Lending quotas for agriculture to be eased under Senate bill
A MEASURE amending the law setting quotas on bank lending to the agriculture and agrarian reform sectors has been filed in the Senate.
Senate Bill No. 1585, filed by Senator Cynthia A. Villar, will amend the Agri-Agra Credit Act of 2009 to include investments and grants for agriculture activities that will improve productivity.
At present, the law requires banks to set aside 25% of their total loanable funds, with at least 10% set aside for agrarian reform beneficiaries.
Ms. Villar said banks typically comply with the 25% requirement by subscribing for shares of stock or investing in special deposit accounts offered by accredited rural financial institutions.
“The Bankers Association of the Philippines explained that its members usually gravitate towards alternative modes of compliance with less risk exposure and are seeking alternative ways to comply with the requirements,” she said in the bill’s explanatory note.
The bill will also remove the distinction between agriculture and agrarian reform lending for a more inclusive financing system.
In addition to existing alternatives, the bill will allow financial institutions to comply through investing in shares of the Philippine Crop Insurance Corp. or lending to agri-business enterprises that engage directly with rural community beneficiaries.
Ms. Villar is also seeking to expand the category of projects that may be financed through bank loans or investment to include fishery activities, agricultural mechanization, agri-tourism and green finance projects, among others.
Other eligible activities, such as the promotion of agribusiness and the acquisition of work animals, farm and fishery equipment and machinery, are currently covered by the Agri-Agra law.
The bill provides for non-compliance fines of 0.5% of the amount below the quota, or rates to be otherwise prescribed by the central bank’s Monetary Board.
Ten percent of the penalties collected will be retained by the central bank while the rest will be remitted to a special fund that will be managed by the Agriculture, Fisheries, and Rural Development Financing Policy Council.
The program will build capacity and institutional know-how for banks and their clients in rural areas. It will also promote the titling of agrarian reform land, and extend credit to cooperatives or associations. — Charmaine A. Tadalan
