No Free Lunch

Misplaced scolding

Poor Landbank. It received a somewhat misplaced tongue-lashing from the President in one of his off-the-cuff deviations from the script in his recent State of the Nation Address. “You know, you are called Landbank but you are now the No. 1  commercial bank in the Philippines,” he ranted. “What the heck is happening to you? You are supposed to finance agricultural enterprises and endeavors. Bakit wala (why nothing)?”

The audience applause seemed to reflect the common sentiment that the government bank mandated to serve small farmers’ financing needs has fallen short in its avowed mission.


He continued: “Why are you mired in so many commercial transactions? Bumalik kayo (go back) where you were created for and that is to help the farmers. Ilang administration na wala (for how many administrations have we seen nothing)? You better decide on that; I will give you until the end of July to give me a plan, or else I will ask Congress to reconfigure you whatnot.”

I could imagine my esteemed fellow University of the Philippines Los Baños alumnus and Landbank president Cecile Borromeo working overtime with her staff these days to come up with the plan they’ve been ordered by the President to submit by next week, or else. But then again, maybe not. All these years, there has been no dearth of good ideas, strategies and plans at the bank to help small farmers. Even earlier, the bank had announced its new approach of proactively reaching out to small farmers to determine and service their financing needs.


The bank’s capable veterans, including President Borromeo herself, have known over the years what they need to do. Their real problem is that they cannot possibly do it well for as long as their hands are tied by something imposed on them from above: They are treated by their bosses in the national government and by the Bangko Sentral ng Pilipinas (BSP) like the very entity the President doesn’t want them to act like—i.e., a commercial bank.

They are expected to be profitable like the country’s top commercial banks, so that they can remit large profits to the national treasury—as if generating revenues for the government is also their primary mission. The BSP, as regulator of all banks in the country, subjects them to the same rules, standards and financial yardsticks it applies to commercial banks. Why blame them, then, for behaving like one?

Like it or not, lending in an agricultural sector dominated by smallholders is always risky business anywhere, and even more so in a calamity-prone country like ours. That’s why commercial banks prefer to pay the fine for not complying with the agri-agra law, rather than lend the mandated amounts of loans to small farmers and agrarian reform beneficiaries. That is also why successful agricultural finance institutions in our neighbors like Thailand and Japan are actually subsidized by their governments with taxpayers money—not expected to generate profits for the treasury.

I have long held that effective small farm (and firm) finance can be considered a public good that benefits society at large, because it helps achieve inclusive growth. As such, it could warrant taxpayer support (translation: subsidy). To expect Landbank to adequately service the needs of small farmers, while expecting it to be as solid as a commercial bank generating large profits to boost the national government coffers, is like expecting a carabao to be trained to fly.

President Duterte is actually right: He should ask Congress to do something about Landbank. But what’s needed from them are amendments to its charter so as not to require it to generate profits for the treasury, but expect it to merely break even as it focuses on its true mandate—and even sustain it with taxpayer support when necessary. Congress also needs to amend the BSP law and allow it to apply less stringent regulatory standards on development finance institutions like Landbank, more compatible with its true mission of serving the needs of small Filipino farmers. It has been done elsewhere, I’m told, so why can’t we?

Don’t scold Landbank, Mr. President. Enable it to do its job right.

[email protected]


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TAGS: Duterte, LandBank, State of the Nation Address
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