirement of 10%.

BSP hopes that Congress, which is on an election break, will prioritize changes to the Agri-Agra Act.

A bicameral conference committee will still have to reconcile any conflapplicable provisions of the measures approved by the House of Representatives and the Senate.

Once enacted, the amendments will expand the range of credits considered in the quota to include the broader supply chain process in the agricultural sector.

MSME LOANS
Banks also failed to meet the small business lending quota required by law, according to separate BSP data.

Loans made by the Philippine banking sector amounted to P463.134 billion, or 5.41% of their total loan portfolio of P8.57 trillion.

This is less than the 10% allowance required for small businesses under Republic Act No. 6977.ers to allocate 8% and 2% of their portfolios to micro and small enterprises (MSEs) and medium-sized enterprises respectively.

Year over year, the amount of loans to small businesses increased by 6.3%.

Loans to MSEs granted by banks amounted to 178.143 billion pesos, only 2.08% of their total loan portfolio and well below the minimum requirement of 8% for the sector.

On the other hand, credit to medium-sized enterprises amounted to 284.991 billion pesos, representing 3.33% of their portfolio and fulfilling the 2% quota.

Banks have long chosen to incur penalties for non-compliance instead of assuming the risks associated with small business lending.

To encourage small business lending, the BSP in 2020 allowed banks to count MSME lending as an alternative compliance to reserves. These borrowings also received a reduced credit risk weighting. — Luz Wendy T. Noble

About Alexander Estrada

Check Also

SBCorp launches new P7-B loan facility for MSMEs – Manila Bulletin

Small Business Corporation (SBCORP), the microcredit arm of the government, is launching a versatile RISE …