Like a farewell of sorts, President Benigno Aquino 3rd delivered his sixth State of the Nation Address (SONA) on Monday with a summation of accomplishments under his administration and the legacy he will leave behind.
The rural banking industry, however, found it wanting in terms of pressing issues and further plans for the agricultural sector and the banking industry.
Noticeable in the President’s speech is his sparse mention of the agricultural sector and the banking industry, only lauding “sown reforms already bearing fruit in the sector,” the recent removal of the Philippines from the European Commission trade blacklist and the country’s improvement in global competitiveness and investment grade credit ratings.
This is an apparent deviation of the President from his previous SONA where he listed improved access to modern farming equipment, enhanced irrigation systems and farm-to-market roads and recapitalization of the central bank.
Nevertheless, the Rural Bankers Association of the Philippines, on behalf of the rural banking industry, wishes that the President and Congress would look more into the issue of Agri-Agra Reform Credit Act and support amendment of this mandatory lending law.
Despite positive effects of the Agri-Agra Reform Credit Act, which compels banks to set aside 25 percent of their total loanable funds for the agricultural and agrarian reform sector, it also creates negative effects for banks.
For one, banks situated in almost-urbanized communities can barely find clients suitable in the agri-agra category. In addition, it also forces banks to compromise their lending practices and risk allowance for the sake of compliance.
While the rural banking industry fully supports the boost of productivity in the agricultural sector, the feasibility of the means employed should still be well deliberated. It should be both effective to promote credit access for the industry and viable for the supporting parties to follow.
The rural bankers, nonetheless, cheer the President for the enactment of the Foreign Equity Law that gives non-Filipino investors to own, acquire and purchase up to 60 percent of voting stocks in rural banks. Under this law, investors have the option to infuse additional capital to rural banks and strengthen their ongoing programs.
With the potential financial backing provided by the foreign investors, loans for the agricultural, hunting and fishery sectors may possibly increase to register a double-digit growth rate in loan portfolio. In effect, rural banks will better serve partner communities with a wider reach and promote economic activities at a bigger picture.