THE Bangko Sentral ng Pilipinas (BSP) is looking to amend the Agri-Agra Reform Credit Act of 2009 (Agri-Agra Law) in order to better support the agriculture sector, with banks still resisting the law’s lending quotas, preferring instead to pay penalties for non-compliance.

BSP Governor Benjamin E. Diokno said the central bank is backing amendments that widen the range of eligible rural beneficiaries and agricultural activities that can be lent in order to meet the quotas.

The central bank said loans to the agriculture and fisheries sector as a proportion of banks’ loan portfolios declined to 2.45% at the end of May, from 12.27% in 2010.

“Since the enactment of the Agri-Agra Law in 2009, the BSP has been able to collect from banks a total of P10.3 billion in penalties for under or non-compliance with the mandated agri-agra credit,” Mr. Diokno said in a briefing Thursday.

Mr. Diokno said banks would rather pay the 0.5% penalty instead of granting credit to the agriculture and agrarian reform sectors.

“Banks justify this on the basis of the perceived high risk, high cost of lending to the agricultural and agrarian reform sector,” he said.

The BSP said it will back the creation of an agri-business management capacity and institution-building fund to improve the productivity, income potential and the bankability of farmers and their enterprises and households.

Under the Agri-Agra law, 25% of banks’ total loanable funds should be extended to the agriculture and agrarian reform sector. However, in 2019, compliance with the agriculture loan quota was 10.8%, while agrarian reform lending was 1.09%, both significantly below quota.

The agriculture sector accounted for about 9.2% of gross domestic product in 2019, with gross value added at more than P1.78 trillion. — Luz Wendy T. Noble