Banks have more freedom to lend to other sectors

MANILA, Philippines – The new law providing a comprehensive financing framework for the development of agriculture, the fisheries sector and rural communities would give banks greater flexibility in allocating their resources, according to the governor from Bangko Sentral ng Pilipinas, Felipe Medalla.

Medalla said the central bank is committed to effectively implementing Republic Act 11901 or the Strengthening Agriculture, Fisheries, and Rural Development Finance Act of 2022 to improve access for rural communities and farming and fishing households, including their micro, small and medium-sized enterprises (MSMEs) to much-needed financial services and programs.

“The new Agri-Agra and Rural Finance Act has been a priority legislative measure for BSP as it considers the demands of beneficiaries from rural communities from a holistic perspective, taking into account their evolving social networks and needs. complex,” Medalla said.

The new law expands agricultural credit and rural development financing activities to include agrotourism, digitization of agricultural activities and processes, public rural infrastructure, programs that promote the health and well-being of rural communities and activities that improve livelihood skills.

It also promotes funding for environmental, social and governance projects, including green projects that support sustainable and inclusive economic growth.

According to the BSP, banks are no longer required to set aside 10% of their loan portfolio for land reform beneficiaries and 15% for agricultural activities, as required by RA 10000 or the Credit Reform Act 2009 Agri-Agra.

The central bank explained that the new law gives banks greater flexibility in allocating the combined 25% compulsory credit quota to a range of borrowers in the agriculture, fisheries and reform sectors. agrarian.

In addition, banks that are unable to lend directly to beneficiaries in rural communities can contribute in other ways, such as debt and equity investment, agricultural value chain financing and granting loans to agribusinesses to finance agricultural and community activities.

In addition, the law provides a mechanism to fund capacity and institution building programs to improve competitiveness and productivity in agriculture and fisheries as well as in rural communities.

“The enactment of the new Agri-Agra and Rural Finance Act is a welcome and positive development as it will help the sector recover from the impact of the COVID-19 pandemic and other natural calamities through the private sector financing,” Medalla said.

Last year, loans disbursed by the banking sector for agriculture and land reform increased by 19.3% to P851.66 billion from P713.6 billion in 2020, but the industry has continued to fall below the prescribed threshold for the sector.

The banking system was only able to allocate about 10.65% of its total loanable funds, well below the 25% prescribed by the old law.

Total loanable funds generated by Philippine banks increased by 15% to P7.99 trillion last year from P7.14 trillion in 2020.

According to the BSP, loans granted by banks to the agricultural sector increased by 20.9% to reach 776.44 billion pesos for a compliance rate of 9.71% or below the required 15%.

Loans granted by banks for agrarian reform increased by 5.7% to reach 75.32 billion pesos. However, the amount was still below the prescribed 10% with a compliance rate of only 0.94%.

About Alexander Estrada

Check Also

Alexander Salter on National Economic Policy and Freedom

Many Americans believe that government has a responsibility to fight recessions. They should not. Politicians …