Chuchi Fonacier
BSP Deputy Governor Chuchi G. Fonacier — Photo by Asia Microfinance Forum

BANK financing remains out of reach for most agricultural firms, with the central bank noting that the credit gap worth over P360 billion as lenders skirt lending quotas under the law.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier said on Friday that banks have remained stingy towards farmers, fisherfolk and other agribusinesses, amid perceptions that lending to the industry would be “risky and unprofitable.”
This leaves at least P367 billion in unmet funding needs for the sector, which has likewise capped growth and productivity.
“Our figures as of present reveal that the gross domestic product (GDP) contribution of agriculture sits only at 9%. The percentage of loans for production and economic activity for agriculture, along with fisheries and forestry, is a paltry 2.9%, while the credit gap currently sits at P367 billion,” Ms. Fonacier said in a speech during the Agriculture Value Chain Financing forum held at the BSP headquarters in Manila.
Members of the Philippine Chamber of Food & Agriculture, Inc. (PCAFI) even see a wider gap, saying that banks should allot as much as P1.1 trillion for agro-industrial activities.
Passed in 2010, Republic Act 10000 or the Agri-Agra Reform Credit Act mandates banks to allot at least 10% of its total loanable funds to agrarian reform beneficiaries and 15% for farmers and fisherfolk.
Despite this, banks choose to pay fines rather than lend to the sector. Philippine banks only extended P629.98 billion loans to the agriculture sector as of end-June, or just 54.7% of the P1.151 trillion they should have lent out to beneficiaries during that period, according to BSP data.
Compliance has remained dismal even after the value chain framework was introduced in 2016.
Under the scheme, farm sector borrowers are evaluated as part of a bigger and organized “value chain” or a linked sequence of product processing from raw materials to final consumer goods. This should boost their chances in securing loans, as the BSP said that lenders may use accounts receivable and confirmed client orders as basis for checking if they are credit-worthy.
To carry out this reform, the PCAFI said during the forum that banks should devote credit officers to assess agriculture-related loan applications.
“I’m asking that the banks create an agri-banking department for agriculture. They (should) hire people who are knowledgeable in agriculture and the dynamics of agriculture, those will be their loan officers,” PCAFI president Danilo V. Fausto told reporters.
“Look at my business opportunities, rather than my collateral.”
He noted that this entity should be separate from loan officers granting real estate mortgages, and should use a different model in assessing farm sector borrowings.
GDP growth eased to 6.1% in the third quarter, with agriculture posting a 0.4% contraction year-on-year as farm output reeled from typhoons which barrelled the country during the period, according to the Philippine Statistics Authority. — Melissa Luz T. Lopez