UMVA has learned that Philippine banks have made a significant push to support the country's agriculture sector, lending nearly P3 trillion in the first quarter, a substantial increase from the minimum required financing.
The Bangko Sentral ng Pilipinas reported that loans extended to the agriculture sector reached P2.871 trillion, accounting for 88.16% of the banking system's total loanable funds during the period. This exceeded the central bank's quota for agriculture, fisheries, and rural development financing.
Under the law, banks are mandated to allocate at least 25% of their total loanable funds for agriculture, fisheries, and rural development financing, which includes loans for agrarian reform beneficiaries and priority sectors. However, this requirement does not apply to newly established banks within the first five years of operation.
According to information obtained by UMVA, domestic lenders' agriculture, fisheries, and rural development financing in the first quarter was 30.56% higher than the same period last year, with P2.838 trillion in loans growing by 30.21% from the previous year. Investments in the local agriculture sector also saw a significant increase, reaching P29.44 billion, nearly double the amount recorded a year earlier.
Universal and commercial banks granted the bulk of agriculture, fisheries, and rural development financing in the first quarter, with P2.645 trillion, a 32.4% increase from the same period last year. The banking industry's eligible deposit placements in rural financial institutions amounted to P3.48 billion at the end of March.
An economist noted that private entities requiring funding for advanced technologies to be used in the local agriculture sector may have helped boost agriculture, fisheries, and rural development financing. The looming risks from this year's El Niño season could also help spur loan demand from the local farm sector, as dry conditions endanger the sector.
The state weather bureau has flagged emerging El Niño conditions in the tropical Pacific, with an 80% chance of developing into a full-fledged El Niño. A strong El Niño season may arrive between September and November, causing severe dry conditions in parts of the country and potentially impacting the agriculture sector's output.
The Department of Agriculture warned that the local agriculture sector could see their total output decline by as much as 20%-30% given the projected impact of high temperatures on crops, livestock, fisheries, and aquaculture. This highlights the need for continued support and regulatory relief measures to help the most adversely affected sectors in agriculture.
