THE Land Bank of the Philippines (LBP) is in the upper tier of the Top 10 commercial banks in the country. No. 3 in assets, No. 4 in capital, No. 2 in deposits and No. 4 in loans. On assets and deposits, it is ranked higher than the country’s oldest commercial bank, the deposit surge boosted by deposits from the State and by its unique role as the depository bank of land reform beneficiaries who pay their 25-year land repayment through the LBP.
In its March 2019 statement, it listed loans granted at P802 billion, which is way above the national government budget once you remove the allocation for salaries and wages and the budget for maintenance and operating expenses. To say that the LandBank is a “banking giant” is an understatement.
On paper, the LandBank is an immense success story, one of the rare public institutions that competed in a tough banking environment – and succeeded. To have racked up the record on assets, capital, deposits and loans imply a lot of things, competence in particular. That it zoomed past the mainstream banks owned by tycoons and taipans is no small achievement.
In a context that defines state institution as either inefficient or incompetent, the record of LandBank should be case for universal appreciation and recognition. Why is none coming? And why did Mr. Duterte use his fourth State of the Nation Address to threaten the LandBank to either fulfill its original mandate or face abolition? Should not Mr. Duterte applaud the LandBank for its phenomenal growth and its success in the tough and ultra-competitive banking environment?
And why is there no appreciation coming from the farming and fishing sector, from the small farmers and agrarian reform beneficiaries? On paper, the LandBank is also a successful agri-oriented, rural-oriented banking entity.
The LandBank was created to serve the needs of the small farmers and agrarian reform beneficiaries. Even its current website says its mission is to serve its clients well, “especially the small farmers and fishers.”
On record, what the LandBank has gotten from the legitimate representatives of the small farmers and agrarian reform beneficiaries has been condemnation and scorn. A few years back, the late Rep. Leonila Chavez, the then Butil party-list representative, delivered a scorching privilege speech that advised the LandBank to “moderate your greed” in reference to the anti-farm lending bias of the bank. Last year, Butil, through a resolution filed by former representative Cecil Chavez, sought a congressional inquiry into the lending practices of the bank.
So, what is it about the LandBank, supposed to be a paragon of banking success, the generates all this criticism?
The answer is this. The LandBank is a banking con. On paper, it is supposedly serving the needs of small farmers, agrarian reform beneficiaries, small, rural-based enterprises that are allied to farming. The sad truth, however, is that it is serving none of these. While it receives full support from government, like the designated bank for state-related transactions and the depository bank of Certificate of Land Ownership payments, it gives nothing in return.
I will cite as Exhibit A, the bankrupt Hanjin, the shuttered Subic-based, South Korean shipbuilder.
Hanjin declared bankruptcy and shuttered the Subic shipbuilding facility in 2018 after its mother company in South Korea, also named Hanjin, fell on hard times and declared bankruptcy. Once hailed as the biggest employer in Central Luzon, Hanjin’s bankruptcy resulted in the mass lay-off of thousands of workers. It turned out that five Philippine banks granted a total of $412 million in loans to Hanjin, all of it unsecured. The LandBank was one of the five, with an $85 million loan granted to the bankrupt shipbuilder.
During the peak of the public discussions on the unsecured loans, the Banko Sentral ng Pilipinas reported that the banking system paid over P6 billion in penalties over the past two years for violating RA 10000, the law that requires banks to lend 25 percent of their yearly loan portfolios to agriculture (15 percent) and agrarian reform beneficiaries (10 percent). On the critical and life-changing loans to agrarian reform beneficiaries, the commercial banks — including the LandBank — had a 0.99 percent compliance rate, or less than 1 percent.
The LandBank and its ilk granted $412 million in unsecured loans to Hanjin, then opted to pay P6 billion in penalties just to violate RA 10000.
It is also well-known that the “agriculture” component of LandBank’s lending does not really go to small farmers. The loans are granted to agri-business giants, agri contract growers, giant rice mills and other agricultural concerns that are big and in the multi-million-peso levels. The LandBank gets away with this ruse and scam because the supposed farmer-representatives in the LandBank are mostly political hacks, not genuine representatives of the small farmers and agrarian reform beneficiaries.
Now the big question is this. Will the LandBank reform and retool after Mr. Duterte’s SONA threat?
Small farmers like myself who have never set foot on a LBP branch because of its known anti-farm bias know the harsh reality. Abetted by cabinet technocrats, the LBP will go on with its merry ways of lending to the likes of Hanjin, the small farmers and agrarian reform beneficiaries — and the presidential threat — be damned.