Bank lending to agriculture sector hits P1.7 trillion

MANILA, Philippines — Loans extended by banks to the agriculture sector reached P1.7 trillion in the first half of the year as banks allocated substantial resources for agriculture, fisheries and rural development (AFRD) financing, the Bangko Sentral ng Pilipinas (BSP) said.

In a report on the Philippine financial system for the first semester, the central bank said the total loanable funds for the mandatory AFRD financing under Republic Act 11901 stood at P912.7 billion as of end-June.

The BSP said banks allocated 192.4 percent of their total loans for AFRD financing as of end-June, significantly higher than the 36.4 percent allocated for agri-agra credit in the same period a year earlier.

According to the central bank, the growth in AFRD financing was partly due to a shorter reference cut-off date for calculating total loanable funds as stipulated by law.

Data showed agricultural loans extended by universal and commercial banks stood at P1.47 trillion in the January to June period. It represented 202.5 percent of the sector’s total loanable funds of P727.6 billion.

Loans extended by thrift banks to the agriculture sector reached P128.7 billion in the first six months of the year, representing 154.1 percent of P83.5 billion in loanable funds.

Rural and cooperative banks also lent out P153.4 billion or 188.4 percent of their P81.4 billion loanable funds.

Meanwhile, digital banks did not extend loans to the agriculture sector from their P20.2 billion total loanable funds. Under RA 11901, newly-established banks are exempt from the mandatory AFRD financing for five years since they started operations.

Pursuant to Section 13 of the AFRD Law, RA 11901 lapsed into law on July 2, 2022 and became effective on Aug. 1, 2022.

The latest law repealed RA 10000 or the Agri-Agra Law and abolished the distinction between the 10-percent agrarian reform and the 15-percent agricultural credit, making the credit quota more inclusive to the entire agricultural value chain.

“Banks strongly supported the growth and development of marginalized sectors of the economy particularly farmers, fisherfolks and micro, small and medium enterprises (MSMEs),” the BSP said.