THE CENTRAL BANK is looking to encourage lenders to build up their  sustainable loans by counting these as part of the mandated Agri-Agra credit,  Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said.

“We are looking for regulatory incentives that can be granted to banks that adhere to these principles. This includes our proposal to consider lending for green projects as compliance to the Agri-Agra requirements,” Mr. Diokno said in an online briefing on Thursday.

Under Republic Act 10000 or the Agri-Agra Reform Credit Act, lenders are required to allocate 25% of their loanable funds to the agriculture and agrarian reform sector.

However, compliance with the agriculture segment quota was only at 10.8% while the agrarian reform side only consisted 1.09% of banks’ total lending, both well below the 15% and 10% credit quotas, respectively. Mr. Diokno has said they observed banks would rather pay the 0.5% penalty instead of loaning to the sector which they perceive to be high risk and high cost.

The central bank chief said BSP Circular No. 1085 which lays out a sustainable finance framework for banks so far does not prescribe a minimum loan requirement for green and sustainable products.

“This will depend on the bank’s strategic objectives and risk appetite in relation to the adoption of sustainability principles,” Mr. Diokno said.

Lenders will be given three years to adapt to the provisions of the sustainable finance framework, which lays out the adoption of sustainability principles through environmental and social risk management systems.

So far, local banks have issued sustainability bonds worth $1.795 billion and social bonds totalling P21.5 billion, BSP data showed.

In 2019, 10.6% of the total loan portfolio of the banking system went to finance green and social projects that are in line with the Sustainable Development Goals of the United Nations, the BSP said. — L.W.T. Noble