Banks plan to boost agri lending this year — survey

MAJORITY OF PHILIPPINE banks are planning to ramp up lending to the agriculture sector in the next 12 months, a joint survey by the Bangko Sentral ng Pilipinas (BSP) and the Department of Agriculture (DA) showed.   

The inaugural 2021 Countryside Bank Survey (CBS) released on Thursday showed at least three-fourths (76%) of bank branches plan to expand lending to the agriculture sector in the next 12 months.

Thrift banks were the largest sector (93%) to confirm their plan to expand agricultural lending, while a little over half (53%) of universal and commercial banks (U/KBs) responded positively.   

“Banks with plans to increase their agriculture loans claimed that they see great potential of the sector for growth and development, and that the sector is a widely untapped market,” the report stated.

“Thus, respondent banks would like to take the opportunity to cater to the financing needs of the sector and increase their loan portfolio and income.”

The countryside bank survey, which was jointly conducted by the BSP and the DA-Agricultural Credit Policy Council (DA-ACPC), focused specifically on banking units’ agricultural lending experience in 2021 versus 2020.

The report showed banks are anticipating an increase in loan demand as the economy recovers from the pandemic.

“Banks also noted that most agribusiness enterprise projects were not affected by the pandemic while affected borrowers may want to borrow and start business again as the pandemic is getting controlled. Hence, banks could take this opportunity to support financing the sector and increase their loan portfolio and income,” it said.

Banks also cited the need to comply with the mandatory credit allocation under the Agri-Agra law.

The Agri-Agra Credit Act of 2009 requires banks to lend 15% of their loan book to the agriculture sector, with a 10% quota set for agrarian reform beneficiaries.

The report also showed banks would want to help finance farmers to expand their businesses, and to stop farmers from availing high-interest rate loans from informal lenders.   

According to the CBS report, the share of agriculture to total loans granted in most banking units ranged from 11-15% of total loans in 2021, which is lower than in the prior year. Also, the number of agricultural borrowers served in 2021 was at least 30% lower than in 2020.

“Around two-thirds (65%) of respondent banks still require and accept conventional forms of loan securities from agricultural borrowers, the most acceptable of which remain to be real estate mortgages,” the report said.

Two-thirds of banks said credit support mechanisms such as credit guarantee/loan insurance and agricultural/crop insurance should be in place to encourage increased lending to the sector.

“As the bank supervisor/regulator, the BSP may calibrate its support to help revive the market-oriented agricultural credit system by enabling a sustainable environment for various support mechanisms to flourish,” the report said.

To regularly monitor emerging trends in agricultural credit as well as the recent challenges and to help calibrate key policies accordingly, the BSP and DA-ACPC will conduct the 2022 CBS in the second quarter of this year.   

Out of 2,530 sample unit banks, 1,904 or 75% responded to the survey. The respondent banks were composed of U/KBs (35%), thrift banks (26%), private rural and cooperative banks (27%), and government-owned banks (12%). — KBT