Ayala unit defies risks of lending to farmers

MANILA, Philippines — The microfinance arm of Ayala-led Bank of the Philippine Islands (BPI) has launched a loan program for farmers with hopes of improving financial literacy (finlit) and access to additional funds for agricultural workers.

Rod Mabiasen Jr., BanKo president, on Wednesday said their Agri NegosyoKo loan program provided lower interest rates—at 2.3 percent a month against the 6.5-percent benchmark rate of banks—to encourage their 10,000 farmer-clients to borrow money and improve their livelihood.

“[Farmers] will get a loan depending on the size of the farm … It is about P70,000 to P80,000 per hectare,” Mabiasen said during the program’s launch.

BanKo partnered with agri-tech firm Agrilever to offer customized loans and several other benefits, including financial education, protection and security, and incentives “for responsible behavior.”

Under the partnership, Agrilever will provide farmers with digital agronomy services, crop insurance, and weather systems, among others, “to promote sustainability and social equity in the agricultural sector.”

Better output, higher income

While admitting that providing loans for the agricultural sector was going to be “very risky,” Mabiasen said that they would tap the expertise of Agrilever to ensure that BanKo’s farmer-clients would have better output and, thus, be able to repay loans.

For example, Agrilever’s crop insurance program included plant pest and disease coverage to help manage risk. The agri-tech firm’s data analytics and artificial intelligence systems likewise offer insights to farmers on how to better manage crops.

READ: Weather, harvest woes restrain agri lending

“Even with the expected loan default coming from the agricultural sector, it should not affect the asset quality of the bank,” Mabiasen said.

According to the Bangko Sentral ng Pilipinas, 73 percent of farmers do not have personal bank accounts that would help them manage their finances.

READ: BSP launches first digital payment program for farmers in Cordillera

BanKo aims to help close the gap by providing financing services to at least 30,000 farmers through its partnership with Agrilever.

Last year, BPI released P14.96 billion of business loans to over 200,000 borrowing clients.

The Ayala Group’s banking arm took full control of BanKo in 2016 through a share purchase deal with Globe Telecom Inc. and Ayala Corp.

BanKo opened 26 new branch-lite units last year, expanding its network to 350 units. —MEG J. ADONIS