Bank agricultural loans have a compliance rate of just 9.7% – Manila Bulletin

Bank loanable funds for agriculture and land reform credit at the end of June this year were still below the mandatory allocation.

(Photo courtesy of the Ministry of Agriculture)

As of the end of June of this year, banks had set aside 789.7 billion pesos for agri-agricultural loans. Of this amount, 718.1 billion pesos is intended for agricultural credit, which translates into a compliance rate of 9.7 percent against the compulsory allocation of 15 percent under the law of the Republic. No. 10000 or the Agri-Agra Reform Credit Law of 2009.

Credit for land reform, which reached just 71.6 billion pesos at the end of June, was only 1%, a compliance rate well below the 10% required by law, the Bangko said. Sentral ng Pilipinas (BSP) in a first half report on the financial system. .

The 789.7 billion pesos, however, is higher than what was loaned in the same period in 2020 of 695.1 billion pesos, an increase of 13.6%.

The BSP said that if the banks complied with both the 15 percent credit allocated to the agricultural sector and the 10 percent land reform loans, they should have set aside 1.850 billion pesos over the course of the year. the period. Of which, 1.11 trillion pesos are for other agricultural credits instead of just 718.1 billion pesos, and 742.2 billion pesos are for land reform funds instead of just 71.6 billion pesos.

The BSP collects penalties from non-compliant banks for the compulsory allocation of agri-agra loans.

By law, penalties imposed on banks for non-compliance / under-compliance with mandatory credit allocations are remitted to the Common Agricultural Guarantee Fund and the Philippine Crop Insurance Corporation.

Pending further modifications to RA 10000, the BSP, the Ministry of Agriculture and the Ministry of Agrarian Reform have approved changes to the implementing rules and regulations to increase the access of the agrarian reform sector to the land reform sector. bank financing. The BSP also streamlined the process of approval by banks of eligible agri-agra securities and promoted financing solutions.

PASB has called for the enactment of comprehensive amendments to the Agri-Agra Law that recommend a financing approach for a broader agricultural ecosystem.

In the meantime, PASB has extended the eligible modes of compliance with the compulsory allocation of agrarian reform credits by including the effective extension of loans to Agrarian Reform Beneficiaries (ARB) and / or ARB households, for the purpose of financing of agricultural, fishing and land reform activities. .

A better Agri-Agra law should improve banks’ compliance with the law in terms of amounts loanable to the sectors concerned.

For many years, banks preferred to pay the 0.5% penalty for non-compliance due to the high risk and high cost of lending to the agricultural sector. On an annual basis, the BSP collects approximately 2 billion pesos in fines from non-compliant banks.

The factors that have contributed to the low compliance of the banks are: the processing time associated with the approval of the securities (before the modifications, the debt securities had to be approved by the Agricultural Credit Policy Council); borrowers find it difficult to obtain credit for land reform; limited availability of agri-agra compliant debt securities; and the lack of visible and bankable agricultural projects.



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