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Banks miss agri-agra lending quota

BANKS failed to comply with the required lending for the agriculture and agrarian (agri-agra) reform sectors in the third quarter of 2020, central bank data showed.

The banking system disbursed P662.62 billion in credit to these sectors in the three months ended September, based on preliminary data from the Bangko Sentral ng Pilipinas (BSP).

Total loanable funds during the quarter reached P6.510 trillion. With the 10% agrarian reform and 15% agriculture credit required under Republic Act 10000 or the Agri-Agra Reform Credit Act of 2009, the minimum credit allocation for the sectors was at P1.627 trillion.

Broken down, banks’ agrarian reform credit allocation amounted to P55.836 billion, only 0.86% of total loanable funds and failing to meet the 10% quota.

Lending to the sector by big banks, thrift, and rural banks reached P43.406 billion, P3.654 billion, and P8.776 billion of their respective loanable funds, respectively, all failing to meet the required amount.

Meanwhile, loans extended to the agriculture sector reached P606.786 billion, only comprising 9.32% of the banking system’s loanable funds versus the 15% requirement.

Only rural and cooperative banks were able to reach the quota as their lending allocation to the sector reached P20.903 billion, equivalent to 20.71% of their loanable funds.

On the other hand, universal and commercial and thrift lenders disbursed agriculture loans worth P568.383 billion or 9.26% of loanable funds and P17.5 billion or 6.43% of their loanable funds, respectively.

The Department of Agriculture and the Department of Agrarian Reform last week expanded the implementing rules and regulations (IRR) of RA 10000, allowing banks to include more types of loans as compliance with the quotas under the law.

The revised IRR allows lending to households of agrarian reform beneficiaries and agrarian reform communities as compliance with the 10% required lending to the sector.

Meanwhile, loans for activities in the agricultural value chain like production, processing and marketing will also be counted as part of 15% quota.

The central bank has also said they are looking into including green loans in the credit quotas.

Banks have been paying fines instead of complying with the Agri-Agra credit quotas due to the risks they associate with lending to these sectors.

In 2019, loans to these sectors made up only P733.92 billion out of bank’s P6.173 trillion worth of loanable funds. This is below the P1.543 trillion that should have been lent out based on the 25% minimum compliance. — L.W.T. Noble

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