Banks ramped up agri lending in H1 — BSP

Bangko Sentral ng Pilipinas (File photo / Philippine Daily Inquirer)

Banks stepped up their support to agriculture in the first half of 2024 by exceeding their mandated lending quota for the important—but long-neglected—sector, the Bangko Sentral ng Pilipinas (BSP) said.

In its latest report on the Philippine financial system, the BSP, citing preliminary figures, said that banks allocated P1.7 trillion as credit to the farm sector in the first six months of the year. This includes loans extended to farmers, fisherfolk, agrarian reform beneficiaries and members of their household.

That accounted for 192.4 percent of lenders’ total loanable funds during the period, which amounted to P912.7 billion.

READ: Weather, harvest woes restrain agri lending

This means local banks went beyond their quota for agriculture lending. Under the law, banks must allocate 25 percent of their total loanable funds for agriculture, fisheries and rural development.

The BSP said the 192.4-percent compliance rate of banks in the first semester was higher than the comparable period last year, when lenders set aside 36.4 percent or P3.1 trillion of their total loanable funds that had amounted to P8.4 trillion.

Banks were able to help the agriculture sector as it continued to register strong growth postpandemic.

BSP data showed the total loan book of the entire local banking system expanded by 12.4 percent to P14.3 trillion in the six months through June—beating the 8.8 percent growth last year and inching closer to the prepandemic growth rate of 13.8 percent—despite the high interest rate environment that may curb appetite for credit.

READ: Fostering financial freedom for Filipino farmers

“The BSP’s financial reforms help sustain the resilience of the banking sector, enabling banks to take a bigger role in the domestic economy through continued financial services to their clients,” BSP Governor Eli Remolona Jr. said.

Left behind

Historically, agriculture accounted for about a tenth of gross domestic product (GDP) and employed around a quarter of Filipino workers. But advancement in other economic sectors had left behind the industry, which the government is now struggling to expand.

According to the 2022 Countryside Bank Survey (CBS) report of the BSP and the Department of Agriculture, vulnerabilities to natural calamities and harvesting uncertainties remain the most common problems that banks face when extending credit to agriculture. These inherent risks, the report said, were aggravated by the pandemic, which had affected the health and livelihood of farmers and jeopardized their capacity to pay bank loans.

At the same time, agricultural borrowers often struggle to meet basic credit criteria, making it challenging for them to secure loans. The BSP had reported that banks still require traditional loan securities from agricultural borrowers, mainly favoring real estate mortgages.

To encourage more lending, banks previously polled by the BSP stressed the importance of credit support mechanisms like guarantees and loan insurance, access to borrower information, and crop insurance.