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LandBank clarifies loan write-offs in ‘year 2010’

/ 11:08 PM May 13, 2012

This is to clarify the Commission on Audit Report on the P471.19 million worth of loans written off  by Land Bank of the Philippines (LandBank) in  2010. (“House to probe LandBank for losing  P500M in bad loans to cooperatives.”  (Inquirer, 5/8/12)

1.       The report said that the written-off accounts were classified as uncollectible because of the financial difficulties of the borrowers or because they could not be located.

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LandBank exhausted all efforts to collect all past due loans before they were eventually written off with a remaining value of P1 in the books of LandBank. The bank assures the public that its lending units exert all efforts to collect all their collectibles before writing them off.

3.       The report said that the amount was 882 percent higher than the P47.982 million the bank also wrote off in 2009.

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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. In other words, the written-off accounts were not incurred in 2010 alone but over a period of 19 years. Contrary to the COA report, LandBank was not lax in the granting of loans as the written-off amount represents only 0.17 percent of the total loan releases (P285.479 billion for the same period) to the mandated sectors.

3. The report said COA recommended that LandBank revisit its policy in the granting of loans to cooperatives and CFIs, particularly on collaterals offered by the borrower.

As LandBank continues to innovate in the expansion of services to its priority clients, it has put in place measures to mitigate the risks of lending to the priority sector, which in most cases does not have hard collaterals to offer.

4.       LandBank strengthened the implementation of the established Cooperative Accreditation Criteria and CFI Risk Acceptance Criteria in the evaluation of the cooperatives/CFIs’ eligibility to access the bank’s credit facilities and other services with the adoption of enterprise-based approach in extending credit and other services, and the 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

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Purchase order/confirmed market tie-up between producers/cooperatives with reliable buyers/processors.

This 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 a Production Technical and Marketing Agreement by both parties. The agreement specifies the roles of the partners and embodies the collection mechanism of a cooperative’s loans extended by LandBank.

Rest assured that LandBank  remains committed to assisting small farmers and fisherfolk, without sacrificing its viability as a government financial institution.

—CATHERINE ROWENA B. VILLANUEVA,

vice president,

Corporate Affairs Department,

Land Bank of the Philippines,

1598 MH del Pilar cor. J. Quintos Sts.,

Malate, Manila

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TAGS: Banking, Commission on Audit, LandBank
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