Big banks violating law on agri-agra lendings

The country’s top lenders are not pro­viding enough lend­ings to agricultural projects as required under the Agri-Agra Law.

Compliance of universal and commercial banks (U/ KBs) and thrift banks (TBs) remain short of the required funding allocations, Bangko Sentral ng Pilipinas (BSP) data show.

Banks are required under Republic Act 10000, otherwise known as An Act Providing for an Agriculture and Agrarian Reform Credit and Financing System Through Banking In­stitutions, to allocate 10 per­cent of their funds for agrari­an reform credit (agra) and 15 percent for other agricultural credit (agri).

BSP data showed as of June 2016, U/KBs set aside only 0.67 percent of total loan portfolio, slightly lower than its 0.68 percent in the previous quarter for Agra lending.

TBs’ compliance rate during the same quarter is 1.45 percent, lower than its 2.04 percent compliance rate in end-March 2016.

Rural banks (RBs) and co­operative banks’ (Coop banks) compliance surpassed the re­quirement at 16.73 percent as of end-June this year, but this is a bit lower than the 17.21 percent share of total loans in end-March this year.

For Agri compliance, U/ KBs’ end-June rate is at 13.09 percent, down from its 13.34 percent in the previous quar­ter, while TBs’ is at 9.92 per­cent, also lower than its 10.07 percent compliance at the end of the first quarter.

Still, RBs and coop banks’ compliance is high at 30.79 percent, which was also a de­cline compared to its 33.05 percent rate in the previous quarter.

BSP Deputy Governor Nestor Espenilla Jr. said it is really a challenge for bigger banks to comply with the Agri- Agra Law given the financial institutions’ business model.

He cited that for foreign banks, for one, it would be hard to meet the law’s requirement since some of these banks only have one branch located nor­mally in Makati City or away from where the Agri-Agra ben­eficiaries are.

He said RBs and coop banks’ compliance is high be­cause these are based where the law’s beneficiaries are.

Another challenge for big­ger banks is locating where the Agri-Agra law beneficiaries are, Espenilla said, pointing out that even the Department of Agriculture (DA) does not have a registry of these benefi­ciaries.

”There are operational problems that are attached to the law. Those are the things that in proper time should be reviewed also so that it can be properly implemented,” he added.