November 15, 2024

 

Philippine bank loans to agriculture sector hit US$28.8 billion in first half of 2024

Loans issued by Philippine banks to the agriculture sector reached PHP 1.7 trillion (US$28.8 billion) in the first half of 2024, according to a report by the Bangko Sentral Ng Pilipinas (BSP), the central bank of the Philippines.

 

These loans reflect a strong commitment to agriculture, fisheries, and rural development (AFRD) financing as mandated by Republic Act 11901.

 

The BSP reported that the total loanable funds for AFRD financing stood at PHP 912.7 billion (US$15.5 billion) as of the end of June 2024. Banks allocated 192.4% of their total loans for AFRD financing during the period, a significant increase compared to the 36.4% allocation for agri-agra credit recorded in the same period the previous year.

 

The central bank attributed the growth in AFRD financing to a shorter reference cut-off date for calculating total loanable funds, as specified under RA 11901. This adjustment contributed to the higher percentage of loan allocations toward the sector.

 

Data showed that universal and commercial banks extended PHP 1.47 trillion (US$24.9 billion) in loans to the agriculture sector from January to June 2024. This represented 202.5% of the sector's total loanable funds, which amounted to PHP 727.6 billion (US$12.3 billion).

 

Meanwhile, thrift banks contributed PHP 128.7 billion (US$2.1 billion) in agricultural loans, accounting for 154.1% of their PHP 83.5 billion (US$1.4 billion) loanable funds. Rural and cooperative banks lent PHP 153.4 billion (US$2.6 billion), or 188.4% of their PHP 81.4 billion (US$1.3 billion) loanable funds.

 

Digital banks, however, did not extend loans to the agriculture sector despite having total loanable funds of PHP 20.2 billion (US$343 million). Under RA 11901, newly established banks are exempt from mandatory AFRD financing for five years following the commencement of their operations.

 

Republic Act 11901, which became effective on August 1, 2022, replaced the Agri-Agra Law (RA 10000). The updated legislation eliminated the distinction between the 10% agrarian reform and 15% agricultural credit quotas, making credit allocation more inclusive across the entire agricultural value chain.

 

The law aims to support marginalized sectors of the economy, including farmers, fisherfolk, and micro, small, and medium enterprises (MSMEs).

 

"Banks strongly supported the growth and development of marginalized sectors of the economy, particularly farmers, fisherfolks, and MSMEs," the BSP stated.

 

-      The Philippine Star