Gustavo Petro announced this week the reform of the current Banco Agrario de Colombia. The state-owned entity is tasked with driving agricultural progress through loans. The new bank will be the central pillar of the government’s so-called “popular economy” and will be renamed as Banco Agrario y Popular (Agricultural and Popular Bank).
A Major Public Bank
The new Banco Agrario y Popular will hold the entirety of government funds, including funds that are currently held in other banking institutions. This will mean that funds from the General State Budget will now support subsidized loans offered by the public bank.
In the words of the Colombian president, the Banco Agrario y Popular will have greater credit capacity than Grupo Aval, the Colombian private banking giant that comprises four banks (Banco de Bogotá, Banco AV Villas, Banco Popular, and Banco de Occidente Credencial), controlled by the billionaire Luis Carlos Sarmiento Angulo.
“To achieve this, we have determined that funds from the Budget that are kept in the banking system, sometimes for long periods, with the Central Bank, will be placed in the Banco Agrario to create a much larger mechanism with a much greater volume of loans at subsidized interest rates,” said President Gustavo Petro during the announcement of the bank’s restructuring.
In this context, the Colombian president announced that the loans provided by the new bank will contribute to the “strengthening of productive units and financial inclusion.” In other words, the loans will follow a pyramid structure, starting with the most vulnerable population, both rural and urban, seeking a loan to initiate or enhance an entrepreneurial endeavor.
Banco Agrario, 24 Years Serving the Countryside
The current Banco Agrario is a public entity established in 1999. Its objective, according to its internal regulations, is to “promote agricultural progress and family development, contributing to the sustainable development of our country.”
The entity currently holds assets exceeding 35 trillion pesos and liabilities worth just over 33 trillion pesos. The consolidated equity of Banco Agrario today is 2.49 trillion pesos. It has 790 branches spread throughout the country and about 8,000 employees.
The first change that will occur with the announced conversion is to one of its foundational tenets: that at least 70% of the loans it offers must be allocated to the agricultural sector. From now on, the new bank will lend to urban as well as rural sectors.
Subsidized Rate Loans
The loans offered by Banco Agrario y Popular will come with subsidized rates. These loans are intended to be more accessible and can be requested by both formal and informal workers. The main focus will be on “neighborhood micro-businesses.”
According to official data, micro-businesses currently constitute 5.37 million productive units in Colombia.