Lenders’ agri-agra compliance still low


BANKS’ COMPLIANCE with mandated credit quotas for the agriculture and agrarian reform sector has shown “no improvement” as loans for these sectors remain limited, a Monetary Board member said.

Bangko Sentral ng Pilipinas (BSP) Monetary Board member V. Bruce J. Tolentino said the central bank has been pushing for amendments to Republic Act (RA) 10000 or the Agri-Agra Credit Act of 2009 to include loans to those in the agricultural value chain as compliance with the quotas.

“There has been no improvement in compliance. Why? Because that law is difficult to comply with. Republic Act 10000 says 25% of banks’ loanable funds should be set for agriculture…but our agriculture sector is less than 25% of the economy,” Mr. Tolentino said at a virtual BSP media forum on Thursday.

The law’s provisions are focused on production and does not consider the entire agricultural value chain, he said.

“So when you look at distribution, manufacturing, processing, manufacturing — that is not included under compliance,” Mr. Tolentino said.

“Any aspect of the production chain should be covered so that the entire agribusiness can be served by the banking system,” he added.

BSP data showed banks extended P789.66 billion in loans to the agriculture and agrarian reform sector as of end-June, higher by 13.6% than the P695.06 billion in credit in the same period of 2020.

However, it was only equivalent to 10.63% of their total loanable funds in the period, still below the 25% mandated under RA 10000.

The BSP earlier said banks paid around P2 billion on average in penalties annually since 2011 due to their noncompliance with the Agri-Agra law.

House Bill 1634, which provides for the expansion of eligible agri-agra loans, was passed on third reading in March 2020 and was transmitted to the Senate. Its counterpart bill remains pending at the committee level.

In March 2021, the BSP through Circular 1111 said loans for activities involved in the agricultural value chain — from farming, fishing, as well as other processes involved in converting an agricultural product from raw materials to its consumption form — will now be counted as agri-agra credit.

Mr. Tolentino has said the circular is an interim measure as they wait for the law to be amended. — LWTN