A SENATE bill is seeking to expand banks’ agricultural and fisheries lending to include other related activities to address the industry’s failure to meet its lending quotas to the sector.

Senate Bill No. 1361, which will become the Rural Agricultural and Fisheries Financing System Act, sought to also create a special fund for capacity-building and other related programs.

The proposal addresses challenges in the sector such as “accessing formal credit owing to issues on bankability of projects, lack of technical expertise of financial institutions in agriculture financing the high levels of risk exposure in the sector,” Senator Juan Edgardo M. Angara said in the explanatory note.

The bill will require all banks, both public and private, to set aside at least 25% of their total loanable funds for agricultural and fisheries financing system. This quota conforms to the requirements of the Agri-Agra Law (Republic Act 10000) but will authorize lending to more activities like mechanization, agri-tourism, green finance projects, public rural infrastructure, and livelihood skills enhancement.

Banks may also comply with the credit quota by lending to rural community beneficiaries, investing directly in rural financial institutions, or opening deposit accounts with rural financial institutions, among others.

The Bangko Sentral ng Pilipinas (BSP) will be authorized to impose administrative sanctions or penalties worth 0.5% of extent of non-compliance or under-compliance, or as prescribed by the BSP Monetary Board.

Mr. Angara proposed to establish the Agribusiness Management Capacity and Institution-Building Fund.

This will finance agricultural- and fishery-related activities as well as educational grants, which may take the form of scholarships or research grants, to public and private school students.

The initial P10-billion fund will be sourced from the penalties collected for under-compliance.

“In case of a shortfall, the banks shall contribute a maximum amount of P2 billion, which shall be chargeable against future penalties,” the bill provided.

It will be managed by the Agricultural and Fisheries Finance and Capacity-Building Council, led by the Department of Agriculture and composed of the BSP, the Department of Agrarian Reform, Department of Trade and Industry, Cooperative Development Authority, the Land Bank of the Philippines, Development Bank of the Philippines and nine representatives from the private sector. — Charmaine A. Tadalan