Agri sector seen to remain resilient with more financing boost

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The agriculture sector is expected to remain resilient with increased access to financing despite the contraction of its share in domestic output in the second quarter of 2021 and the impact of weather-related disturbances.  

Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said the agriculture sector accounts for almost 10 percent of domestic output and around 25 percent of total employment.
 
“(It) has been relatively resilient as a contributor to the economy since the pandemic last year, as part of the essential industries/activities as well as the fact that the agricultural areas have not been hit hard by the COVID-19 (coronavirus disease 2019) pandemic in view of less population density and located away from urbanized/congested/high population density areas,” he said.
 
Ricafort said the central bank’s decision to provide additional financing access to the agriculture sector through the reserve requirement ratio (RRR) compliance, easing of risk weights for some loans, and easing of capitalization requirements of some banks, among others, will “encourage and boost lending activities” that support the sector and the rural areas in general and “contribute to growth for the broader economy.”
 
He said the policy accommodation also helped boost food security in the country, adding the impact of some disruptions in global supply chains and the impact of adverse weather conditions.
 
The Bangko Sentral ng Pilipinas (BSP) has allowed, among others, banks’ Agri-Agra lending as temporary compliance to banks’ RRR to provide additional liquidity to boost economic activities amid the pandemic.
 
The Agri-Agra Reform Credit Act of 2009 or the Republic Act (RA) 10000 requires banks to allocate 10 percent of their loans to agrarian reform beneficiaries (ARBs) and 15 percent for the agriculture sector.
 
Monetary authorities said banks’ compliance on the law remains below the required level thus, the latter have been slapped with penalties for non-compliance.
 
BSP data show that as of end-June 2021, total compliance of the banking sector on the law was 0.96 percent for agra lending and 9.67 percent for agri lending.
 
These are both higher relative to the previous quarter’s 0.93 percent for agra lending and 9.66 percent of agriculture loans.
 
Total loans extended by banks to ARBs totaled to P47.191 billion under direct compliance as of end-June this year while alternative compliance amounted to P25.584 billion.
 
During the same period, agriculture loans under direct compliance reached P360.091 billion while alternative compliance amounted to P356.793 billion.
 
Ricafort said weather-related factors, the recent of which is Severe Tropical Storm Maring that devastated northern Luzon, one of the biggest producers of agricultural products, is “a drag on agricultural production.”
 
He said the damage caused by Maring “could also lead to some pick-up in inflation, until the next planting/harvest season restores/brings back supply.”
 
Ricafort said the additional financing boost that banks can provide to the agriculture sector thus would have a positive impact on the sector.
 
“Increased loans for agriculture would also help further improve the sector's productivity, further modernization, and overall development, going forward,” he added.PNA
 



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