Agri-agra loans slip 2.8% in 2020

Loans extended by Philippine banks for agriculture and agrarian reform slipped by 2.8 percent to P713.6 billion last year from P733.92 billion in 2019 as the industry continued to fall short of the mandated threshold for the sector.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed the banking system was able to allocate only about 10 percent of its total loanable funds last year, way below the 25 percent mandated under Republic Act 10000 or the Agri-Agra Reform Credit Act of 2009.

The law has retained the mandatory credit allocation in Presidential Decree 717, where 15 percent of banks’ total loanable funds are to be set aside for agriculture while 10 percent should be made available for agrarian reform beneficiaries.

Total loanable funds generated by the banking industry jumped by 15.7 percent to P7.14 trillion last year from P5.54 trillion in 2019.

Loans extended by local banks to the agriculture sector declined by 3.6 percent to P666.69 billion in 2020. The figure was equivalent to a 9.32 percent compliance ratio or below the required 15 percent.

The central bank said big banks or universal and commercial banks registered a compliance ratio of 9.01 percent after extending P608.9 billion to the agriculture sector, while the ratio of thrift or mid-sized banks only reached 6.4 percent after granting P18.1 billion.

Rural banks extended P15.33 billion to the agriculture sector for a compliance ratio of 16.3 percent.

Likewise, the compliance ratio of the banking system fell way short of the 10 percent threshold as banks only extended P55.84 billion for agrarian reform loans equivalent to a compliance ratio of only one percent.

The compliance ratio of big banks for agrarian reform loans only reached 0.88 percent, while that of thrift banks settled at 0.95 percent, as well as rural and cooperative banks with 9.69 percent.

BSP Governor Benjamin Diokno earlier said the central bank remains committed to pursue strategies to promote agriculture financing in view of the sector’s critical role in enhancing financial inclusion and broad-based economic growth.

“A more responsive agriculture financing ecosystem is needed to realize its full potential as an engine of inclusive economic development. We need to be deliberate in our bid to create a more inclusive new economy by supporting the development needs of the agriculture sector,” Diokno said.