Banks miss their loan quotas for agriculture and agrarian sectors

NB FILE PHOTO

LENDERS were unable to provide the required credit for the agriculture and agrarian reform (agri-agra) sectors during the period July to September, based on data from the central bank.

Banks disbursed loans worth 804.17 billion pesos in the third quarter for the two sectors, according to preliminary data released by the Bangko Sentral ng Pilipinas (BSP).

During the same period, the total loanable funds amounted to 7,493 billion pesos.

With the 10% land reform and the 15% agricultural credit required under Republic Law 10,000 or the Agri-Agra Reform Credit Law of 2009, the minimum credit allowance was 1,124 trillion pesos.

Broken down, the credit allocation for the land reform sector amounted to 68.932 billion pesos, which is only 0.92% of total bank loanable funds. This is well below the 10% quota.

Credit to the sector disbursed by large banks, savings banks and rural banks amounted to 55.042 billion pesos, 3.053 billion pesos and 10.837 billion pesos, respectively. Not all of them managed to reach the minimum loan requirement.

Meanwhile, compliance for the agricultural sector amounted to 735.241 billion pesos or 9.81% of the banks’ total loanable funds. This is below the minimum requirement of 15%.

Large savings banks and rural banks did not meet the quota with FiFunding to the sector during the period amounted to 700.148 billion pesos, 16.944 billion pesos and 18.149 billion pesos, respectively.

The central bank said earlier that lenders have paid around 2 billion pesos on average in penalties each year since 2011 because of their failure to comply with Agri-Agra law.

BSP officials lobbied for the measure to be changed to include loans in the agricultural value chain as part of quota compliance. This would include distribution, manufacturing, processing and manufacturing, which are part of the agri-food production chain.

In March, BSP issued Circular 1111 which authorized credits for activities covering the conversion of an agricultural product from raw material to form of consumption as part of agri-agra compliance. This is an interim measure while the law has not yet been amended.

House Bill 1634, which provides for the extension of qualifying agri-agra loans, passed third reading in March 2020 and has been forwarded to the Senate. Its counterpart bill remains pending at committee level. – Luz Wendy T. Noble

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