MANILA, Philippines - The Philippine Chamber of Commerce and Industry (PCCI) wants lending to the agriculture sector and agrarian reform beneficiaries solely in the hands of government financial institutions (GFIs) as banks are unable to comply with the mandated level of loans to the sectors by law.
PCCI president Alfredo Yao, whose group controls mid-sized lender Philippine Business Bank, told reporters banks find it difficult to comply with Republic Act (RA) 10000 or The Agri-Agra Reform Credit Act of 2009.
The law mandates banks to set aside 25 percent of their loanable funds to the agriculture and fisheries sector, of which 10 percent will have to be provided to agrarian reform beneficiaries.
While banks are able to lend to the agriculture and fisheries sector, he said there is not much demand from agrarian reform beneficiaries.
“For agri-agra, banks cannot comply. The agri (part) is complied mostly but for agra, banks cannot comply. Who will we lend to for agra? It (mandated level) is high,” he said.
Aside from lending to the agri-agra sectors, banks are also mandated to lend to other sectors such as micro, small and medium enterprises (MSMEs).
Under RA 9501 or the Magna Carta for MSMEs, banks are required to allocate another 10 percent of their loan portfolio to MSMEs.
“For lending to MSMEs, it is manageable… It is the agri-agra we can’t comply with,” Yao said.
The compliance to mandated loan levels to certain sectors is also made difficult as banks have to be prudent in lending with the Bangko Sentral ng Pilipinas implementing banking rules on safety standards.
As such, Yao said lending to the agrarian reform beneficiaries and even the agriculture sector would be best left with GFIs such as the Land Bank of the Philippines (Landbank).
“That is the mandate of the Landbank. It should be them lending to that sector,” he said.
If lending to the agri-agra sector cannot be done by GFIs alone, he said the government must make it easier for banks to comply with the law by providing other alternative forms of compliance.
Under the law, banks are not restricted to lending to the agri-agra sectors, but may also extend loans to accredited rural financial institutions, which would re-lend the funds to the target markets.