Gov’t must roll out ‘credit-worthy’ projects to boost banks’ agri loans

The government needs to roll out more “credit-worthy” projects for the agriculture sector to encourage banks to fund food security and agricultural development initiatives, a member of the central bank’s policy-setting Monetary Board said.

“The banks want to lend money. The problem is they’re having a hard time finding credit-worthy projects… The public goods that are necessary to create and maintain credit-worthy projects are not there,” Monetary Board member V. Bruce J. Tolentino said in a panel discussion at the Asian Development Bank’s (ADB) Food Security Forum on Tuesday.

Banks are careful about lending to fund the government’s agriculture-related programs due to insufficient public support services, Mr. Tolentino said.

“There are not too many agriculture projects that are demonstrably credit-worthy because of inadequacies in basics: transport, power, land tenure, seeds…,” he said in a separate Viber message.

Under Republic Act (RA) No. 11901 or the Agriculture, Fisheries and Rural Development Financing Enhancement Act of 2022, banks must allocate 25% of their total loanable funds for the agricultural and fisheries sectors.

Banks can comply by lending to rural community beneficiaries, including agrarian reform beneficiaries, to finance projects in these sectors, including lending to parts of the agricultural value chain and agri-business enterprises, as well as engaging in sustainable finance.

The law repealed RA 10000 or the Agri-Agra Credit Reform Act of 2009, which required banks to lend 10% to the agrarian reform sector and 15% to the agriculture sector.

Including parts of the agricultural value chain like processors, transporters, mills and warehouse owners, allows banks to finance the development of the sector, Mr. Tolentino said.

“You’re able to enable the banks to lend to a much broader swathe of players in the countryside,” he said.

Since the enactment of RA 11901, less banks are paying penalties for noncompliance with the credit quota as loans to the agriculture sector quadrupled over the past year, Mr. Tolentino noted.

Latest data on banks’ loans to the agriculture sector was not immediately available.

“Reforms to enable the private sector to act according to their best interest, and for government to provide the public goods [are] necessary so that the private sector can act according to their best interest,” Mr. Tolentino said.

In the 2021 Countryside Bank Survey conducted by the Bangko Sentral ng Pilipinas and the Department of Agriculture, 76% of bank branches said they plan to expand lending to the agriculture sector. — B.M.D. Cruz