Banana plantation in Maguindanao shuts down without bank financing
A huge banana plantation in Maguindanao is stopping its business operations after it failed to get lending support from Land Bank of the Philippines and Development Bank of the Philippines, two government banks that refused to set aside their loanable funds to agricultural projects that provide job opportunities to support the government’s peace program in the Bangsamoro.
Al SaharAgri Ventures (“Al Sahar”), which has 1,500-hectare banana plantation in its business plan in Maguindanao (the “Project”), one of the poorest provinces in the country, has ceased its business operations last week.
Al Sahar chairman and CEO John Perrine unburdened himself before thousands of his employees, half of whom were rebel-returnees of the MILF and MNLF, in announcing the difficult decision he had to make regarding the stoppage of business operations of the banana plantation, which started in November 2014.
Credited with the successful handling of La Frutera, a 1,200 hectare banana plantation which similarly employed former rebels of the Moslem separatist groups, Perrine said he had to bite the bullet after both LBP and DBP stopped processing the loan applications for undisclosed reasons.
Al Sahar had already invested more than 1500 million and it had been harvesting export quality cavendish bananas in its initial 400-hectare banana plantation.
Perrine's Project had earlier been provided assurance of financial support for a concessionary loan from the financing facility to be established with financial assistance from the Japan International Cooperation Agency (JICA) which saw merit in granting low-interest loan to the Al Sahar banana plantation carved out of the municipalities of Talayan, Budon and Datu Odin Sinsuat.
That JICA lending program, dubbed "Harvest Fund, was meant to push the return to normal lives of rebel returnees especially in conflict areas. However, the fund was reduced from $125 million to $40 million due to realighments with the change in administration.
And the $40 million was apportioned to other conflict areas, forcing Al Sahar to seek the financial support from the government banks.
However, Land Bank and Development Bank of the Philippines for undisclosed reasons withheld financial support that put Al Sahar into financial trouble.
The case of Al Sahar raises the specter of the lack of desire from government banks to support the call of President Duterte for the banks to fund worthy agricultural projects, according to a banker who learned of the plight of the banana plantation.
The banker also said that Land Bank, which lent collateral-free to the failed Hanjin shipping firm, should have taken to heart the need for the bank to lend to Al Sahar as part of its compliance with the Agri-Agra Law.
That Agri-Agra law mandates the lending of 25 percent of the loanable funds of the banks to agri-agra projects, to which the Al Sahar banana plantation belongs.
The banker, speaking on condition of anonymity, said that BangkoSentralngPilipinas data show that the banks would rather pay the fines than lend to agri projects due to the fear of losing what they lent.
BSP data show that the banks collectively paid 16 billion in fines for failure to comply with the law.
With anticipation of government financial support through the Harvest Fund (a $125 Million JICA funding to support private sector initiative in the Bangsamoro), Al Sahar broke ground in the farm of Talayan in November 2014. Using it’s own fund, Al Sahar continued the development activities including land preparation, importation of basic infrastructure like irrigation equipment, etc. and actual planting on the ground.
Meanwhile, the Harvest Fund got caught up with change of Administration. The $125Million that JICA approved was reduced to $40 Million only and the intention to make it exclusive to BARMM was amended to include “other conflict affected areas.” At the end, none of the JICA funded assistance to support private sector initiative in BARMM was released to BARMM provinces and municipalities by Land Bank of the Philippines, the administrator of the Fund.