banks in the Philippines

[OPINION] Landbank-DBP merger: Bigger not necessarily better

Leonardo Q. Montemayor, Pablito M. Villegas, Romeo C. Royandoyan

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[OPINION] Landbank-DBP merger: Bigger not necessarily better
Left unaddressed, concerns about the planned merger may morph into social discontent and increased impoverishment of farmers and fisherfolk who already have little or no access to credit, technology, and markets

Finance Secretary Benjamin Diokno announced recently the planned merger of the state-owned Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP). He declared that the merged institution would become the country’s biggest universal bank, save the national government P5.3 billion yearly, and improve services to its clients.

Farmers, bank employees, and other stakeholders are seriously concerned about this decision, which came about without any public consultations.  

LBP and DBP were created under separate laws. They were mandated – under their respective charters – to perform specific missions to achieve balanced national socioeconomic and agro-industrial development.  

LBP was to serve as the main financing institution for agrarian reform beneficiaries and other agriculture stakeholders (including micro, small, and medium enterprises). If successful, it would help liberate them from food insecurity and poverty.  

DBP was supposed to focus on development-oriented investments (in areas like infrastructure, energy, power generation, telecommunications, and digitalization) and participate in “public-private partnership” business modalities that are normally shunned by private commercial banks.   

The main rationale of the planned merger appears to be “bigger is better.” But our question is: better for whom?   

Over the years, small farmers and agriculture businesses have reported that, ever since LBP became a universal bank, its commercial operations have dwarfed its loans to small farmers and rural entrepreneurs. Many of them complain of great difficulty in accessing LBP’s services. They are unconvinced that the merger – with LBP as the dominant entity – will make a major difference for them.

Straying from mandate

Our small farmers and fishers therefore stress that any new legislation should return these banks to their original mandates. As stated earlier, LBP has strayed far from its principal task of servicing small agricultural producers. Merged or not, it will be hard pressed to deliver on the current administration’s goals of food security, farmers’ prosperity, and poverty reduction.  

Secretary Diokno should be reminded further that cost-effective and more efficient bank operations should be realized without neglecting or deprioritizing the mandates of LBP and DBP.  Also, cost savings can be a function of improved management – even without the merger. They need not entail the laying off of employees. Instead, management should concentrate on retooling or retraining them and removing the excess fat at the head and regional offices. The latter should be reassigned at the grassroots and countryside, where their financial and technical services are critically needed. 

There will be disgruntled bank staff with no padrinos to protect them from losing their jobs. Thus, the planned merger may create more disunity and disenfranchisements. Moreover, such a merger will need legislation by Congress to amend the existing charters of both banks and to establish a new one for the merged institution. All these will cause uncertainties, delays, and other unwanted consequences in the operations of LBP and DBP. 

Left unaddressed, these concerns may morph into social discontent and increased impoverishment of farmers and fisherfolk who – with little or no access to credit, technology, and markets – are further caught in the unmitigated cost-price squeeze in an uneven economic playing field. – Rappler.com

Leonardo Q. Montemayor is board chairman of the Federation of Free Farmers, and a former secretary of agriculture. Pablito M. Villegas is owner-operator of the Villegas Organic and Eco-Tourism Farm in Malvar, Batangas. He is a former senior executive of the Land Bank of the Philippines. Romeo C. Royandoyan is executive director of Centro Saka.

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