Banks’ farm loans remain below compliance rate
Loans extended to the agriculture and agrarian reform (agri-agra) sectors further rose to P432.7 billion in 2015, although this level was still below the compliance rates required from banks.
The latest Bangko Sentral ng Pilipinas (BSP) data showed that across universal, commercial, thrift, rural and cooperative banks, total compliance to Republic Act (RA) No. 10000 or the Agri-Agra Reform Credit Act jumped by 20.6 percent from P358.7 billion in 2014.
The end-December figure was also 8.1-percent higher than end-September’s P400.1 billion.
Loans meant as alternative compliance (mainly investments in treasury securities), which hit P233.1 billion, exceeded those for direct compliance amounting P199.6 billion.
For agrarian reform beneficiaries, total compliance was P31.5 billion, slightly up from P31.4 billion a year ago.
The compliance rate for agrarian reform, however, was a mere 1.11 percent even as the required lending under RA 10000 must be 10 percent of banks’ total portfolio. The minimum amount required to be allocated for agra loans in 2015 should have been P284.4 billion.
As for the agriculture, compliance was at P401.2 billion, up 22.6 percent from P327.3 billion in 2014.
As of end-2015, the compliance rate for lending to agriculture stood at 14.4 percent, also below the requirement of 15 percent of total loanable funds generated equivalent to P426.6 billion.
Universal and commercial banks contributed the bulk of total agri-agra loans at P395.3 billion, followed by rural and cooperative banks at P21.8 billion and thrift banks, P15.7 billion.
Last month, the BSP’s policy-making Monetary Board approved the adoption of an agricultural value chain financing framework. This listed the regulatory incentives to be granted to financial institutions that will engage in such type of financing, which include direct or allowable alternative compliance to the mandatory agriculture and agrarian or agri-agra reform credit allocation.
Another incentive to be given away is an additional 25-percent increase in the single borrower’s limit for loans granted to borrowers involved in agricultural value chains for a three-year period.
According to the BSP, the framework supported the promotion of agricultural value chain financing as an effective and organized approach to channel funds to the agriculture and fisheries sectors and promote financial inclusion. “By encouraging the linking of various actors/players in an agricultural value chain, credit risk of participating smallholder farmers/fisherfolks can be reduced. As a result, this type of financing would facilitate and allow small farmers/fisherfolks to have access to credit,” the BSP explained.
Better access to credit in agricultural value chains were seen further improving productivity in the agriculture and fisheries sectors and at the same time uplifting the lives of these marginalized farmers/fisherfolks, the BSP said.
