• RBAP: In pursuit of inclusive growth

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    PROTESTS and impeachment threats are hounding the country’s Executive branch. Nevertheless, in his fifth State of the Nation Address, President Benigno Simeon Aquino 3rd opted to stay away from the controversies and recalled the major accomplishments of his administration, instead.

    Now four years through his term, the President said he is already satisfied with his achievements, proud that reforms made under his administration have prompted the “resurgence of the country’s economy.”

    This economic recovery has been affirmed by the global community in the form of an investment grade awarded by the three credit raters in the world: Moody’s, Fitch and Standard and Poor’s. The President cheered this accomplishment, saying that it laid the way for the government to borrow funds for programs and projects at lower interest rates, attract more businesses into the country, and enable Filipinos to feel the benefits of our economic resurgence more quickly.

    Of course, that last part on inclusive growth should be the ultimate goal of the government because improving statistics on the state’s debt or foreign reserves cannot be palpably felt when the number of people experiencing hunger and below the poverty line is increasing.

    According to the President’s report, 1.65 million jobs have been created from April 2013-April 2014. Indeed, this is a welcome improvement as job security remains one of the major concerns in the country, but taking into consideration the number of unemployed Filipinos which has been pegged at 2.9 million in January, it seems that the efforts for a better job market still has a long way to go.

    Moreover, the government must ensure that the same opportunities for growth are made available in far-flung areas, especially in those regions where dwellers rely largely on agriculture for a living. On this matter, the President reported that initiatives such as enhancement of irrigation systems, construction of farm-to-market roads, and the launch of training programs have been implemented to make farming viable and an attractive livelihood even for the young.

    The rural banking industry has been a partner of the government in promoting growth in the countryside, it being established primarily to empower the low-income farmers and fisher folks financially. Over the years, regulators have been quick in coming up with ways to guide rural banks in fulfilling this duty, one of which is the implementation of Republic Act 10000, otherwise known as the Agri-Agra Reform Credit Act, which mandates banks to allocate 25 percent of their funds for loans to the agricultural and agrarian reform sector.

    Rural and cooperative banks have gladly responded to this law, lending a combined P29.5 billion out of their P46.3 billion funds in compliance with the said law as of March 2014. The implementation of mandatory lending, however, poses a problem for the financial sector as a whole.

    Although the law is premised on the best intentions, the repercussions of its implementation are proving to be a disadvantage to financial institutions. Lending to the low-income sector is already risky on its own and mandatory lending only forces banks to loan beyond the level of risk they can handle. It also pushes them to relax their banking standards and lend just for the sake of compliance.

    The President also cited the infusion of P40 billion into the capital of the Bangko Sentral ng Pilipinas, fulfilling the promised P50-billion recapitalization mandated way back in 1993. With a stronger capital base, the central bank is now in a better position to maintain the price and financial stability of the country. Hopefully, the effects of such stability and development will trickle down to the poor through better credit access. (The Rural Bankers Association of the Philippines)

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