The state-owned Land Bank of the Philippines plans to issue special bonds to unlock part of an estimated P325 billion that banks have failed to lend out to the agriculture and fisheries sector as mandated under the “agri-agra” law and channel funds to farmers’ cooperatives.
Landbank—which plans to triple its loan portfolio to small farmers and fisherfolk from P38 billion as of September 2016 to P115 billion by 2022—commits to do this by bankrolling multiple farmers’ cooperatives that team up with big agribusiness enterprises to professionally manage their collective farms and make them more productive.
In an interview with Inquirer, Land Bank president Alex Buenaventura said he had found a “very deep source of funding” for cooperatives across the country.
To date, he noted that banks in the country were paying a penalty of 0.5 percent or around P1.6 billion a year for noncompliance to the agri-agra law, which mandates that 25 percent of total loanable funds should be set aside for agriculture and fisheries (of which at least 10 percent should be made available for agrarian reform beneficiaries).
Because many of these farmers do not have sterling credit profiles, many banks opt to pay the penalty than face risks of loan defaults.
Landbank now plans to sell special bonds that will be considered bank compliance to the agri-agra law.
“By buying those bonds, they (banks) might even earn a fraction of a percent instead of paying a penalty of 0.5 percent,” Buenaventura said.
Asked how much of these special bonds Landbank wants to issue, Buenaventura said it would depend on several factors.
These joint venture cooperatives will have to be created and funded by Landbank first before the bank could sell the special bonds to banks.
“I hope we can pilot three (joint venture cooperatives) this year—one for palm oil (in Autonomous Region in Muslim Mindanao) through OPAPP (Office of the Presidential Adviser on the Peace Process), one for rice through DAR (Department of Agrarian Reform) and one for rubber through DA (Department of Agriculture),” he said, adding that the bond issuance could then happen by next year.