Land Bank clarifies reported losses due to loans to coops

May 8, 2012 10:47 pm 

By Lilybeth G. Ison

MANILA, May 8 — The Land Bank of the Philippines on Tuesday clarified the reported P471.19 million uncollectible loans to cooperatives and countryside financial institutions in 2010.

Catherine Rowena Villanueva, vice president of Land Bank's corporate affairs department, said that the bank has "exhausted all efforts to collect all past due loans before such were eventually written-off with a remaining value of P1 in the books of the bank.

Likewise, she said the State bank's lending units have exerted collection efforts on written-off accounts.

The committee on government enterprises and privatization of the House of Representatives is set to conduct an inquiry into the report released by the Commission on Audit (CoA) in 2010, that the Land Bank of the Philippines incurred losses of almost half-a-billion pesos in loans to cooperatives and countryside financial institutions.

"The State bank wrote off P471.19 million in loans and that these accounts were classified as uncollectible because of the financial difficulties of the borrowers or the borrowers could not be located," said Cagayan de Oro City Rep. Rufus Rodriguez.

Rodriguez filed House Resolution 2129 together with his brother Abante Mindanao party-list Rep. Maximo Rodriguez Jr., urging the House committee to look into the matter and determine why Land Bank lost almost half-a-billion pesos.

He said State auditors traced the huge increase in uncollectibles to a lax lending policy adopted by the bank in 2009, which no longer required comprehensive surety agreements and other collateral requirements for some borrowers.

Rodriguez said the amount was an 882-percent increase over the P47.982 million in write-offs in 2009.

"Of the written-off accounts in 2010, 88.08 percent pertained to cooperatives, while 11.92 percent pertained to countryside financial institutions," he said.

According to Rodriguez, the Land Bank is a government financial institution that strikes a balance in fulfilling its social mandate of promoting countryside development while remaining financially viable.

"The dual function makes Land Bank unique because the profits derived from its commercial banking operations are used to finance the bank’s developmental programs and initiatives.

The Cagayan de Oro City solon said Land Bank has continued expansion of its loan portfolio in favor of its priority sectors which are the farmers and fisher folk, small and medium enterprises and micro-enterprises, livelihood loans and agribusiness, agri-infrastructure and other agri and environment-related projects, socialized housing, schools and hospitals.

He said Land Bank launched a more aggressive lending drive in 2010, reporting over P32 billion in countryside loans channeled through hundreds of farmers and fisher folk cooperatives and countryside financial institutions.

Rodriguez, however, said that the State bank lost almost half-a-billion pesos in loans in 2010 due to its laxity in granting loans.

He said CoA recommended that Land Bank revisit its policy on the granting of loans to cooperatives and countryside financial institutions, particularly on collateral offered by the borrower and that it should also not simply write-off the accounts but try to collect them using all available legal means.

"There is really a need to look into the matter and determine if there is a need to further enact new legislation to ensure that Land Bank continues to perform its functions and help the countryside while at the same time ensuring its financial viability," he said.

On the reported increase in the write-off by 882 percent by the bank in 2010 over the P47.982 million in 2009, the Land Bank said the P471.19 million written-off accounts in 2010 came from the bank’s loan releases to cooperatives and countryside financial institutions (CFIs) from 1991 to 2010.

Thus, it said, the said accounts were not incurred in 2010 alone but over a period of 19 years.

"Contrary to the CoA report, the bank was not lax in the granting of loans as the written-off amount represents only 0.17 percent of the total loan releases to the said mandated sectors which stood at P285.479 billion for the same period," said Villanueva.

On the recommendation of CoA that Land Bank should revisit its policy in the granting of loans, she said the bank continues to innovate in the expansion of services to its priority clients.

Villanueva said Land Bank has put in place measures to mitigate the risks of lending to the priority sector, which in most cases do not have hard collaterals to offer;

Land Bank strengthened the implementation of the established Cooperative Accreditation Criteria and CFI Risk Acceptance Criteria in the evaluation of the cooperative’s/CFI’s eligibility to access the Bank’s credit facilities and other services;

Adoption of enterprise-based approach in extending credit and other services; and

Use of credit enhancements, such as:

— PCIC insurance coverage;

— Guarantee coverage of the Agricultural Guarantee Fund Pool, Credit Surety Fund and other guarantee funds; and <br>– Purchase order/confirmed market tie-up between producers/cooperatives with reliable buyers/processors.

Villanueva said the tie-up will ensure that there is a market for the produce of the farmer/fisherfolk members of the cooperative or organization.

This tie-up is done through the signing of Production Technical and Marketing Agreements (PTMA) of both parties specifying the roles of the partners and embodies the collection mechanism of cooperatives' loans extended by Land Bank, she noted.

Villanueva assured that Land Bank remains committed to expanding its reach to small farmers and fisherfolk, without sacrificing the bank’s viability as a government financial institution. (PNA)<br>DCT/LGI

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