BSP allows all banks to offer small agri loans

Small farmers may soon tap any bank for their funding needs after the Bangko Sentral ng Pilipinas (BSP) allowed all banks to offer agricultural micro-loans. BSP Governor Amando M. Tetangco, Jr. told reporters on Friday the Monetary Board had agreed to permit all banks to offer such loans instead of limiting these to rural banks participating in the government's microenterprise lending program. The central bank will issue a circular formalizing the new rule this week. In January 2006, the central bank approved the lending program but limited it to rural banks. "What we are doing now is extending this to all banks... following prescribed conditions and standards," Tetangco said. He added that since small agricultural loans must follow microfinance best practices, payment delinquency will not be tolerated. Also, only farmers with multiple sources of income may avail themselves of the product. Under BSP Circular 272 issued in 2001, microfinance loans, which are granted to the poor, do not require collateral, do not exceed P150,000 and payment must be done frequently. "The forthcoming circular... will expand opportunities for microfinance in line with our advocacy of achieving financial inclusion so more people can have access to formal financial services," Tetangco said. In a telephone interview on Sunday, RBAP spokesman Tomas S. Gomez IV welcomed the development, saying this would improve farmers' access to formal credit. "The advantage for the farmer especially for the one who does not own the land or does not have the title yet, is that the collateral requirements are negated," he said. He noted that under a traditional agricultural loan, farmers must put up their land as collateral. The BSP chief added that while the circular would allow all banks to offer the product, the policy would primarily benefit rural lenders given their target market. "What [universal and commercial banks] do is wholesale lending. They either find a rural or thrift bank they can use for lending to microfinance borrowers but they do not have direct exposure," he said. Central bank data from showed there were 642 rural banks as of September. Only 50 of were participating in the micoenterprise lending program. As of June 2009, outstanding loans of rural banks for agriculture-related activities reached P32 billion, almost a third of the sector's total loan portfolio. — Don Gil K. Carreon, BusinessWorld