By Paolo Romero, January 31, 2022; The Philippine Star
Manila, Philippines — Sen. Cynthia Villar is pushing for amendments to the Agri-Agra Reform Credit Act to help expand financing for farmers and fisherfolk as well as related micro, small and medium enterprises (MSMEs) by making it easier for banks to extend low-cost loans.
Villar, who chairs the Senate committee on agriculture and food, sponsored last week the proposed amendments in plenary and urged her colleagues to immediately approve the same.
She said Republic Act 10000 should be amended to make it more effective in reaching the agricultural sector and promote rural development.
Based on data from the Bangko Sentral ng Pilipinas (BSP), banks have paid an average of P2 billion in penalties per year for non-compliance with the law, she said.
The banks have extended a total of P713.6 billion in agri-agra credit as of end-December 2020, she said.
Agriculture loans amounting to P642.4 billion are only nine percent of the 15 percent compliance requirement in agricultural credit, while agrarian reform credit extended by banks amounting to P71.2 billion is a mere one percent compliance vis-à-vis the 10-percent requirement under the RA 10000.
She said among the hindrances to compliance are the limitations of the loans to purely agricultural production-related activities and the targeted borrowers are restricted to farmers and agrarian reform beneficiaries only.
Villar said the bill allows a wider room for compliance for banks to achieve a holistic approach to countryside development, including removing the distinction between 15 percent for agriculture and 10 percent for agrarian reform beneficiaries (ARBs) in the banks’ portfolios; and broadening of the list of loan beneficiaries and activities that can be financed through bank loans or investments, and welcoming other alternative modes of compliance.
Under the bill, all banks whether government or private, except newly established banks from effectivity of the law shall set aside a credit quota of at least 25 percent of their total loanable funds for agriculture lending.
For newly established banks a five-year grace period is given within which no penalty shall be assessed.
Loans shall now cover all activities to include complementary or agriculture and fisheries related activities to increase agricultural production to improve the well-being of farmers and fisherfolk.
The farming family household members, farm workers, their associations and organizations and their MSMEs can now avail themselves of these loans.
Environmental projects such as privately funded and LGU-funded irrigation systems, climate change mitigation, biodiversity protection and renewable energy projects shall be included.
Lending for the construction and upgrading of infrastructure, including but not limited to farm-to-market roads, as well as post-harvest facilities are seen to benefit rural communities.
The amendments also aim to facilitate access of private companies engaged in agri activities and financing to these loans.
The bill also included special lending arrangements for agribusiness enterprises with qualified agricultural borrowers and agricultural value chain financing, which covers not only production but also distribution, manufacturing and processing of agricultural products.
Allowed loans are those requested by all kinds of financial institutions operating and located in rural municipalities and not just rural financial institutions.
Projects that promote livelihood, skills enhancement and capacity-building activities consistent or analogous to the above will also be recognized.
A special fund will be set up from the penalties collected from banks unable to extend loans according to the provision of the new law, net of 25 percent to the general fund and 10 percent for BSP to cover administrative costs.