A bill to stimulate lending to the agriculture, fisheries and land reform sectors has passed its third and final reading in the Senate.
Senate Bill (SB) 2494 or the Strengthening Agriculture, Fisheries, and Rural Development Funding Act of 2022, certified urgent by President Rodrigo R. Duterte, seeks to amend the law of the Republic (RA) 10000 or the Agri-Agra Credit Reform Act 2009.
All banking institutions, with the exception of newly created banks, must, for five years from the start of their operations, reserve at least 25% of their total loanable funds for sectors related to agriculture and fisheries.
RA 10000 specifies credit quotas of 15% for agriculture and 10% for land reform beneficiaries.
The central bank said lenders have paid an average of 2 billion pesos in penalties a year for failing to meet these credit quotas. He said banks would rather pay penalties than lend to these sectors because they are considered risky.
Under SB 2494, banks are expected to design and offer financial products and services tailored to the specific needs of agricultural customers, taking into account their cash flows and production cycles.
The bill also includes special loan agreements for agribusinesses with qualified agricultural borrowers and agricultural value chain financing, which cover the production, distribution, manufacturing and processing of agricultural products.
Banks can meet the credit quota by lending to beneficiaries in rural communities to finance agricultural and fishing-related activities, as well as by investing in securities whose proceeds are intended to finance such activities.
Other modes of compliance include opening deposit accounts or investing in fixed-term deposit products of rural financial institutions (RFIs), direct investment in RFIs, loans for construction and modernization of agricultural infrastructure, the granting of credit to agri-food companies with a supply of basic products. -Chain arrangements with beneficiaries from rural communities, as well as engagement in sustainable finance.
The Bangko Sentral ng Pilipinas (BSP) may also identify other activities that will be eligible under the quota and is responsible for monitoring and reporting on banks’ compliance with the measure.
Administrative penalties and other penalties will be calculated at one-half percent or at rates prescribed by the PASB Monetary Board, 10% of the penalties collected will be retained by PASB to cover administrative expenses, and 25% will be returned to the General Fund. .
Under RA 10000, 90% of the penalties collected must be allocated according to the needs of the agri-agra sector, and the remaining 10% is paid to the BSP to cover administrative costs. — NOT