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Philippines: BSP backs changes to Agri-Agra Law
MANILA, Philippines — Further amendments to the mandated loan threshold for the agriculture and agrarian reform activities will push the country into the next stage of development post-pandemic, according to the Bangko Sentral ng Pilipinas.
BSP Governor Benjamin Diokno said monetary authorities are pushing for the amendments to Republic Act 10000 or the Agri-Agra Reform Credit Act of 2009 as part of its reform agenda in the 18th Congress.
“The agri-agra bill will strengthen rural development by providing a holistic approach in addressing the financing needs of the broader agricultural financing ecosystem,” he said.
House Bill 6134 is expected to tackle the persistent challenges in agriculture financing that emanate from both the borrowers’ side and the banks’ and lending institutions’ side.
BSP Monetary Board member Bruce Tolentino asserted during the hearing of the Senate committee on agriculture, food and agrarian reform the agricultural sector’s significant role in promoting inclusive and broad-based economic growth.
“The BSP fully supports the objectives driving the various agri-agra bills, which seek to strengthen rural development through holistic approaches that consider the broad context for agricultural financing and rural community development,” Tolentino said.
The proposed amendments are envisioned to strengthen rural development and improve the well-being of agricultural and rural community beneficiaries.
The changes would enhance access of rural communities to private sector financing through the expansion of the modes of compliance by banks, creation of a special fund managed by an Agricultural and Fisheries Finance and Capacity-Building Council to finance organizational-, capacity- and institution-building programs and activities of rural agricultural and fisheries households.
The BSP together with the Department of Agriculture and the Department of Agrarian Reform approved the amendments to the implementing rules and regulations of the Agri-Agra Law last March as an interim measure pending the passage of the proposed amendments.
Latest data from the BSP showed loans extended by banks for agriculture and agrarian reform declined by 2.8 percent to P713.6 billion last year from P733.92 billion in 2019 as the industry continued to fall short of the mandated threshold for the sector.
Total loanable fund generated by the banking industry jumped 15.7 percent to P7.14 trillion last year from P5.54 trillion in 2019.
The banking system was only able to allocate about 10 percent of its total loanable funds last year, way below the 25 percent mandated under the law.
The BSP reported the loans extended by the banks to the agriculture sector slipped 3.6 percent to P666.69 billion for a 9.32 percent compliance ratio or below the required 15 percent.
Likewise, the compliance ratio of the banking system fell way short of the 10 percent threshold for agrarian reform credit as banks only extended loans increased by 5.9 percent to P55.84 billion for a compliance ratio of one percent.
Source: https://www.philstar.com/business/2021/05/14/2098031/bsp-backs-changes-agri-agra-law