Rural banks commit to agri-agra sector

MANILA, Philippines - The Rural Bankers Association of the Philippines (RBAP) has promised farmers and fisher folks in the countryside that rural banks will continue to be on their side, as the group looks to sustain its aggressive investment initiative in the country’s agriculture and agrarian (agri-agra) sector.

RBAP president Joseph Omar Andaya expressed confidence that they will be able to consistently exceed the mandatory loan allocation of 25 percent of banks’ total loan portfolio set for the agri-agra sector.

“We will not just surpass the mandatory limit, but we will exceed it with aplomb,” said Andaya. “We remain firm with our commitment of lending majority of our loans to the farmers, fisherfolk and agribusiness entrepreneurs.”

Currently, more than 50 percent of rural banks’ total loans are invested in the agri-agra sector. From 2002 to 2008, 46 percent of the total loan portfolio of rural banks has been allotted to the sector.

In addition, more than 32 percent of rural banks’ loan portfolio is invested in the agriculture sector totaling more than P35 billion.

Loans to the agriculture sectors have been exceeding 30 percent of the total loan portfolio of rural banks for the past several years.

Presidential Decree 717 or the Agri-Agra Law mandates that at least 25 percent of banks’ total loanable funds should be made available to the agriculture sector, 15 percent of which (or 60 percent of the loanable funds) for agriculture stakeholders and the 10-percent balance (or 40 percent of the loans) for agrarian reform beneficiaries.

However, the law also permits banks to invest in other non-agri ventures like investments in the housing, education and health sectors as a means of alternative compliance.

Under the Barangay Micro Business Enterprises (BMBE) Act of 2002 signed by President Arroyo, government financial institutions that set up special credit windows to fund the operations of micro businesses would be able to use the loans granted to BMBEs as alternative compliance to the Agri-Agra Law, and Republic Act 6977, the Magna Carta for Small and Medium Enterprises (SME).

In addition, the BMBE law provides that “any loan granted by a private institution will be counted as twice in terms of compliance with the SME Act and with regard to the Agri-Agra Law.

Andaya pointed out that rural banks would rather continue to channel funds to agricultural credit to lend out money to farmers and agrarian reform beneficiaries, than actively pursue alternative compliance.

“We will not deviate from our goal. Rural banks will continue to provide assistance to the agri-agra sector,” he said.

For the period 2002 to 2007, rural banks have the lowest percentage of using alternative compliance to agri-agra mandatory credit allocation.

The rural banking sector used alternative compliance methods at an average of only 10 percent of their total loans to agri-agra.

This compares quite favorably to commercial banks and thrift banks that used 46 percent and 69 percent alternative compliance measures, respectively, for 2007.