PHILIPPINE BANKS failed to comply with the minimum required lending for the agriculture and agrarian reform (agri-agra) sectors in 2021, according to the central bank.

Lenders disbursed loans worth P851.76 billion as of end-December to these sectors, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

This is below the minimum required credit allocation of P1.997 trillion against their total loanable funds worth P7.992 trillion.

Under Republic Act No. 10000 or the Agri-Agra Reform Credit Act of 2009, banks must allocate 10% of their total loanable funds for the agrarian reform sector and 15% for agriculture.

Credit extended to the agriculture sector reached P776.436 billion in 2021, equivalent to only 9.71% of their total loanable funds.

Big, thrift and rural banks financed loans to the agriculture sector amounting to P740.281 billion, P18.141 billion, and P18.014 billion, respectively.

On the other hand, lending to the agrarian reform sector stood at P75.319 billion, or 0.94% of their total loanable funds.

Credit extended by big, thrift, and rural banks hit P61.584 billion, P3.194 billion, and P10.541 billion, respectively, — all below the 10% minimum requirement.

The BSP hopes that Congress, which is on a break for the elections, will prioritize changes to the Agri-Agra law.

A Bicameral Conference Committee will still need to reconcile any conflicting provisions of the measures approved by the House of Representatives and Senate.

Once signed into law, the amendments will widen the range of credit counted as part of the quota to include the larger production chain process in the agriculture sector.

Banks also failed to meet the quota for small business loans required by law, a separate BSP data showed.

Loans extended by the Philippine banking industry amounted to P463.134 billion, equivalent to 5.41% of their total loan portfolio of P8.57 trillion.

This is lower than the 10% required allocation for small businesses under Republic Act No. 6977. The law mandates lenders to allocate 8% and 2% of their portfolios to micro and small enterprises (MSEs) and medium-sized enterprises, respectively.

Year on year, the amount of loans to small businesses increased by 6.3%.

MSE loans extended by banks amounted to P178.143 billion, which is only 2.08% of their total loan portfolio and much lower than the 8% minimum requirement for the sector.

On the other hand, credit to medium enterprises stood at P284.991 billion, equivalent to 3.33% of their portfolio and fulfilling the 2% quota.

Banks have long opted to incur penalties for noncompliance instead of taking on the risks associated with lending to small businesses.

To encourage lending to small businesses, the BSP in 2020 allowed banks to count MSME loans as alternative reserve compliance. These borrowings were also given reduced credit risk weight. — Luz Wendy T. Noble