Banks’ agri loans near P3 trillion as of March

PHILIPPINE BANKS lent nearly P3 trillion to the domestic agriculture sector in the first quarter, exceeding the minimum required financing, preliminary Bangko Sentral ng Pilipinas (BSP) data showed.

As of March, loans extended to the agriculture sector reached P2.871 trillion, accounting for 88.16% of the banking system’s P3.256-trillion total loanable funds during the period.

This meant banks’ lending to the agriculture sector topped the BSP’s quota for agriculture, fisheries and rural development (AFRD) financing.

Under the law, banks are mandated to allocate at least 25% of their total loanable funds for AFRD financing, which includes loans for agrarian reform beneficiaries, agrarian reform communities or other priority sectors, until July 2032.

However, the requirement does not apply to newly established banks within the first five years from the start of their operations.

Based on data posted on the BSP’s website, domestic lenders’ AFRD financing in the first quarter was 30.56% higher than the P2.199 trillion it disbursed in the same period last year.

It was also up by 2.24% from the P2.808 trillion lent to the farm sector in the fourth quarter of 2025.

Of the total, P2.838 trillion were loans, which grew by 30.21% from the P2.18 trillion a year ago and by 2.24% from the P2.776 trillion in the previous quarter.

Meanwhile, banks’ investments to the local agriculture sector reached P29.44 billion in the January-to-March period, nearly double the P15.38 billion recorded a year earlier. Quarter on quarter, it edged up by 1.97% from P28.87 billion.

Lenders’ entire first-quarter agricultural investment was in the form of debt securities.

The banking industry’s eligible deposit placements in rural financial institutions amounted to P3.48 billion at end-March. This was 13% below the P4 billion a year ago, but up 5.14% from P3.31 billion in the fourth quarter.

Central bank data also showed that universal and commercial banks granted the bulk of AFRD financing in the first quarter with P2.645 trillion, jumping by 32.4% from P1.998 trillion in the comparable year-ago period. Big banks had P2.728 trillion worth of available loanable funds at end-March, while thrift banks had P117.3 billion, and rural and cooperative banks had P108.56 billion.

On the other hand, the total loanable amount generated by thrift banks reached P282.28 billion at end-March, while rural and cooperative banks had P151.55 billion.

Digital banks, on the other hand, had not used P94.06 billion of their total loanable funds during the period.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said private entities requiring funding for advanced technologies to be used for the local agriculture sector may have helped boost AFRD financing in the country.

“This could be partly correlated by increased private sector (both foreign and local) participation in the local agricultural sector using the best global technologies to further boost productivity and reduce costs, while helping food security,” Mr. Ricafort said.

“These loans would structurally help and support the agricultural and agroindustrial businesses, both foreign the local and export markets that have great potential for further growth,” he added.

Meanwhile, looming risks from this year’s El Niño season could help spur loan demand from the local farm sector, as dry conditions endanger the sector, according to Mr. Ricafort.

“Possible strong El Niño drought risk from June 2026 to early 2027 could require more support and regulatory relief measures to help the most adversely affected sectors in agriculture,” he said.

The state weather bureau has flagged emerging El Niño conditions in the tropical Pacific, noting that there is now an 80% chance that it will develop into a full-fledged El Niño.

A “strong” El Niño season may arrive between September and November, and could intensify into a “very strong” one by October until January next year, the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) said.

According to PAGASA, the El Niño phenomenon will likely strengthen the southwest monsoon and tropical cyclones as well as cause severe dry conditions to parts of the country.

Meanwhile, the Department of Agriculture said the local agriculture sector could see their total output decline by as much as 20%-30% given the projected impact of high temperatures on crops, livestock, fisheries and aquaculture. — Katherine K. Chan