Press Release
November 20, 2011

'Loan blockade' vs. big corporations is best behest loan antidote

Crony-owned or not, private corporations and their wealthy owners should be barred from dipping its hands into the loan portfolio of state banks to avoid a repeat of the alleged P660-million behest loan granted by Development Bank of the Philippines (DBP) to former Marcos trade minister Roberto Ongpin.

Sen. Ralph G. Recto yesterday said there would still be behest loans that could be obtained in the near future from state-owned banks like the DBP and the Land Bank of the Philippines (LandBank) unless a policy reform is adopted by state banking regulators.

"Loan money from these state-owned banks would have better use if placed in an exclusive credit window for the agriculture sector and SMEs (small-medium enterprises)," Recto, Senate ways and means chair and senior member of the Congressional Oversight Committee on Agriculture and Fisheries Modernization (AFMA), said.

According to Recto, DBP and LandBank should be barred from extending loans to big corporate clients and instead be mandated to facilitate easy loan downloads for growing segments of the agriculture, fisheries and the SME sectors.

The senator pointed out big corporate clients could always turn to their preferred private commercial banks for credit or additional capital as a consequence of the "loan blockade."

Recto stressed that this was really among the mandates of the DBP and LBP, which was to offer cheap loans to farmers, fisherfolks and small entrepreneurs but have not been fully implemented.

"If we put up a loan blockade on big corporate players or at least put a cap on how much state banks could lend to them, we would be seeing the last of behest loans that take away so much loan money that should have been channeled to growing sectors," Recto said.

The senator said if an overhaul of the charters of DBP and LandBank would be necessary to firm up his proposal, he would be willing to put together a Senate bill.

Ongpin appeared before a Senate investigating committee Monday to deny that his closeness to former first gentleman Mike Arroyo clinched for him the controversial DBP loans he used to buy mining shares.

Ongpin applied for two loans from DBP. The first, for P150 million, was granted in May 2009 and the second, for P510 million, six months later. Both were allegedly approved with dispatch.

The former trade chief used these to purchase 50 million shares from Philex Mining Corp., the country's largest gold and copper mining firm.

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