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‘Loan strictures only encourage informal lending’

In Photo: Executives had Planbank’s 15th branch site inaugurated and blessed last Friday at the lender’s Batangas City premises. Photographed at the ceremonial ribbon cutting were, from left, Justice Harriet O. Demetriou; chairman of the ALC Group of Cos. D. Edgard A. Cabangon; Rep. Mario Vittorio Mariño of the Fifth District of Batangas; Planbank President D.Rufina Cabangon Chua; and Msgr. Fred Madlangbayan, who officiated the event following a thanksgiving Mass. The newest Planbank branch is at the Grand Transport Terminal complex along Diversion Road, Barangay Alangilan, Batangas City.

By Kathryn Kristina T. Jose @kathryntjose

Executives at Planbank, the largest rural bank in Laguna, seek the removal of the income-tax return (ITR) as primary loan requirement by the Bangko Sentral ng Pilipinas (BSP) on low-income borrowers, especially the farmers, suggesting, instead, a focus on the provision of agricultural facilities and information by government units and private entities.

Dominga Rufina S. Cabangon Chua, president of Planbank, said in the opening of its 15th branch at the Grand Transport Terminal in Batangas City on March 31 the mandatory submission of the ITRs, especially the farmers as main client, only serve to impede greater lending in the countryside.

“Whenever these documents were not given, we get penalized by the BSP,” Chua said. “So they are really making it difficult on our end to serve the market [which is] what the rural banks are meant for.”

According to BSP Circular 855, dated October 29, 2014, on the guidelines on sound credit-management practices, borrowers must submit audited financial statements, such as the stamped ITR by the Bureau of Internal Revenue, for credit evaluation, regardless of financial statements from other sources.

“At the end of the day, the guys who can’t borrow from the banks are going to go to short [dated]  loans whose interests are so high,” the lady executive said.

Thus, Roxanne V. Cuenco, vice president at Planbank for operations, said they plan to convince Batangas City Mayor Beverly A. Dimacuha and Vice Mayor Jun Berberabe to introduce a microfinance program that discourages people from borrowing from informal lending entities, such as the five-six lenders reported by the Securities and Exchange Commission in February. The five-six crowd impose nominal-interest rates as high as 20 percent.

Cuenco urged government units to develop “a program that if you [rural bank] lend money to this [farmer], we [the government unit] will raise another farmer whom we will teach to grow the seeds, and we will search for a storage area for his vegetables”.

This will ensure the borrowed money and the seeds provided will be truly used for planting the produce and subsequently selling it, the Planbank executive said.

Thus, Chua supports the plan of Rep. Mario Vittorio A. Mariño of the Fifth District of Batangas, for the construction of a 1-hectare integrated terminal and storage area on Diversion Road in Barangay Alangilan, owned and developed by Batangas Ventures Management and Development Corp.

Mariño, who also envisions the terminal as occupied by commercial stalls and fast-food restaurants that attract investors, create jobs and generate income for the city, has asked bank presidents of the Rural Bankers Association of the Philippines and its technical working group to propose legislation requiring rural banks to execute more flexible
loan terms.

“What is the collateral they can give? Perhaps, the guarantee of payment could be that after a certain volume of harvest, how much capital can they borrow without going through a rigorous process?” the legislator asked rhetorically.

Extending individual loans is risky without proper information. And even with a collateral when granting a loan, the priority is to look at the borrower’s cash flow. The collateral serves only as backup in case the borrower cannot pay, Chua said in explaining the bank’s adjustable interest-rate product.

Chua said Planbank, which aims to be the largest in the Calabarzon, is eager to help small  income borrowers with the cooperation of the BSP, the local government and private entities, such as telecommunications companies, to guarantee borrower cash flow.

She said Globe Telecom shares information with Planbank and its use of an algorithm to monitor cell-phone usage and the bills payment of  borrowers in India and Africa to find if they were good candidates for a loan. Chua said “if the government can facilitate that camaraderie, everything will be connected now—your card, your loans, your bills.”

But with the income to be generated from the terminal’s commercial establishments and highly skilled people with above-95-percent literacy rate in Batangas City, the Planbank president looks forward to the trickling down of income growth from the city to the farmers. The income of the city can safeguard farmer loans.

“If you have quality work force, the IT [information technology] and BPO [business-process outsourcing] will follow where the talents are, especially [now that] Metro Manila is very congested,” Chua said of Batangas City, identified as an industrial port city of Calabarzon and Regional Agro-Industrial Center and Special Economic Zone under the Medium Term Philippine Development Plan and the Ecozone Act  of 1995.

The BSP circular states that a government agency can guarantee loan up to 85 percent of the unpaid interest-bearing balance based on the internal policy and assessed value of the attached guarantee by the bank.

Thus, public and private entities share the burden of making available low-cost loans and managing the risk.

On the part of the local government, Mariño said, “The local government must ask who plants in the area, to whom the produce is delivered and can the farmer harvest in three months.”

On the part of rural banks, Chua said, “Our goal is to help the small guys become bigger. But to be able to do that, we need the cooperation of the government, of the BSP, to try to make things a little bit easier on our end.”

Image credits: Roy Domingo

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