Agri-agra loans plunge at the end of 2020
Bank loans to the agriculture and land reform sector fell 2.76 percent at the end of last year, also falling below the prescribed threshold, data from Bangko Sentral ng Pilipinas shows (BSP).
The banking system set aside 713.599 billion pesos for the sector at the end of 2020, down 20.32 billion pesos from the 733.921 billion pesos at the end of 2019.
Total loanable funds climbed 15.59 percent to 7.13 trillion pesos at the end of December, from 6.17 trillion pesos a year ago.
The combined allocation for agriculture and land reform – 10 percent of the total loanable funds – was below the 25 percent threshold set by the Law of the Republic (RA) 10,000 or the “Law on the Credit of the Agri-Agra reform of 2009 ”.
By law, banks are required to provide 15% and 10% of their loan portfolio respectively to farmers and beneficiaries of land reform.
Banks provided only 9 percent of their total loanable funds to the agricultural sector. During this time, they allocated only 1% of their total loanable funds to the beneficiaries of the land reform.
BSP has been pushing for modification of RA 10000, which Bangko Sentral Governor Benjamin Diokno says will strengthen rural development by offering a holistic approach that takes into account the broader agricultural finance ecosystem and requirements from the community.
“It responds to the challenges faced by the agricultural sector to access finance,” he said.
In particular, the central bank wishes to allow banks to invest part of their mandated portfolio in green projects.
“The plan is to extend the list of projects eligible for banks under the law, for example, to green projects and investments in rural communities,” Diokno said.
Banks find it difficult to reach the full 25% threshold if they only lend to the agro-agricultural sector, he added.
Besides local lenders, the BSP chief said foreign banks operating in the country were having difficulty meeting the agri-agra lending threshold.
To help the banking sector reach the threshold, he added that the central bank was exploring ways to comply.
“We have so many projects that they can fund, such as green infrastructure projects and those to strengthen the country against natural disasters. We need more investment in these areas, ”Diokno stressed.