LENDERS INCUR penalties worth about P2 billion annually due to noncompliance with the mandated quotas under Republic Act 10000 or the Agri-Agra Credit Act of 2009, a central bank official said.

“On average, banks pay around P2 billion in penalties every year generally since 2011,” Bangko Sentral ng Pilipinas Supervisory Policy and Research Department Deputy Director Ma. Cynthia M. Sison said in an online briefing on Thursday.

BSP data showed loans qualified under the agricultural segment of the Agri-Agra Law stood at P642.371 billion as of end-December 2020. This was only 9% of banks’ P7.136-trillion loanable funds, falling short of the 15% requirement.

Meanwhile, banks lent P71.228 billion under the agrarian reform segment, which was only 1% of their loanable funds in 2020 and below the 10% quota in the law.

Lenders have been opting to pay penalties instead of extending credit due to the risks associated with lending to the agriculture and agrarian reform sectors.

BSP Governor Benjamin E. Diokno cited factors for the low compliance such as difficulty from the borrowers’ part to secure agrarian reform credit; limited availability of agri-agra compliant debt securities; and the lack of visible bankable agricultural projects.

“For this year, the BSP, Department of Agriculture, Department of Agrarian Reform, Agricultural Credit Policy Council and other relevant agencies will continue to push for the enactment of comprehensive amendments to the Agri-Agra Law,” Mr. Diokno said.

In March 2020, House Bill No. 6134, which contained these amendments, was passed on third reading and was transmitted to the Senate. Its counterpart Senate Bill 1924 is pending at the committee level.

Both measures include more projects for compliance with the mandated credit for the agriculture and agrarian (agri-agra) reform sectors.

The BSP this month released Circular No. 1111 which expanded eligible agri-agra loans to include those for activities related to the agricultural value chain, from farming, fishing, as well as other processes involved in converting an agricultural product from raw material to its consumption form.

It also included communities and integrated development made up of farmers who were granted land or benefited from redistributed land through previous agrarian reform programs as possible loan beneficiaries.

Mr. Diokno said the amended implementing rules and regulations of the Agri-Agra Law are only “interim measures”, adding that they will continue to push for direct revisions to the law. — L.W.T. Noble