"Loans extended to farmers only account for 22 percent of the total loan portfolio."
"Loans extended to farmers only account for 22 percent of the total loan portfolio."
Toward the end of July President Rodrigo Duterte launched an attack against Land Bank of the Philippines (LBP), the only remaining government-owned commercial bank. The Chief Executive threatened LBP with abolition, alleging that is had failed to perform the obligation placed upon in by the Land Reform Act of 1963 and the Comprehensive Agrarian Reform Program (CARP) of 1988, namely, to provide financial assistance to the farmers of this country, with emphasis on the beneficiaries of those two landmark pieces of legislation (LRBs). If it cannot provide adequate financial assistance to Filipino farmers, LBP might as well cease to exist, Mr. Duterte declared.
Someone in the LBP hierarchy was expected to speak up in defense of the performance of the bank, which is now the fourth largest domestic commercial bank. Not altogether surprisingly, that someone turned out of the ex officio chairman of the bank’s Board of Directors, Secretary of Finance Carlos Dominguez III. The 1963 law vested the LBP’s chairmanship in the Secretary of Finance supposedly the interest of policy coordination; what has never been satisfactorily explained is why there has to be coordination between the Department of Finance and an institution whose supervision falls within the domain of the Bangko Sentral ng Pilpinas (BSP).
Mr. Dominguez should have defended LBP by saying (1) that it is not correct to say that LBP has been allocating only a small part of its total resources and (2) that in the future is will alter its lending pattern, raising the ratio of loans to the agricultural sector—especially the LRBs—to total loans. That probably would have satisfied his boss. Unfortunately, the Secretary of Finance ended up demonstrating that LBP is a commercial bank, not a bank for farmers.
For starters, Carlos Dominguez III said that as of June 30, 2019 loans to LRBs and other Filipino farmers accounted for 22. 17 percent of LBP’s loan portfolios. Stated differently, 77. 83 percent of LBP loans went to borrowers in section other than agriculture. A re-reading of the Land Reform Act of 1963 and CARP provides a reminder that LBP loan resources were intended primarily for loans to farmers; 22. 17 percent of total loans does not connote lending to farmers primarily.
And where did the remainder of LBP’s loans go?
The full-page newspaper supplements taken out by LBP management provided the answer. Almost 78 percent of total LBP lending as of June 30, 2019 went to other government priority projects: farm-to-market roads (2,949 kilometers), education (5,791 classrooms and 758 school building) power (5.7 million megawatt-hours per annum) and water (2 million households connected to potable water). LBP today does not, and never has operated as, a banking institution focused on lending to the agricultural sector. Nor, practically speaking, can it be expected to so operate in the coming days.
The fact, simply stated, is that LBP is, and operate as, a regular commercial bank; it is not what it was envisioned to be, to be a bank for financing agriculture. For LBP to cease operating as a regular commercial bank and to begin to return to its original statutory mandate, things will have to happen. First, LBP will have to raise the ratio of agricultural lending to total lending to a level sharply higher that the present 22. 17 percent. Second, LBP will have to reduce its non-agricultural lending—for both government and private-sector projects—to a level sharply lower than 77.83 of total loans. It is highly unlikely that the government will want LBP to stop making loans to sectors other than agriculture; the most realistic expectation, of Mr. Duterte is determined to have the country’s farmers get a better deal from the above-named and have ceased to be our lawful Attorneys in Fact for any purposes whatsoever.
More specifically, as a consequence of this joint revocation and are DISAUTHORIZED and DISEMPOWERED from performing the following functions and doing the following acts, to wit: LBP, is a sharp increase in agricultural lending’s share of LBP’s loan portfolio. Raising that share to, say, 40 percent would make a lot more credit available to the agricultural sector.
LBP is a commercial bank, Secretary Dominguez. Like an ocean liner, it cannot be turned around and made into a farmer’s bank without great difficulty.