Lenders’ agri-agra compliance remains low

BANKS ‘COMPLIANCE with mandatory credit quotas for the agriculture and land reform sector has shown “no improvement” as loans for these sectors remain limited, a member of the Monetary Council said.

V. Bruce J. Tolentino, a member of the Monetary Council of Bangko Sentral ng Pilipinas (BSP), said the central bank had pushed for changes to the Republic Act (RA) 10000 or the Law on the Republic (RA) 10000. the Agri-Agra credit of 2009 to include loans to those in the agricultural value. chain like compliance with quotas.

“There has been no improvement in compliance. Why? Because this law is difficult to respect. Republic 10,000 law stipulates that 25% of bank loanable funds should be allocated to agriculture… but our agricultural sector represents less than 25% of the economy, ”Tolentino said in a virtual media forum BSP Thursday.

The provisions of the law are production-oriented and do not take into account the entire agricultural value chain, he said.

“So when you look at distribution, manufacturing, processing, manufacturing – that’s not included in compliance,” Mr. Tolentino said.

“All aspects of the production chain must be covered so that the whole agro-industry can be served by the banking system,” he added.

BSP data showed that banks made 789.66 billion pesos in loans to the agriculture and land reform sector at the end of June, an increase of 13.6% from 695.06 billion. of credit pesos for the same period in 2020.

However, this only amounted to 10.63% of their total loanable funds during the period, still below the 25% mandated under AR 10,000.

The BSP said earlier that banks had paid around 2 billion pesos on average each year since 2011 due to their failure to comply with Agri-Agra law.

House Bill 1634, which provides for the extension of qualifying agri-agra loans, passed third reading in March 2020 and has been forwarded to the Senate. Its counterpart bill remains pending at committee level.

In March 2021, PASB through Circular 1111 declared that loans for activities involved in the agricultural value chain – from agriculture, fisheries, as well as other processes involved in the conversion of an agricultural product from raw materials to its form of consumption – will now be counted as agri -Agra credit.

Tolentino said the circular is an interim measure until the law is amended. – LWTN

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