The share of agriculture loans and services increased to 18.1 percent in 2022 from 17.6 percent in 2021, according to the 2022 Countryside Bank Survey (CBS) report released by the Bangko Sentral ng Pilipinas (BSP).
The increase was mainly observed in rural and cooperative banks (RCBs). It reflects an expansion in loan products related to various agricultural needs, such as seeds, fertilizer, working capital, and farm equipment, sustainable projects, digitalization of farming activities, and agri-tourism activities.
The 2022 CBS Report is a collaborative effort between the Department of Agriculture-Agricultural Credit Policy Council (DA-ACPC) and the BSP.
The report aims to examine lending trends and policy implications concerning agricultural financing by leveraging branch-level data.
It evaluates banking units’ agricultural lending activities in 2022 compared to 2021 and covers aspects such as loan demand, borrower profiles, interest rates, repayment dynamics, profitability, risk management, challenges, and future plans.
Administered electronically nationwide, survey respondents came from universal and commercial banks (UKBs), thrift banks (TBs), RCBs, government-owned banks (GBs), and digital banks (DBs).
The conduct of the 2022 CBS also coincided with the start of implementation of Republic Act (RA) No. 11901 also known as the Agriculture, Fisheries and Rural Development Financing Enhancement Act of 2022.
The survey establishes baseline data to monitor banks’ compliance with said law and includes questions about specific agricultural loan products and services offered in 2021 and 2022 that are consistent with RA No. 11901 guidelines.
The CBS Report also cited the following:
- Demand for agricultural loans varies among different banking groups, with at least 40 percent of RCBs and 74 percent of GBs underscoring their lending support for small-scale agricultural borrowers.
- Distribution of loan borrowers across banking groups illustrates that RCBs maintained a strong commitment to supporting agricultural borrowers, including small-scale farmers and fisherfolk.
- Regional distribution of agricultural borrowers reveals that UKBs have a higher concentration in Luzon. RCBs exhibit a similar trend but with notably fewer borrowers in the NCR. TBs have a higher number of borrowers in Mindanao. GBs show similar borrower numbers outside the NCR, with slightly more borrowers in Mindanao.
- In 2022, there was a significant 36.7 percent increase in the total value of agricultural loans compared to 2021. Survey responses attribute this rise to growing demand for agricultural loans, potentially influenced by the implementation of RA No. 11901, along with intensified marketing efforts by banking units to attract new borrowers.
- In 2022, the average interest rates on agricultural loans ranged from 12 percent to 18 percent, higher than those on non-agricultural loans, which ranged from 7.5 percent to 16 percent. RCBs within the NCR (NCRRCBs) reported the highest rates, ranging from 16 percent to 21 percent. RCBs outside the NCR and TBs showed a slightly broader range of rates, from 13 percent to 20 percent. In contrast, UKBs and GBs had lower interest rates on agricultural loans, ranging between 4.6 percent and 7.2 percent, and 3.3 percent and 6.6 percent, respectively.
- In 2022, respondent banking units reported an average overall repayment loan rate of 67 percent, with GBs recording a higher rate of 70 percent. Some banking units attributed lower repayment rates in 2022 to the impact of the COVID-19 pandemic. Overall non-performing loan (NPL) ratios for agricultural loans slightly declined from 7.3 percent in 2021 to 7.2 percent in 2022, with NCRRCBs experiencing significant decreases in their NPL ratios for agricultural loans in 2022.
- The 2022 CBS showed strong financial performance and strategic capabilities of the respondent banking units. Operating income has notably increased and net income shows a collective growth trend, underscoring overall profitability gains.
- Most respondent banking units still require traditional loan securities from agricultural borrowers, mainly favoring real estate mortgages. To encourage increased lending to the agriculture sector, two-thirds of respondent banks stressed the importance of implementing credit support mechanisms, including credit guarantee/loan insurance, access to borrower information, and agricultural/crop insurance.
- Banking units often face challenges when lending to the agricultural sector due to inherent risks like exposure to natural disasters, uncertain crop yields, fluctuating borrower incomes, and an aging population. They see it crucial to adopt measures that address information gaps in agricultural lending to boost confidence in extending credit to this sector.
- Looking ahead, respondent banks are optimistic about the next twelve months. They anticipate favorable lending conditions for agricultural borrowers. Specifically, they foresee improvements in loan volumes and quality, aiming to enhance profitability.
You may download the complete report of the 2022 CBS by clicking on this link: https://www.bsp.gov.ph/Media_And_Research/Countryside_Bank_Survey/2022_Countryside_Bank_Survey_Report.pdf
