DA’s Piñol says banks’ refusal to lend holding back agriculture

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AGRICULTURE Secretary Emmanuel F. Piñol said banks are to blame for refusing to comply with Republic Act 10000, or the Agri-Agra Reform Credit Act of 2009, saying that their refusal to embark on lending to farmers is holding back growth in the sector.

Mr. Piñol, speaking to reporters about banks that refuse to comply with the 25% legal requirement for the share of agriculture lending, said: “How can you expect growth in Philippine agriculture if banking institutions are avoiding the Agri-Agra law commitments? You’re trying to milk a cow that you’re not even feeding so how can it give you milk?”

The BSP said earlier this month it is looking at ways to improve bank compliance with the law, including applying the 25% requirement to all beneficiaries, with no distinction between regular farm loans and loans made to agrarian reform beneficiaries.

The Agri-Agra Law requires that 15% of a bank’s loan portfolio be directed farmers while 10% is lent out to agrarian reform beneficiaries, though banks consider agricultural lending to be risky and have had trouble complying.

The BSP has said that lending capacity of about P460 billion went untapped due to noncompliance, as of 2017.

Mr. Piñol, citing conversations with bankers, added that banks are gaming the system in various ways, including using erroneous competitions of farm lending.

Mr. Piñol reiterated that the Department of Agriculture (DA) hopes to eliminate farm subsidies and replace them with easy-access credit from its own funds.

The DA claims a 96% repayment rate nationwide for its loan programs.

“We’re proving to (banks) that it’s possible. In the last (Philippine Statistics Authority) report for example, they cited the PLEA (Production Loan Easy Access program) as one of the contributors to the growth of Philippine agriculture.”

“So it means that it’s working. Now they (banks) expect so much from Philippine agriculture but they won’t even let (farmers) borrow money.” — Anna Gabriela A. Mogato