Big banks fail to meet agri-agra lending quota

BIG BANKS continued to beg off the required lending to farmers during the first quarter, latest central bank data showed, even as credit lines grew by nearly a fifth from a year ago.

Universal, commercial, and thrift banks ignored the credit quota for agriculture and agrarian reform beneficiaries between January and March, despite an existing law that requires financial firms to allocate portions of its loanable funds to these sectors.

Signed in 2010, Republic Act 10000 or the Agri-Agra Reform Credit Act imposes a credit quota for the farming sector, wherein banks must allocate at least 10% of total loanable funds to agrarian reform beneficiaries, and 15% for farmers and fisherfolk.

Philippine banks granted P502.449 billion in loans to the farming sector during the quarter, which is just half of the P906.5 billion required amount under the seven-year-old law.

The figure rose by 16% from the P431.367 billion handed out in March 2016, but did not match the 22% surge in the amount of loanable funds held by the lenders which grew to P3.626 trillion, according to the Bangko Sentral ng Pilipinas (BSP).

Only rural and cooperative banks met the required lending levels, sustaining a trend observed over the past few years. The small lenders allotted 16.57% of its funds to agrarian reform clients at P8.26 billion, well above the 10% standard.

Lending to the farming sector took a 29.7% share of the local lenders’ portfolio at P14.785 billion, although slipped from the P14.988 billion lent out during the same period last year.

On the other hand, the big banks approved higher loan amounts as of March this year, although the share remained well below the required levels.

Universal and commercial players set aside P25.765 billion in loans for agrarian reform borrowers, which jumped by a third from last year’s P18.99 billion. Still, the amount accounted for just 0.76% of the banks’ P3.41-trillion total credit line.

Lending to farmers likewise rose to P434.637 billion from P374.512 billion previously, but only took a 12.75% share versus the 15% requirement.

Thrift banks also failed to hit the lending thresholds during the quarter, having set aside only P2.868 billion or 1.73% of its funds for agrarian reform and P16.136 billion or 9.72% for the farming sector, BSP data showed.

Banks are given several options to meet the credit quotas. Direct compliance involves loan approvals to qualified borrowers and the purchase of eligible loans from other financial firms.

On the other hand, alternative methods include investing in duly-declared eligible debt instruments, investing in the special deposit accounts of BSP-accredited rural lenders, wholesale lending to rural banks, granting rediscount loans to other banks covering farm loan credits, and the extension of loans for public infrastructure for the benefit of the farming sector.

Despite these, total compliance across the entire Philippine banking system stood at a mere 12.84% for farmers and fisherfolk worth P465.557 billion, and P1.02% or P36.892 billion for agrarian reform beneficiaries.

Officials have said that lenders simply choose to pay the penalties rather than lend to these so-called “risky” sectors.

BSP Governor Nestor A. Espenilla, Jr. has said that banks should gain access to comprehensive credit data in evaluating whether borrowers can be trusted, as he doubted the ability of mandated lending in terms of improving access to credit for farmers and small-scale firms. — Melissa Luz T. Lopez