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Masters of art the focus in Manila Hotel’s new gallery

A WORK of colorful chaos, a memento of places travelled, and beauty as seen through an evolving image of a woman’s face are just some of the artworks on view at Manila Hotel’s newly opened Art Gallery.
Titled The Masters, the gallery’s inaugural exhibit features works by Hermes Alegre, Ross Capili, Salvador Ching, Fil Dela Cruz, Edgar Doctor, Raul Isidro, Raul Lebajo, and Mario De Rivera.
Upon entering the gallery’s hallway, Fil Dela Cruz’s painting of a fairy, titled Diwata: Perlas, greets guests with the woman’s eyes looking in their direction. According to the artist, he has been working on it since the 1980s after a stay in Mindanao. Mr. Dela Cruz said that the image evolved from the original face of a woman from an indigenous community, into that of a goddess, and, finally, into a fairy.
Mr. Dela Cruz said that the painting’s counterpart, Diwata: Punla, which is displayed at the far end of the hallway, is a “sleeping” image of the former artwork. “One is sleeping, the other one is wide awake. It is a symbol of night and day,” he said. The image representing day also symbolizes water given the image of a pearl as its right eye, while the other symbolizes land as seen from the plants surrounding the image.
“It is not about who, it is about how and why. My idea is to portray beauty,” he told BusinessWorld.
For Mario De Rivera, his work Between Diu and Makassar is very personal. He recalls his childhood through the images of places he has been to and the people he met while living for a year in China as a young man.
“I was working in Beijing for a while and the culture gets into you,” he said.
The painting — done on a folding screen-shaped canvas — depicts mountain landscapes and characters from his Chinese grandfather’s children stories.
Hermes Alegre and Mario De Rivera collaborated on Palayupuy, creating an image of nature and man.
Mr. Alegre, who focused on painting the female images in the piece, said that the artwork turned out to be what they thought of despite their refraining from communicating. “Mario saw what I saw. The image that I saw in my head was what came out. The image he was thinking of was what I painted,” Mr. Alegre told BusinessWorld in a mixture of English and Filipino.

Made in the Philippines
Made in the Philippines by Salvador Ching

“I don’t start on a blank canvas. Many do that. I don’t,” he said. “Lalagyan ko siya ng kalat para tulungan niya ako mag-isip, kasi kung blank ang hirap mag-isip. Wala kang makita (I put a mess into it [referring to an initial scatter of paint he makes on the canvas] to help me think, because if it is blank, it is hard to think. You don’t see anything).”
Mr. Alegre also revealed that the artwork is unfinished, pointing to nude-colored area where an arm of a woman should have been defined. “’Yun yung masayang part. Natapos kami bago kami tumigil (That was the best part. We finished even before we stopped).”
BETTER LATE THAN NEVER
Manila Hotel’s Art Gallery was established to showcase Filipino culture and heritage.
“We always had this vision to have more attachment to culture and arts and try to promote the local artists, both world-renowned and young, but we just did not know where to put it,” Chris J. Orta, Manila Hotel’s resident manager, told BusinessWorld at the launch last week, adding that it took a year to finally open a gallery space in the hotel.
It was the artists who decided which of their works to include at the exhibit.
“We got the opportunity to be introduced to these artists and they helped collaborate with the idea (of opening the gallery),” Mr. Orta said.
After its inaugural exhibition, the Art Gallery will continue to showcase artworks from celebrated and emerging Filipino artists.
“We are a Filipino hotel and we want to portray that heritage,” he said.
The Masters will be on view until March 30, 2019 at the Art Gallery by the Manila Hotel, located at the hotel’s ground floor. — Michelle Anne P. Soliman

BIR projecting over 20 million will use electronic tax filing in 2018

THE BUREAU of Internal Revenue (BIR) expects more than 20 million taxpayers to file their taxes through its electronic platform this year.
BIR Commissioner Caesar R. Dulay in a speech during a handover ceremony for the Facilitating Public Investment (FPI) project yesterday, thanked the United States Agency for International Development (USAID) for its technical assistance in establishing the government’s electronic tax filing and payments system.
“You have seen how the FPI project has improved and enhanced our electronic filing and payments system. Now from 1.5 million filers in 2013, it has increased considerably about 19 million in 2017. Filers as of the first four months (of 2018) reached 7.5 million,” Mr. Dulay said.
“So for this year we expect to have about 20-23 million tax filers all because of the enhanced e-filing and e-BIR registration forms with the help of our development partners,” he added.
The FPI is a five-year, $15.3-million project that began in 2013, with the objective of addressing to tax collection inefficiencies, minimizing tax evasion, and eliminating public spending bottlenecks.
“With the hope that your support will continue, that efficient tax administration in BIR will lead to more public and private investments in the Philippines,” said Mr. Dulay.
USAID Tax Administration head Admir Zajmovic meanwhile said in his speech: “Our recommendations would be to please continue to build a central database, please continue to work on implementing risk management and utilize risk-based audit selection, simplify tax filing requirements and make it simple for taxpayers.”
“With all of that to be able to achieve your goals which are attaining collection targets, improve taxpayer satisfaction, and strengthen good governance within the agency,” he added.
The BIR collected P1.61 trillion in the 10 months to October, up 12% from a year earlier.
This is equivalent to 78.96% of the P2.039-trillion 2018 target. — Elijah Joseph C. Tubayan

Nickel Asia to buy back up to P1.5B of its shares

LISTED mining company Nickel Asia Corporation on Tuesday said its board of directors approved the plan to buy back up to P1.5 billion worth of shares in the next two years.
“Given the current weakness of the market, now is an opportune time for the company to repurchase its own shares, which has been exceedingly undervalued,” Martin Antonio G. Zamora, president of Nickel Asia, said in a statement.
“The objectives of the buyback program are to enhance shareholder value and to manifest confidence in the company’s inherent value and long-term prospects,” he added.
The share buyback program will start on Dec. 3, 2018, and will end on Dec. 2, 2020. The total number of shares to be repurchased has not been determined yet as it would depend on the share price.
Nickel Asia reported its attributable net income rose 35% to P3.54 billion for the first nine months of 2018.
Shares in Nickel Asia closed at P2.20 per piece on Tuesday, up by 4.27%. — Reicelene Joy N. Ignacio

Rice imports must avoid harvest window under new planting schedule

THE Department of Agriculture (DA) needs to announce a clear schedule for its proposed new crop timetable to facilitate the timing of imports, according to a former administrator of the National Food Authority (NFA).
Romeo G. David, who was NFA Administrator during the Ramos administration, said in a text message: “I have no problem imposing 35% tariff on imported rice but a very strict import or landing window must be clear and imposed, accountabilities identified, penalties spelled out subject to periodic updating. The Secretary of the DA should (also) be tasked to announce the cropping schedule with a clear date before each cropping season to allow the setting of the import window.”
The current import regime seeks to avoid synchronizing the arrival of rice imports with the harvest, in order not to depress the prices farmers obtain for their produce. The DA has since proposed altering the rice planting calendar to minimize the chances of destructive typhoons transiting through key rice growing provinces during critical periods of the crop’s development.
The rice tariffication bill aims to remove quantitative restrictions on rice importation, but applies a 35% tariff on shipments by the private sector from countries within the Association of Southeast Asian Nations (ASEAN), and a 50% tariff for non-ASEAN member countries.
“Anything arriving that falls outside the window must be immediately confiscated in favor of government without question (with responsibility and risk with the importer) to be added to government inventory for use in calamity relief. The illegally imported rice must be accounted for and released by Customs and delivered to NFA immediately for warehousing and management in trust for the government,” Mr. David said.
He added: “A portion of taxes collected must be committed to continuous updating of economic data (area-specific production and consumption including prices of inputs, transport, and retail prices) on rice, corn and grain to help farmers and government make informed decision towards improving farm family income.”
Mr. David said that the NFA or the Department of Trade and Industry (DTI) should facilitate the registration of import applications and certificates that the volumes are within the consumption ceiling for the period to avoid oversupply. He said that to avoid corruption, this should be done electronically.
The rice tariffication bill which has been approved by the bicameral conference committee has yet to be signed by President Rodrigo R. Duterte.
Herculano C. Co, Jr., president of the Philippine Confederation of Grains Association (PCGA), said that the rice industry is a sunset industry, given the lack of support from the government for the farmers.
“This is a sunset industry. Give it two years, this industry will be gone,” Mr. Co said at a briefing on Food Supply for the Holidays organized by the Philippine Agricultural Journalists (PAJ) on Tuesday.
“If the palay (unmilled rice) falls below the support price, that is the time the NFA comes in. This time it will be different with private sector imports, which will depress prices, and that is a problem. Can the farmers match that price without government support?” Mr. Co said.
Mr. Co said that the tariff which is supposed to be used for the Rice Competitiveness and Enhancement Fund (RCEF) has no clear provisions on how this will be distributed to the farmers. — Reicelene Joy N. Ignacio

Funding the farmers: crowdfunding as an option

By Jochebed B. Gonzales
Senior Researcher
WITH the agriculture sector being perceived as high-risk, finding a source of funding is a tall order for farmers, more so when they have little or no assets to pledge as collateral. This leads them to borrow money from informal lenders at predatory rates, which makes them susceptible to a cycle of poverty that would last generations.
Fortunately, there is an alternative: crowdfunding.
Crowdfunding makes use of online channels to raise fresh capital from willing donors or lenders, who buy into the business pitch or goal presented by the proponent.
In the agriculture sector, there are two known platforms: those from Cropital Enterprises Corp. and FarmOn Agri-Community Corp., who hope to change this notion on agriculture as a risky venture.
“If you look at the perspective of Cropital, the problem we’re really trying to solve is ‘how do we minimize the risks in lending to farmers?’” said Ruel T. Amparo, chief executive officer (CEO) and founder of Cropital.
“It is the problem of big institutions like banks because they perceive [agriculture] as having very high administrative costs with high risks and low returns.”
Cropital serves as a platform that allow registered individual lenders to lend directly to at least one farmer at lower interests compared to informal lenders who usually charge a minimum 20% after harvest season.
“It is a loan,” Mr. Amparo said. “Basically, there is direct relationship between you and the farmer you are lending money to.”
Now on its third year, Cropital has funded around P34 million in loans, according to Mr. Amparo. Based on its website, an investor gets a fixed return of 3.5% in four to six months for short-term funding.
Meanwhile, FarmOn’s approach is providing a “package of technology” to each farmer from planting season to post-harvest after which investors and farmers split profits through a 50-50 sharing.
Presently, FarmOn caters to thousands of farmers of around 20,000 hectares of land in Cagayan Valley, said Teodulo O. Otoman II, CEO and founder of FarmOn. Investors finance a farmer’s inputs which are products provided by FarmOn.
“The number one problem of farmers in Cagayan Valley is [the need for] capital. Second, most of the parents convince their children to study hard and look for other jobs besides farming… We want to show them that there’s money in farming. It’s a business,” said Mr. Otoman.
“We have technologies to make the job easier. It’s more of an awareness program, a movement to show that there’s future in farming.”
Other than the P250 registration fee and P300 notary fee, Mr. Otoman said their platform does not collect fees from investors and farmers.
The online platform is just 10% of FarmOn’s operations, Mr. Otoman said, while the other 90% are activities done “offline” such as providing farmers inputs and farming equipment such as reapers, tractors, rice mills, and post-harvest facilities.
“FarmOn’s profits come from its own products and services — seeds, fertilizers, chemicals, reaper, tractor, trucking, etc.” Mr. Otoman said. “We get our income in the same way as other rice-processing companies and facilities get theirs.”
FILLING THE GAP
Rather than a threat, some players in the banking sector see crowdfunding platforms as an alternative to financing the needs of farmers that some banks cannot provide.
“Crowdfunding platforms can fill a credit gap in the sector by bridging farmers and small agri-enterprises to the wider investing and lending public — providing an alternative to bank financing,” said Pia Bernadette Roman-Tayag, managing director and head of Financial Consumer Protection Department and Inclusive Finance Advocacy Office at the Bangko Sentral ng Pilipinas (BSP).
For Bank of the Philippine Islands (BPI) head of corporate credit products Eric Roberto M. Luchangco: “Crowdfunding institutions complement the agricultural financing sector by helping the ‘unbankable’ scale of their business and eventually become ‘bankable.’”
Raymundo C. Roxas, president of Rizal MicroBank — A Thrift Bank of Rizal Commercial Banking Corp., shared the same view, but cited the need for supervision among crowdfunders to prevent abuse.
“Somehow they’re contributing to some things, like answering a gap. Crowdfunding is a good concept because it responds to the financial requirements of sectors who have difficulty in addressing their capital requirements. But I still believe there needs to be someone to provide oversight,” he said.
“The issue is, who are the people behind? Do they have the business skills to really take care of these investments that will pass through their platform? Now there’s direction to regulate them especially if they are bordering or venturing into what formal financial institutions do which is highly regulated.”
BSP’s Ms. Tayag concurred: “Investor protection is a key consideration in crowdfunding. Investors need to be adequately informed of the risks and recourse mechanisms, and to be screened for suitability.”
“As the intermediary, regulating the platform providers for investor protection and anti-money
laundering duties would be a natural course of action, especially as the crowdfunding market significantly expands,” she added.
In November last year, the Securities and Exchange Commission released a draft memorandum circular providing rules and regulations for crowdfunding. The draft rules limit the amount to be raised by an issuer to P10 million. The amount sold to an investor “across all issuers” is also capped at P50,000. A waiver must be signed by the investor should he intend to exceed the P50,000 limit requirement.
WHY NOT THE BANKS?
Banking institutions are mandated by the Agri-Agra Law to allocate at least 15% of their loanable funds to the agriculture sector and another 10% for agrarian reform beneficiaries (ARBs).
But the banking industry in general often underperforms in this regard.
Based on data from the BSP, total loanable funds generated in the banking sector has reached P4.605 trillion as of June 2018, but loans to the agriculture sector only amounted P584.928 billion, equivalent to 12.7% of the industry’s total loan portfolio versus the 15% requirement.
Lending to the ARBs was far worse as compliance rate in the entire industry was reported at 1% (P45.052 billion) against the 10% (P460.533 billion) required.
“In terms of ‘other agricultural loans,’ Rizal MicroBank is over compliant because it is our market. However, our cost to serving this market is equivalent to 90% of our gross revenue,” Mr. Roxas said as he described hours of trekking by his team to reach their target clients.
Mr. Roxas also cited a study made by the bank wherein only those who own at least two hectares of land were likely able to pay back their borrowings.
“Whether it’s palay or corn, a farmer needs at least two to three hectares of land to generate income or to be able to pay his loans. And that is barring unforeseen events such as typhoons…,” he explained.
“It’s a function of the challenges of serving that kind of market.”
Meanwhile, BPI’s Mr. Luchangco showed more optimism for the agriculture sector than the ARB segment.
“We believe that full compliance with the agri component is possible because a wide scope of sectors in the supply chain, from producers to traders, are qualified…,” he said.
“Full compliance with the agra component continues to be a challenge, as there is a restriction to ARBs. Most ARBs operate informally and would not pass the bank’s credit criteria.”
Mr. Luchangco also noted the “bit of mismatch” between 25% Agri-Agra compliance rate and the agriculture sector’s contribution to economic output which stood at 8.5% last year.
BSP’s Ms. Tayag admitted that “not all banks are equipped” to lend to the agriculture sector which “requires a certain level of expertise and focus.”
“Most of the big banks have not developed — and have not invested in developing — the required capabilities to aggressively pursue the agri-agra sector, given that they have a different strategic positioning and may not find the sector promising in light of the challenges,” she said.
RECEPTION
“I can say the banks are concerned with our presence,” said Cropital’s Mr. Amparo. “[But] at the end of the day, we’re aiming for collaborations and partnerships.”
He said Cropital’s focus is “devising a scheme that will allow individual and institutional lenders to lend directly to individual farmers.”
“In the long run, what we see is more of a partnership between banks and Cropital in serving the needs of the farmers,” Mr. Amparo said.
There were also reactions coming particularly from informal lenders and rural banks, explained FarmOn’s Mr. Otoman. “But we are trying explain to them that we are not into competition. What they provide is money. Ours are the needs of the farmers,” he said.
Currently, FarmOn is dealing with individual investors. When asked on the possibility of working with institutions, Mr. Otoman said: “We do not accommodate yet. There are so many farmers who wanted to join the program. There are so many investors who wanted to invest. But we limit it to our capacity of 20,000 hectares for now.”
Rizal MicroBank’s Mr. Roxas acknowledged the disruption brought about by crowdfunding platforms while also citing the importance of adapting to modernization.
“As a banker, [I] do not look at them as direct competitor because their business model is a lot different than ours. In a way, they’re disrupting, but disruption is inevitable when it comes to business.”
Crowdfunding or not, Mr. Roxas said that banks have to adapt in an ever competitive business landscape.
“To bring down the cost of serving this market, it’s high time that banks and financial institutions like us should really look into digital and technological innovations,” he said.
“What we’ve realized, if we are going to do it the traditional way by putting up branches, it will exhaust all our resources. In the plan that we have, we are always on the lookout for Fintech companies whom we can partner with, whom we can use their platforms to reach out our target market without necessarily building a branch.

Beethoven reinvented with the MSO

LUDWIG VAN BEETHOVEN is loved for the emotional depth of his music. His iconic “Moonlight Sonata” has been a window to peer into his loneliest moments, allowing people to share in his sorrows. His ninth symphony, Ode to Joy, lifts the human spirit to great heights with themes of triumphant joy in brotherhood with man and fellowship with God.
On Nov. 30, 8 p.m., at the Meralco Theater, the Manila Symphony Orchestra (MSO) will celebrate this beloved composer’s music with Beethoven Redux.
The MSO will be playing music by and inspired by Beethoven. Among these is “Par Clemenza pour Clement,” a “diptych after Beethoven’s Violin Concerto” made by Filipino composer Jeffrey Ching. Mr. Ching describes it as mostly made out of “solo cadenzas that are really mini-fantasias on Beethoven’s themes, but quoted and combined in unexpected ways. These are punctuated by fragments of Beethoven’s original orchestration which appear in the wrong order.”

Iskandar Widjaja
Indonesian-German violin virtuoso Iskandar Widjaja, described as “a force of nature,” will be performing Jeffrey Ching’s “Par Clemenza pour Clement,” a “diptych after Beethoven’s Violin Concerto.”

Mr. Ching studied in Harvard, Cambridge, and London, and now resides in Berlin. He represented the Philippines in three cultural delegations to China, was 1998 TOYM Awardee in Music, and in 2003 was the first composer to receive the Jose Rizal Award for Excellence from the Philippine president. He is currently working on three new operas.
For this concert, the MSO will be led by Singaporean conductor Darrell Ang. Mr. Ang has been Artistic Director and Chief Conductor of the Sichuan Orchestra of China since December 2016 and is a regular guest conductor at the Mariinsky Theatre. He studied conducting in St. Petersburg with Leonid Korchmar and continued at Yale with Shinik Hahm. He took all three top awards at the 50th Besançon International Young Conductors’ Competition leading to the Music Directorship of the Orchestre Symphonique de Bretagne (2012-2015).
Mr. Ching’s music is to be played by Iskandar Widjaja, an Indonesian-German violin virtuoso. Mr. Widjaja has performed with internationally renowned ensembles in Germany, Switzerland, China, Australia, and Austria. His personality and energy are aptly summed up by The Strad: “Iskandar Widjaja, a true force of nature.” Mr. Ching fondly describes Mr. Widjaja: “He combines absolute technical mastery and interpretive depth with a pop star’s stage persona that is entirely of our own time.”
Beethoven Redux will be held on Nov. 30, 8 p.m., at The Meralco Theater, Ortigas Ave. cor. Meralco Ave., Pasig City. Tickets are available at TicketWorld, (https://tinyurl.com/MSOBeethovenRedux or 891-9999). For group and other special discounts, call the MSO office at 523-5712 or e-mail marketing@manilasymphony.com. — Gideon Isidro

Senators approve MORE power franchise for Iloilo City

THE SENATE on Monday approved on third and final reading the bill granting the franchise of MORE Electric and Power Corp., effectively replacing Panay Electric Co. (PECO) as the sole power distributor in Iloilo City.
House Bill No. 8302, which grants the company to operate for 25 years, was approved with 15 affirmative votes, zero negative vote, and no abstentions.
It was sponsored by Senator Grace S. Poe-Llamanzares, chair of the Senate committee on public services, for the Senate’s plenary approval.
The House of Representatives approved MORE Power’s legislative franchise on Oct. 8 and transmitted it to the Senate the following day. MORE Power was previously MORE Minerals Corp., a unit of Enrique K. Razon, Jr.’s Monte Oro Resources and Energy, Inc. (MORE).
To ensure the uninterrupted supply of electricity, the franchise bill provides for a transition period allowing PECO to operate temporarily until MORE Power is in full operation. The period will not exceed to two years from the grant of legislative franchise.
During the transition period, PECO is required to settle all refunds in connection with the all cases filed against it.
Meanwhile, MORE Power is directed to “accord preference” to hiring PECO employees and to conduct an information campaign regarding its operations to Iloilo end-users.
Both companies are also required to ensure that laid-off employees receive all separation and retirements benefits prescribed by law.
MORE Power should also undergo a competitive selection process in securing power supply agreements, the bill stated. It should also reduce the duration and frequency of power interruptions.
MORE Power is required to submit an annual report to Congress on its compliance with the terms and conditions of the franchise. Any sale or transfer of its shares are also subject to Congressional notification.
The Energy Regulatory Commission (ERC) was directed to conduct a comprehensive assessment of the company’s operations one year after the grant of the franchise and five years thereafter. — Camille A. Aguinaldo

SMPC unit signs retail power contract

SEMIRARA Mining and Power Corporation (SMPC) on Tuesday said its retail electricity unit has signed a 4-megawatt (MW) retail supply contract with a steel manufacturing company based in Luzon.
In a disclosure to the stock exchange, the Consunji-led energy company said Sem-Calaca RES Corporation’s (SCRC) supply contract, which started in September, will last for 15 months.
“We expect a challenging 2019 for the local power industry because of increasing power supply in the market and the growing competition for power contracts. With the increasing contestable customers switching to retail suppliers, the RES (retail electricity supplier) market could be a bright spot for SMPC,” SMPC President and Chief Operating Officer Victor A. Consunji was quoted as saying in a statement.
RES refers to a person or entity “authorized to sell, broker, market or aggregate electricity to the ‘contestable’ market.” Starting this year, the threshold for the 12-month average peak demand to qualify to become a contestable customer was brought down to 750 kW from 1 MW.
“We are in talks with a number of contestable clients for an aggregate volume of 150 MW. The negotiations are in various stages of negotiation,” Mr. Consunji said.
Mr. Consunji expressed confidence that SCRC can compete with other RES players, as it provides customers with customized solutions in managing electricity costs.
SCRC offers affordable electricity prices “by securing sufficient supply from affiliate power plants Sem-Calaca Power Corporation and Southwest Luzon Power Generation Corporation, other independent power generators, or from the Wholesale Electricity Spot Market.”
Parent company SMPC reported a 23% drop in consolidated net income to P8.9 billion as of September this year from P11.6 billion a year ago as coal and energy sales both declined during the period.
Coal sales dipped 4% to P17.7 billion during the nine-month period, as production slipped 10% to 8.9 million metric tons. Revenues from the power business decreased by 11% to P13.2 billion on weaker plants’ performance.

Rural banks still in the lending game

By Lourdes O. Pilar
Researcher
RURAL BANKS began to sprout in the 1950s when the countryside lacked basic financial services, which prompted the government to set up measures to incentivize the establishment of such lenders by way of lower interest and other perks. Prior to this, the main sources of credit were moneylenders in the informal sector that charged very high interest rates. Convenient and secured payment facilities in many rural communities hardly existed.
However, issues of undercapitalization, illiquidity, and insolvency have led many of these banks to file for bankruptcy, prompting the central bank to tell these banks to shape up, or else face closure.
From a peak of around 1,040 in 1981, the number of rural banks in the country has been reduced to more than half, with several closures happening every year or so. The growing number of rural banks driven to bankruptcy led to initiatives such as the Consolidation Program for Rural Banks (CPRB) to encourage more mergers among lenders to fortify their financial footing.
“The unfortunate closure of some rural banks resulted to the reduction of the number of banks serving the market, but the joint enabling support of the Bangko Sentral ng Pilipinas (BSP) and the Philippine Deposit Insurance Corp. via the CPRB Plus with the specific push for merger and consolidation, coupled with other regulatory initiatives, has admittedly helped further strengthen the industry,” the Rural Bankers Association of the Philippine (RBAP) told BusinessWorld in an email.
The group cited BSP data explaining that while the number of rural banks’ head offices declined, the number of branches was on an uptrend from 2,956 as of March 2018 to 2,972 as of June 2018.
“In addition, the number of ‘branch lites’ and ‘agencies of banks’ allowed under BSP Circular Nos. 987 and 940, respectively, have scaled up (1,690 branch-lite units, 926 of which are rural banks and 138 micro-banking offices) the capacity of our rural banks to address the financial requirements of these farmers and fisherfolk,” RBAP noted.
In 2015, state agencies launched the CPRB, which aims to strengthen the rural banking system by way of consolidations. The initiative, which expire on Aug. 25, 2017, was extended until 2019 to prod more mergers among small lenders to fortify their financial footing. The revived CPRB program dropped the five-bank requirement in order to be eligible for the funding aid although merging banks still have to meet the required capitalization.
To date, there are four groups involving 18 rural banks under the revived CPRB program according to RBAP.
“Closures and consolidation of rural banks are meant to strengthen and improve the stability of the rural banking industry, and not weaken it. Accordingly, we do not believe such closures have negatively affected the rural banks’ ability to lend to farmers and fisherfolk. Well-managed and strong rural banks can be more responsive to the financing requirements of the rural clients,” said Pia Bernadette Roman-Tayag, Head of the BSP’s Financial Consumer Protection Department and Inclusive Finance Advocacy Office.
KNOWING THE MARKET
The rural banking sector held a combined P238.03 billion in assets, representing a 1.5% share of the Philippine banking system’s total assets of around P15.71 trillion as of the end of the second quarter according to BSP data.
Even with its relatively small size, the rural banking has the advantage of knowing their market in the countryside.
“While the unfortunate closure of some rural banks resulted to the reduction of the number of banks serving the market, it doesn’t necessarily end up to diminishing the ability of the remaining banks to lend to farmers and fisherfolk,” RBAP said.
“Considering that rural banks are strategically located in the countryside, they get to maintain foothold position over the agri-lending market. This is basically the edge of these member-banks of ours over the rest of the banks in the country,” RBAP noted.
“Because of their proximity to the farmers and fisherfolk, they get to immediately reach out to this specific client group and provide them the financial solutions they need.”
Rural banks could also offer services other than loans given their knowledge of their rural clients.
“Our member-banks can further assist them by establishing possible linkages with possible buyers of farm produce. There is always a huge opportunity for our member-banks to work with other merchants in the agricultural value chain to further improve farming business viability,” RBAP said.
“In addition, our member-banks can serve as their financial literacy mentors to also improve the skills of our farmers and fisherfolk in this aspect,” RBAP added.
BSP’s Ms. Tayag, concurred: “These [rural] banks are perceived to have comparative advantage in granting relationship lending to small-sized enterprises, including those belonging to the agriculture sector. For instance, big banks given their sheer size, have ‘standardized’ their lending process. On the other hand, small banks have the advantage of being community-based which afford them with more intimate information and insights about the rural clients,” she said.
“Such local knowledge can be particularly valuable in determining market opportunities and managing credit risk.”
Figures on compliance under the Agri-Agra Reform Credit Act of 2009, which mandates banks to allot at least 10% of total loanable funds for agrarian reform beneficiaries (ARBs) and 15% for farmers and fisherfolk, have shown that only rural banks, along with cooperative banks, have consistently managed to meet the quota while other banks fall short.
As seen in the previous quarter, rural and cooperative banks shelled out 35.64% of their total loanable funds as compliance to the law, allotting 11.2% of their available funds to the agra-component and 24.5% to the agri-component.
Even so, RBAP noted that the 10%- and 15%- cap on the agri-agra components, respectively, have “been a fence” for their member-banks.
“Apparently, it is more challenging to scout for agrarian reform beneficiaries in some areas than to generally find farmers. Having a 25% blanket requirement for lending to agriculture is definitely going to have its ‘liberalizing’ effect to our member-banks. In turn, this would mean having more clients to be openly served,” RBAP said.
RBAP was referring to a proposal to lump the agri-agra lending provisions into a 25%-blanket requirement for lending to the agriculture sector in order to allow for greater flexibility.
BSP’s Ms. Tayag noted the BSP’s reservation to the mandatory credit quota scheme “given its implementation challenges and potential negative impact on financial stability and consumer protection as reported in local and international research papers.”
Ms. Tayag likewise noted that while rural and cooperative banks have been meeting the 10% quota requirement for agrarian reform, their compliance rates has been on a decline to 11.18% in Q2 2018 from 13.97% in Q2 2017.
GETTING BETTER
RBAP reiterated that even with the decrease in rural bank head offices, the rural banking network in general “is growing significantly.”
Latest data from the BSP show the rural and cooperative bank group’s gross total loan portfolio as of June 2018 at around P135.94 billion, 4.6% higher compared to the figure as of June 2017.
BSP’s Ms. Tayag likewise noted the rural banks’ current upward trend, citing the increase of the group’s deposits by 4.8% to P169.6 billion versus the P161.8 billion in the same period last year as well as the number of deposit accounts to 8.18 million as of June 2018 compared to 7.37 million and 6.57 million in 2017 and 2016.
There was also “steady improvements” in the group’s capital adequacy ratio, which increased to 19.57% as of June 2018 versus the 18.32% in 2017 and 17.37% in 2018, Ms. Tayag said.
“In terms of profitability, liquidity and asset quality, however, rural banks’ performance for the same periods has not shown marked improvement,” noted the central bank official.
Selected Performance Indicators of Rural Banking Industry
“Overall and in the long term, we see that consolidation and closures will bring about greater banking stability and strengthen rural banks’ ability to effectively respond to the dynamic operating environment.”
For RBAP, they believe there is “still huge room” for their member-banks to expand their respective agri-loan portfolios: “The demand-supply data that we have from the Department of Agriculture and the BSP are apparently telling us to reach out further to this needing farmers in the countryside,” RBAP said.
The group also cited the passage of Personal Property Security Act (Republic Act 11057) into law as a “confidence booster” of lending towards the agriculture sector. The law increased the list of acceptable personal properties that small businesses can use as loan collaterals besides real estate.
“Our farmers can even make use of their future crops, produce or livestock for this purpose. This should, in effect, encourage these client groups to be on-boarded onto the formal banking scenario,” RBAP said.
They also mentioned the credit guarantees offered by the Agricultural Guarantee Fund Pool (AGFP) program and the crop insurance in the cart of the Philippine Crop Insurance Corp. (PCIC). The AGFP covers 85% guarantee to private financial institutions against default risks of farmers while PCIC gives insurance protection to farmers against certain type of damages and losses to their agricultural assets.
The rural banks have also taken step to digitalize their operations to improve their services.
“To sustain its ability to provide better access to credit in the countryside, rural banks need to effectively adopt and leverage technology. Digitalization will allow rural banks to operate more efficiently and develop contextualized, more convenient and affordable financial services for their clients,” BSP’s Ms. Tayag said.
Ms. Tayag said that the BSP has promoted digitalization to help address the high transaction costs in lending to the agriculture sector.
“The BSP issued a package of policies for digital financial inclusion which are particularly relevant and designed for rural communities… These include polices that aim to: 1.) enable ease in the opening of basic, no-frills accounts; 2.) expand banking access through ubiquitous, low-key cash agents; and 3.) develop and interoperable retail payment system as a platform for innovative banking products,” she explained.
These policies, Ms. Tayag said, enable lenders to develop loan products that “are more aligned with the profile and preferences of agri workers and enterprises.”
Aiding in the digitalization process, Ms. Tayag said, is the Philippine ID system that is expected to further expand and deepen digitalization of financial services benefitting the underserved and financially excluded.

Gov’t fully awards 7-year bonds

By Melissa Luz T. Lopez
Senior Reporter
THE GOVERNMENT raised P15 billion via Treasury bonds (T-bonds) yesterday, and looked to raise more funds via a tap facility given overwhelming demand for the papers at lower prices.
The Bureau of the Treasury made a full award of reissued seven-year papers on Tuesday, which have a remaining life of six years and four months. This came as market players put forward P62.227 billion worth of bids, which was more than four times the programmed offering.
The long-term notes also saw its rate drop to a 6.974% average, 11.1 basis points lower than the 7.085% fetched when the papers were last awarded in September.
The yield is likewise below the 7.084% market rate yesterday, based on the benchmark Bloomberg Valuation Service reference rates.
The seven-year IOUs originally carried a 5.75% coupon when these were first floated in April. This week, market players asked for returns ranging from 6.9% to 6.99%.
National Treasurer Rosalia V. De Leon said the strong demand for T-bonds reflects a last ditch effort among banks and investment firms to allocate their portfolios now as they anticipate rates to trend lower in 2019.
“We are pleasantly surprised,” Ms. De Leon told reporters after the auction. “Actually we are seeing…the preference going into the intermediate, they are going longer because they want to lock in the rates right now.”
“The expectation is that the rates will further be falling already given that the inflation is expected to already trend downwards [with] lower oil prices, peso is appreciating, so they better lock in already on the long end of the curve,” the official added.
The Treasury also chose to open a tap facility to accommodate other bids that did not meet the first cut-off, where it raised P15 billion more as planned. Tenders reached P53.9 billion.
The tap facility was limited to the 10 firms that have been named as market makers by the Treasury, which are given privileges like this in exchange for obligations like submitting rate bids within a prescribed range.
The government also opened the tap window last week and raised an additional P15 billion worth of reissued five-year T-bonds, as appetite for the papers amounted to P48.857 billion during the 1 p.m. cut-off.
Raising more funds from the tap facility may allow the Treasury to advance its fundraising activities and avoid higher interest rates in future note offerings.
Sought for comment, a bond trader said the better turnout of the auction came on the back of an “improved near-term CPI (consumer price index) outlook,” as investors appear convinced that inflation is indeed on its way down coming from a peak of 6.7% in September and October.
The trader noted that the tap facility will likely be fully subscribed given upbeat market demand.
Meanwhile, Ms. De Leon said they remain watchful of developments as they time the issuance of dollar bonds to global investors. In particular, they are looking out for the minutes of the Nov. 7-8 meeting of the United States Federal Reserve to look for cues for the expected rate hike in December.
Speeches by Fed officials scheduled this week are also anticipated as authorities want to digest the “slant” of their remarks.
Another major event eyed by markets is the upcoming G-20 meeting of US President Donald J. Trump and Chinese President Xi Jinping, as they seek to settle the trade war between the world’s largest economies.
The Treasury is raising P270 billion from the domestic market this quarter through auctions of securities, offering P180 billion in T-bills and another P90 billion in Treasury bonds.
This is part of the P888.23-billion borrowing plan this year from local and foreign sources to fund the budget deficit and support increased government spending.

Ubuntu opens at Arete

ATENEO DE MANILA University’s (ADMU) Arete formally opened its main plaza which will be called the Ubuntu Space. The link that will connect Arete’s arts and innovation wings is sponsored by the UnionBank of the Philippines.
An African word which means “humanity,” or “belonging through collaboration,” Ubuntu Space can be a venue for town-hall meetings, exhibitions, and launches.
ADMU’s Arete is the creative hub for students where they can develop their thinking, creativity, and ideas.
UnionBank chairman Justo A. Ortiz, an Ateneo alumnus, said in a statement that the bank has always supported “out of the box innovation” and expects the partnership to be a “mutual benefit to all involved,” meaning the students, the school, and the bank.
Prior to this particular partnership, UnionBank HR director Michelle Rubio said it had partnerships with Ateneo, including the Design Thinking workshops where students are asked to conceptualize and innovate human-centered creations.
“It’s important to have connections between the academe and the private institutions, not just about the arts, but about our broad capabilities for learning and keeping up with innovation in education,” Ms. Rubio told BusinessWorld at the sidelines of the quick Ubuntu unveiling.
Outside Ateneo, UnionBank is “friendly to all schools” said Mr. Rubio. For instance, it has a Hackathon program that started in 2016 where students and professionals all over the country are given “wicked challenges like themes on poverty, climate change, and agriculture” and the student have to come up with a solution, a prototype, within the next 24 hours.
UnionBank is banking on “the creativity of the Filipinos,” said Ms. Rubio. — NFPDG

PHL reforms pushing renewable power growth, Bloomberg research arm says

THE PHILIPPINES has achieved a “turnaround” in sourcing power from renewable sources with policy innovations that have helped bring down the cost, putting the country sixth among developing nations in the Climatescope 2018 ranking compiled by Bloomberg New Energy Finance Ltd. (BNEF).
The Philippines scored 2.29 points, enough for sixth on the rankings, amid surging electricity demand, decreasing technology costs, and innovative laws.
“It’s been quite a turnaround. Just a few years ago, some argued that less developed nations could not, or even should not, expand power generation with zero-carbon sources because these were too expensive. Today, these countries are leading the charge when it comes to deployment, investment, policy innovation and cost reductions,” said Dario Traum, senior associate of BNEF and project manager of Climatescope in a statement Tuesday.
BNEF said reforms introduced by the Electric Power Industry Reform Act (EPIRA), or Republic Act 9136, and the Renewable Energy Act (RE), or RA 9513, fueled the growth of the renewable energy sector.
In September, the Department of Energy also issued a circular detailing its intent to identify competitive renewable energy zones (CREZ), where renewable sources are deemed feasible for development.
The government has also moved to give energy developers the right to sign power supply agreements (PSAs) directly with customers. Meanwhile, the Green Energy Option program authorizes utilities to supply customers opting for renewable energy.
BNEF also noted the country’s target for renewable capacity of 15.3 gigawatts (GW) by 2030.
BNEF said the negatives include targets to increase coal energy capacity by up to five times the current level. It said that while additins to coal-fired capacity fell to their lowest levels in over a decade in 2017, actual power generated by coal plants rose 4% year-on-year.
The top five in the BNEF ranking were Chile at 2.63 points, India (2.57), Jordan (2.54), Brazil (2.52), and Rwanda (2.31). China, which claimed the top spot last year, finished seventh. — Vincent Mariel P. Galang

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