Banks’ agri-agra lending still below requirement

Loans extended to the agriculture and agrarian reform (agri-agra) sectors slid quarter-on-quarter to P431.4 billion at the end of the first quarter, while total compliance rate of banks remained below the requirement.

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 declined from P432.7 billion as of the end of 2015.

Loans meant as alternative compliance, which hit P228.2 billion, exceeded those for direct compliance amounting P203.2 billion.

For agrarian reform beneficiaries, total compliance was P29.3 billion.

The compliance rate for agrarian reform, however, was a mere 0.99 percent, even as the required lending under RA 10000 must be 10 percent of banks’ total portfolio. The minimum amount that should have been allocated for agra loans as of the end of March was P297.7 billion.

As for agriculture, total compliance was at P402 billion.

As of March, the compliance rate for lending to agriculture stood at 13.5 percent, also below the requirement of 15 percent of total loanable funds generated equivalent to P446.6 billion.

Universal and commercial banks contributed the bulk of total agri-agra loans at P393.5 billion, followed by rural and cooperative banks’ P22.8 billion, and thrift banks’ P15.1 billion.

In March, the BSP announced that the Monetary Board, its highest policy-setting body, approved the adoption of an agricultural value chain financing framework.

The framework listed down the regulatory incentives to be granted to financial institutions that will engage in such type of financing, that includes direct or allowable alternative compliance to the mandatory 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 “supports the promotion of agricultural value chain financing as an effective and organized approach to channel financing to the agriculture and fisheries sectors and promote financial inclusion.”Ben O. de Vera