Loans increase shows robust farms

Loans increase shows robust farms | Daily Tribune

Farm financing has been growing the past few years, according to a Bangko Sentral ng Pilipinas (BSP) report.

The share of agriculture loans and services increased to 18.1 percent in 2022 from 17.6 percent in 2021, the 2022 Countryside Bank Survey (CBS) report released by the BSP showed.

The increase was mainly observed in rural and cooperative banks (RCBs). It reflects an expansion in loan products related to various agricultural needs, such as seeds, fertilizer, working capital, and farm equipment, sustainable projects, digitalization of farming activities, and agri-tourism activities.

The 2022 CBS Report is a collaborative effort between the Department of Agriculture-Agricultural Credit Policy Council (DA-ACPC) and the BSP.

The report aims to examine lending trends and policy implications concerning agricultural financing by leveraging branch-level data.

It evaluates banking units’ agricultural lending activities in 2022 compared to 2021 and covers aspects such as loan demand, borrower profiles, interest rates, repayment dynamics, profitability, risk management, challenges, and future plans.

Administered electronically nationwide, survey respondents came from universal and commercial banks (UKBs), thrift banks (TBs), RCBs, government-owned banks (GBs), and digital banks (DBs).

The conduct of the 2022 CBS also coincided with the start of implementation of Republic Act (RA) 11901 also known as the Agriculture, Fisheries and Rural Development Financing Enhancement Act of 2022.

The survey establishes baseline data to monitor banks’ compliance with said law and includes questions about specific agricultural loan products and services offered in 2021 and 2022 that are consistent with RA No. 11901 guidelines.

Loan distribution breakdown:

The CBS Report also cited the following:

Demand for agricultural loans varies among different banking groups, with at least 40 percent of RCBs and 74 percent of GBs underscoring their lending support for small-scale agricultural borrowers;

Distribution of loan borrowers across banking groups illustrates that RCBs maintained a strong commitment to supporting agricultural borrowers, including small-scale farmers and fisherfolk;

Regional distribution of agricultural borrowers reveals that UKBs have a higher concentration in Luzon. RCBs exhibit a similar trend but with notably fewer borrowers in the NCR. TBs have a higher number of borrowers in Mindanao. GBs show similar borrower numbers outside the NCR, with slightly more borrowers in Mindanao; and

In 2022, there was a significant 36.7 percent increase in the total value of agricultural loans compared to 2021. Survey responses attribute this rise to growing demand for agricultural loans, potentially influenced by the implementation of RA No. 11901, along with intensified marketing efforts by banking units to attract new borrowers.

n 2022, the average interest rates on agricultural loans ranged from 12 percent to 18 percent, higher than those on non-agricultural loans, which ranged from 7.5 percent to 16 percent. RCBs within the NCR (NCRRCBs) reported the highest rates, ranging from 16 percent to 21 percent. RCBs outside the NCR and TBs showed a slightly broader range of rates, from 13 percent to 20 percent.