BSP grants longer grace period for timber, fruit loans

GENERAL SANTOS CITY -- A Bangko Sentral ng Pilipinas (BSP) memorandum circular, growers of long-gestating crops, including fruit and timber tree species, are now entitled to a longer grace period for repaying loans used to finance these projects.

Under the new guidelines, banks and guarantee institutions are allowed to extend loans and guarantees with a grace period of up to seven years to viable, long-gestating agriculture and fisheries projects.

BSP Rafael Buenaventura signed Circular 217 last November.

"This is a welcome development," said Romy Francisco, treasurer of the Fruit Development Cooperative of Davao. "The government is realizing that in some agricultural sectors, you don't get results overnight."

"The new ruling came about through the strong efforts of the agriculture sector, particularly the tree growers, with the help of agencies like the DA and DENR," said Bonifacio Tamayo, vice president for Mindanao of the Development Bank of the Philippines (DBP).

The Banko Sentral directive is in line with Section 24 of the Agriculture and fisheries Modernization Act (AFMA), which states that projects with a long gestation period should have a commensurately longer grace period for repaying loans used to finance the projects, based on the economic life of the project.

The new guidelines will help clear up one bottleneck. The DBP, the Land Bank of the Philippines (LBP), and other government financing institutions have been allocated funding for long-gestating crops, but under the General Banking Act were restricted from lending at a grace period longer than three years.

Farmers have been held back from financing tree crops and other long-term crops through loans, since these would be maturing and the principal would have to be paid when no significant revenue could as yet be generated from the projects. The new ruling is expected to provide a window of opportunity for such crop growers.

The Network Rural Bank of the Southern Philippines is set to allocate 10 percent of its portfolio to long-gestating crop projects, particularly coffee, mango and palm oil, "now that the kinks have been ironed out," Alex Buenaventura, president of the Davao-based bank, said.

"We've had long-term credit lines which we deferred availing of, because of the unstable interest rates associated with the Asian financial crisis since mid-1997," he added.

However, the LBP pointed out that the effects of the new ruling might not be felt immediately.

When asked if the LBP would consider loans for smallhold farm projects, replied: "We will consider long-gestating crop projects of 10 hectares and below, provided these are feasible and viable."

The DBP would consider lending for such long-term projects on titled property, whose owner-grower is expanding an existing project, and who has other sources of income to sustain interest payments on the loan throughout the gestation period.

"If the loan is less the P500,000, say, we encourage the grower to band together with other growers in the same vicinity to avail of the loan, and to lessen supervisory costs," Tamayo said. "Repayment would still be on an individual basis, however."

The new grace period should benefit growers of common tree crops, including rubber, coffee, and palm oil; and fruit trees such as mango, durian, mangosteen and rambutan.

Other crop projects falling under the new guidelines may include industrial tree crops planted on private lands and used for intercropping purposes, as determined by the Department of Agriculture through the Agricultural Credit Policy Council, according to the BSP. This would include fast-growing timber species such as bagras and falcata. -- GEM