BPI plans entry into SME agribiz lending business
THE COUNTRY's second largest lender, Bank of the Philippine Islands
(BPI), is looking at extending loans to small- and medium-sized
agribusinesses and is seeking the help of the World Bank's private
sector investment arm, International Finance Corp. (IFC), to gain
competence in this arena.
"These are early days, but we are looking at expanding our collaboration
with the IFC, and one area we are looking at is the agribusiness space,"
said Alfonso L. Salcedo, Jr., BPI executive vice president and corporate
banking group, after the signing of a grant agreement with the IFC
yesterday.
BPI and the IFC are presently partners in a program that extends loans
to small- and medium-sized firms undertaking clean energy and energy
efficiency projects. IFC extends investment advisory services and
guarantees part of the loans given by BPI.
The two yesterday signed the agreement covering the $1.24-million grant
that BPI won as one of the global winners of the IFC-administered G-20
SME Finance Challenge.
For the agricultural loans program, Mr. Salcedo said BPI may ask IFC to
give investment advisory or enter into a risk sharing arrangement.
"We can do agri-related loans but we don't have the level of comfort for
lending because we do not have the expertise in lending to the agri
space. With the expansion of our partnership with the IFC, could get
into that space," Mr. Salcedo added.
BPI's outstanding loans to the agriculture sector presently totals to
just around P10 billion.
"We lend through cooperatives and to end-users at present. End-users are
the owners of feedmills, factories and distributors, among others,"
Nanette A. Biason, BPI assistant vice president, said at the sidelines
of the same event.
"We don't have direct lending to farmers, we use cooperatives as our
conduits to small farmers," she added.
For his part, Jesse O. Ang, IFC resident representative to the
Philippines, said: "We are a tropical country so we can grow a lot of
[crops] here. And we have a lot of issues to deal with such as the
Agri-Agra Law. We also need to support the farmers with knowledge and
financing."
"What we would like to do is to look into the agribusiness space,
primarily on the advisory side... We have people who understand agri
financing," he added.
Republic Act 10000 or the Agri-Agra Reform Credit Act of 2009 orders
banks to set aside at least 25% of their total loanable funds for
agriculture and agrarian reform.
BPI President Aurelio R. Montinola III, at the sidelines of the signing
ceremonies yesterday said: "We have an interest in the agriculture
sector... but BPI tends to cautiously go into the sector because there
is unfamiliarity. That is why we are seeking the help, particularly
investment advisory, of the IFC."
"We are entering a space where the more you do this kind of financing,
then the more you can avoid mistakes moving forward," he added.
Regarding BPI's $1.24-million grant, Ms. Biason said it will be used to
"improve the market's awareness through education of SMEs in energy
efficiency and renewable energy projects."
"It will also be used to enhance the capacity of the bank's lending
group through training and marketing tools to provide better financing
and technical services to clients," she added. -- ARRG
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