Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno reiterated over the weekend that passage of amendments to the Agricultural Credit Reform Act of 2009 will improve and expand access to credit farmers, fishers and micro, small and medium enterprises (MSMEs) in sectors related to agriculture and agro-industry.
The Senate approved Senate Bill 2494 on February 2. Next comes the legislative process in the bicameral procedure. The House of Representatives approved Bill No. 6134 at third and final reading on March 10, 2020.
“The Agri-Agra Bill will strengthen rural development through a holistic approach to meeting the financing needs of the agricultural finance ecosystem,” Diokno said over the weekend.
The Agri-Agra Bill is one of BSP’s priority legislative measures, which aims to improve the creditworthiness of agricultural workers and their businesses by building their capacities, modernizing their business operations and integrating them into value chains. profitable domestic and export-oriented.
Loanable funds from banks for agriculture and land reform credit remain below the mandatory allocation of 15% for the agricultural sector and 10% for land reform loans.
Based on BSP data as of end-September 2021, banks have earmarked 804.17 billion pesos of loans for agricultural credit, representing a compliance rate of around 9.8% compared to the mandatory 15%.
Credit for land reform reached only 68.9 billion pesos during the period. It was less than one percent compliance rate at just 0.92 percent when under the law it should be 10 percent.
If the banks did indeed follow the law and release 15% of their loanable funds to the agricultural sector, then farmers, fishers and agro-industrial MSMEs should have had access to some 1.124 billion pesos of credit at the end of September last year instead of only 804 pesos. .17 billion. And, instead of just 68.9 billion pesos for land reform credit, the banks should have released 749.38 billion pesos if they strictly abide by their mandate.
Banks apparently prefer to pay the 0.5% penalty for non-compliance rather than set aside the mandatory amount due to the high risk and high cost of lending to the agricultural sector. Each year, the BSP collects about 2 billion pesos in fines from non-compliant banks. By law, penalties collected are remitted to the Agricultural Guarantee Fund Pool and the Philippine Crop Insurance Corp.
Factors that have contributed to poor bank compliance include: processing time related to the accreditation of securities since debt securities must be accredited by the Agricultural Credit Policy Board; borrowers find it difficult to obtain land reform credit; limited availability of Agri-Agra compliant debt securities; and the lack of visible bankable agricultural projects.
Pending further amendments to RA 10000, PASB, the Department of Agriculture, and the Department of Land Reform have approved amendments to the implementing rules and regulations to increase the access of the land reform sector to the bank financing.
The BSP streamlined the process for banks to approve Agri-Agra eligible securities and promoted financing solutions. It also expanded the eligible modes of compliance with the Land Reform Compulsory Credit Allocation to include the actual provision of loans to Land Reform Beneficiaries (ARBs) and/or ARB households, for the purpose of financing agriculture, fishing and agrarian reform activities.
Diokno said earlier that the amendments to the Law Enforcement Rules and Regulations (IRRs) aim to mobilize financing from the banking sector towards the land reform, fisheries and agricultural sector by addressing the challenges identified in the operationalization of the law.
The IRR is, however, only a temporary measure until a more comprehensive amendment to the Agri-Agra Act is approved.
SUBSCRIBE TO THE DAILY NEWSLETTER
CLICK HERE TO REGISTER