Thrift, rural banks back proposed tweaks to Agri-Agra credit quotas

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THE Agri-Agra Law requires banks to disburse 25% of their loanable funds to the agriculture and agrarian reform sector. PHOTOGRAPHER: VEEJAY VILLAFRANCA/BLOOMBERG

SMALL LENDERS expressed support for the central bank’s proposal to include sustainable financing as part of their compliance with the mandated credit under the Agri-Agra Law as this will help boost the capital of pandemic-hit businesses geared towards sustainability.

Rural Bankers Association of the Philippines (RBAP) President Elizabeth C. Timbol said allowing banks to count green loans as part of their Agri-Agra (agriculture and agrarian) compliance will broaden business opportunities for borrowers and farm owners.

“They will be encouraged to make their farms more productive. Also, by making their farms as tourism sites will help generate employment within their locality,” Ms. Timbol said in a Viber message.

She added the proposal can create a ripple effect in the economy amid job losses among Filipinos here and abroad amid the coronavirus pandemic.

Chamber of Thrift Banks (CTB) Executive Director Suzanne I. Felix also expressed support for the proposal.

“Green financing as a mode of compliance with Agri-Agra is a signal for banks to refocus their strategy towards sectors and activities that support sustainable recovery, and should provide various opportunities for them,” she said in an e-mailed reply to questions.

Ms. Felix said they also support House Bill 6134 which seeks to amend the Agri-Agra Law to include green finance projects as compliance with the credit quota. The bill has been approved by the House of Representatives and was received by the Senate in March.

Meanwhile, Senate Bill 1585 filed on June seeks to amend the Agri-Agra Credit Act by including investments and grants for agriculture activities as part of the mandated credit. It also seeks to remove the distinction between agriculture and agrarian reform lending and to include fishery activities, agriculture mechanization, agri-tourism and green finance projects as part of compliance. The bill is still pending in the Senate.

“We trust that legislation on Agri-Agra lending will continue to be adjusted to realistic levels, for the good not only of the farmers but of the Filipino people. Instead of imposing penalties, we earlier proposed the granting of incentives to encourage banks to lend to the Agri-Agra sector,” Ms. Felix said.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno last week  said they are looking at counting financing for green and sustainable projects as compliance with Republic Act 10000 or the Agri-Agra Reform Credit Act.

The law requires banks to disburse 25% of their loanable funds to the agriculture and agrarian reform sector in a bid to boost productivity and growth.

Mr. Diokno said they observed banks would rather pay the 0.5% penalty instead of complying with the agriculture and agrarian reform lending quotas of 15% and 10%, respectively, as these sectors are considered high risk. Banks’ credit to the agriculture and agrarian reform segments were only at 10.8% and 1.09%, respectively, of their total loan book, he added.

In May, the BSP issued Circular No. 1085 which lays out a sustainable finance framework for banks. Lenders will be given three years to streamline their operations in accordance with the framework, which is based on sustainability principles through environmental and social risk management systems.

BSP data showed 10.6% of the banking system’s total loans in 2019 were disbursed to finance projects that are in line with the Sustainable Development Goals of the United Nations. — Luz Wendy T. Noble

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