Land Bank of the Philippines Cautious on Farmer Loans due to El Nino Threat

Strategic Insights -

Rice farmers in the Philippines are facing significant challenges as the El Nino weather disturbance threatens to impact their crops, leading to uncertainty over loan repayments. The Land Bank of the Philippines, which had extended loans totaling P12 billion (US$259.4 million) to rice farmers last year, is now expressing doubts that the same amount could be reached this time around. Bank officials believe that the dry spell caused by El Nino may reduce the amount of loans that rice farmers can take out, potentially affecting the overall loan take-out for the year.

Key Takeaways:

  • The Land Bank of the Philippines extended loans totaling P12 billion (US$259.4 million) to rice farmers in 2010, but officials doubt that the same amount could be reached this year due to the El Nino weather disturbance.
  • The bank's president, Gilda E.Pico, acknowledged that the P10 billion projected from rice farmers alone could even be optimistic, given the impact of El Nino.
  • Rice loans through conduit banks could drop by around 16% this year as the dry spell begins to impact on the sector's ability to deliver a good harvest.
  • The areas worst affected by El Nino are north of the main island of Luzon, key areas in the Visayas, and some provinces in Mindanao in the south.
  • Land Bank's lending portfolio totaled P195 billion last year, with some P180 billion being snapped up by borrowers, helping to push forward development in the countryside.
  • The bank was able to limit its non-performing loans to 2.99% of portfolio at end-2009, while posting a net income of P6.758 billion, which was 35% higher than target.
  • Land Bank's strict lending standards and risk management measures have enabled the bank to maintain a significantly low non-performing loan ratio, despite the significant lending to farmers during the year.

Statistics:

  • P12 billion (US$259.4 million) in loans extended to rice farmers in 2010
  • P10 billion in projected rice farmer loans this year
  • 16% potential drop in rice loans through conduit banks this year
  • P195 billion total lending portfolio in 2010
  • P180 billion snapped up by borrowers in 2010
  • 2.99% non-performing loan ratio at end-2009
  • P6.758 billion net income in 2009, a 35% increase over target
  • P31.37 billion in gross revenues in 2009, a 18% increase over 2008
  • P24.32 billion in operating expenses in 2009, a 14% increase over 2008

Sources:

  • Asia Pulse, February 25, 2010
  • Philippine News Agency (PNA), February 25, 2010