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The irrationally tight lending policies of the Philippine banking
system have their upside and the proof is their relative stability
now. Except for the few that suffered from minor bruises because of
their investment in Lehman Brothers, the banking system has built a
virtual firewall that now shields it from the collapsing global
financials.
No bankruptcies, no bank runs, not even the
slightest hint or rumor of trouble.
Philamlife had nothing to do with the
collapse—and hubris—at AIG. It is just tough luck that it has to
suffer from the follies and indiscretions of the jerks at its mother
unit. You can’t pick your mother company. Philamlife should have
disengaged from AIG several years back, after the discovery of an
array of accounting tricks that the AIG employed to pad its profit
reports.
But it will sell at a premium price. It is the
crown jewel of the Philippine insurance business and a profitable
one.
The banking system is now beating its chest and
is close to gloating over its irrationally tight lending policies.
See, we were right all along.
It is now telling the people and companies with
rejected credit applications this: We made the right decision, you
possible balasubas.
There is real danger with such mind set. And the
real possibility that the Philippine banking system will further
tighten its lending policies after this sorry episode in the global
financial system. And any further tightening of credit extension
will be a big blow to the effort to narrow the gap between the rich
and the poor in this country.
As things stand, the Philippine banking system
is partly to blame for the disproportionate share of incomes and
wealth in the country. The huge chasm between the haves and the
have-nots has the banking system as its major promotional unit. The
banks lend to the rich to make them richer. They deny credit even to
the deserving poor because they do not want to take risks. The banks
help condemn the poor to lifelong poverty.
Less than 1 percent of the population earn more
than 30 percent of the income and wealth generated yearly in the
country. Ten to 15 percent of the population own 85 percent of the
country.
Only bank loans can help the most deserving
among the poor build their own business and break out of their
poverty status. Only bank loans can help farmers reach a certain
level of productivity and generate profit. Only bank loans can help
energize the economies of the countryside.
Yet, loans to those that need it most have been
sparing, if not really scarce, or bordering on cruelty. And the
financial meltdown will tighten lending to the poor more than ever.
Local banks are safe from the crashing global
financials, sure. But this cannot be a source of comfort to the
nation that faces a bigger and more explosive problem in the form of
a huge rich-poor gap.
At the House of Representatives, a draft law
that seeks to nudge banks to go into countryside lending instead of
just buying government bonds to fulfill the requirements of the Agri-Agra
law (the law requires banks to allocate 25 percent of their loans to
agricultural and agrarian reform credit), will soon be elevated into
plenary vote.
Principally authored by Butil Party-list Rep. Ka
Nellie Chavez, the draft law says that the commercial banks can now
lend to farmers and agrarian reform beneficiaries without fear of
massive default. Coop banks shall be used as conduit for the Agri-Agra
loans and the same coop banks shall guarantee repayment.
This is a welcome piece of legislation. The
commercial banks can now fulfill their obligation to lend to
agriculture under the Agri-Agra Law. The coop banks shall serve as
conduits for these loans and guarantee repayment. Farmers can secure
production loans, which they badly need.
Critics will still have something to carp about
the draft law, says Ka Nellie, despite the breakthrough idea that it
is offering to break the reluctance of commercial banks to lend to
agriculture. They will raise the issue of the limited absorptive
capacity of the coop banks, Ka Nellie says.
Worries and all, this is by far the best
solution offered to ease the intolerance of commercials banks toward
agricultural lending. And to the nagging and crippling problem of
scarce countryside loans.
mvrong@yahoo.com
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