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Landbank to triple farm lending

State-owned bank eyes ‘corporatives’ to be owned eventually by farmers, fisherfolk
By: - Reporter / @bendeveraINQ
/ 03:01 AM December 26, 2016

Land Bank of the Philippines plans to triple to P115 billion its lending to small farmers and fisherfolk by 2022 by tapping what the state-run lender called “corporatives.”

The Department of Finance announced that Landbank’s target to drastically ramp up its loan portfolio for the agriculture sector from P37.9 billion at present was in line with “President Duterte’s goal of dispersing the benefits of growth to the countryside through the development of the farm sector.”

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According to Landbank president Alex Buenaventura, he would initiate a reengineering of the credit facilities for small stakeholders in the agriculture sector and encourage them to enter into “corporatives.”

“A corporation would be formed to manage the consolidated farms of small farmers who wish to take part in the corporative. The corporation would be owned 40 percent by Landbank and 60 percent by participating commercial banks. The farmers would provide the manpower to keep their lands profitable,” Buenaventura explained.

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Also, 99 percent of the corporation’s earnings would be distributed to the participating farmers pro-rata according to their respective land ownership, while 1 percent would be declared as dividends of the corporate owners, Buenaventura added.

The Landbank chief also said that he would discuss with regulators the plan to allow commercial banks that would be part of the corporative to strictly comply with the Agri-Agra Law and allocate 15 percent of their total loanable funds to farmers and fisherfolk as well as 10 percent to agrarian reform beneficiaries, instead of paying fines for noncompliance.

“Also, a portion of the profits earned every harvest by the farmers would be used by them to buy equity in the corporation, until such time that the 60 percent owned by commercial banks is fully divested to the small farmers,” according to Buenaventura.

The proposed corporative approach aims to make small Filipino farmers globally competitive and among the most productive and profitable in Asia, Buenaventura said.

Landbank data showed that as of September, only 8.2 percent of the loan portfolio or P37.9 billion of the total P482 billion were infused into the agriculture sector.

With an end-September net income of P10.3 billion—an improvement from P4.1 billion a decade ago—Buenaventura said the lender was in a very good position to further expand its services, reach and support especially to its mandated sector, the farmers and fishers.

Buenaventura said that under the corporative, farmers could plant any of the following cash crops that have high export potentials: Abaca, banana, cacao, coconut, palm oil and rubber.

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“Under the setup, the Department of Agrarian Reform will identify the lands owned by small farmers that can be formed into corporatives cultivating rice, sugar and banana,” said Buenaventura. “The scheme will also work for palay farmers who could face new challenges next year with the possible lifting of the quantitative restrictions on rice in 2017.”

State planning agency National Economic and Development Authority earlier disclosed the decision of the majority of economic managers to remove the Philippines’ quota on rice importation as the government moves to lower the prices of the Filipino staple food.

Economic managers have been pushing the amendment of the decade-old Republic Act No. 8178 or the Agricultural Tariffication Act of 1996, which had put the rice import quota in place. In 2014, the World Trade Organization (WTO) allowed the Philippines to extend its QR on rice until June 30, 2017, in a bid to buy more time for local farmers to prepare for free trade in light of the government’s goal of achieving rice self-sufficiency.

Since the government imposes a quota on rice imports, domestic prices are vulnerable to shocks resulting from meager supply. The QR puts the burden of rice supply and demand on the government as market forces are being limited by the quota system.

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