Local banks’ agri-agra lending compliance still below requirement

Loans extended to the agriculture and agrarian (agri-agra) sectors further slid quarter-on-quarter to P423.9 billion at the end of the first half, while the 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 again declined from P431.4 billion at the end of the first quarter and P432.7 billion at end-2015.

Loans meant as alternative compliance, which hit P216.8 billion, exceeded those for direct compliance amounting P207.2 billion.

For agrarian reform beneficiaries, total compliance during the first half was P29.1 billion, down from P29.3 billion a quarter ago.

The compliance rate for agrarian reform, however, was a mere 0.97 percent, down from 0.99 percent a quarter ago, even as the required lending under RA 10000 was 10 percent of the banks’ total loan portfolio.

Based on this, the minimum amount that should have been allocated for agra loans was P299.6 billion.

As for agriculture loans, total first-half compliance was at P394.8 billion, down from P402 billion as of the end of March.

As of the end of June, the compliance rate for lending to agriculture stood at 13.2 percent, down from 13.5 percent in the first quarter and still below the requirement of 15 percent of total loanable funds. The total amount that should have been extended to agriculture, based on the minimum requirement,  is P449.4 billion.

Universal and commercial banks contributed the bulk of the total agri-agra loans at P380.4 billion, followed by rural and cooperative banks’ P22.6 billion, and the thrift banks’ P20.9 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 the regulatory incentives to be granted to financial institutions that would engage in such type of financing, which include direct lending or allowable alternative compliance to the mandatory agri-agra credit allocation.

Another incentive to be extended is an additional 25 percent increase in the single borrower’s limit for loans granted to borrowers involved in the agricultural value chains for at least three years.

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.”