Loans provided by banks to the agriculture and agrarian reform sector plunged by 2.76 percent at the end of last year, also falling short of the mandated threshold, Bangko Sentral ng Pilipinas (BSP) data showed.
The banking system set aside P713.599 billion for the sector as of end-2020, a P20.32-billion slide from P733.921 billion as of end-2019.
Total loanable funds soared by 15.59 percent to P7.13 trillion as of last end-December from P6.17 trillion a year ago.
The combined allocation for agriculture and agrarian reform — 10 percent of total loanable funds — was below the 25-percent threshold set by Republic Act (RA) 10000 or the “Agri-Agra Reform Credit Act of 2009.”
Under the law, banks are required to extend 15 percent and 10 percent of their total loan portfolio to farmers and agrarian reform beneficiaries, respectively.
Banks only provided 9 percent of their total loanable funds to the agriculture sector. Meanwhile, they only allocated 1 percent of their total loanable funds to agrarian reform beneficiaries.
The BSP has been pushing for the amendment of RA 10000, which Bangko Sentral Governor Benjamin Diokno has said will strengthen rural development by providing a holistic approach that considers the broader agricultural financing ecosystem and community requirements.
“It addresses the challenges faced by the agricultural sector in obtaining access to financing,” he pointed out.
In particular, the central bank wants to allow banks to invest part of their mandated portfolio in green projects.
“The plan is to expand the list of eligible projects for banks under the law, for example, to green projects and investments in rural communities,” Diokno stressed.
Banks find it hard to meet the total 25-percent threshold if they only lend to the agri agra sector, he added.
Besides local lenders, the BSP chief said foreign banks operating in the country as having difficulty of meeting the agri-agra loan threshold.
To help the banking sector meet the threshold, he added the central bank was exploring ways for them to comply.
“We have so many projects that they can fund, such as green infrastructure projects and those meant to strengthen the country against natural calamities. We need more investments in those areas,” Diokno underscored.