Loans to housing sector eyed as agri-agra compliance

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) is open to making loans for housing as an alternative mode of compliance for banks to the Agri-Agra Credit Reform Act in order to address the country’s housing backlog.

Speaking at the Chamber of Real Estate and Builders’ Associations, Inc.’s (CREBA) Third Monthly Business Meeting, BSP Deputy Governor Diwa Guinigundo said reviewing the Implementing Rules and Regulations (IRR) of Republic Act (RA) 10000 or the Agri-Agra Credit Reform Act to include lending for housing as another mode of compliance is among the ways to address the country’s huge housing backlog.

This, as Guinigundo noted that banks rely on substitutionary compliance provided by RA 10000 given the slight difference in the value of banks’ loans for direct compliance and indirect compliance to the law.

RA 10000 mandates banks to set aside 25 percent of their loanable funds to the agriculture and fisheries sector, of which 10 percent has to be provided to agrarian reform beneficiaries.

The law provides the following alternative modes of compliance for banks: investment in bonds issued by the Development Bank of the Philippines and the Land Bank of the Philippines declared eligible by the Department of Agriculture (DA); subscription to shares of stock of accredited financial institutions such as the Quedan and Rural Credit Guarantee Corp. or the Philippine Crop Insurance Corp.; investment in special deposit accounts of rural financial institutions accredited by the BSP; wholesale lending to accredited rural financial institutions; rediscounting of agriculture and agrarian reform credits; loans for construction of farm-to-market roads and post-harvest facilities; and loans to warehouses or millers or wholesalers accredited by the National Food Authority.

Citing BSP data, Guinigundo said the value of loans extended by banks as direct compliance to RA 10000 reached P178.503 billion as of end-September 2014, while funds for alternative compliance amounted to P158.161 billion in the same period.

At present, he said, implementing agencies of RA 10000, namely the BSP, DA and Department of Agrarian Reform are undertaking a legal review of whether the use of the quota for housing and the education sector could be included in the IRR as an alternative compliance for banks.

“Because the compliance is small, perhaps because the demand is not big, there is scope for allocating these funds to the housing sector,” he said.

The BSP official said that in reviewing the IRR, and in looking at extending loans to the housing sector as an alternative compliance to the law, there are certain considerations.

“The inclusion of the housing sector as alternative compliance should not water down the original intent of the bill to make credit available for the agri-agra sector,” he said.

He said the impact of the revision to business operations of banks should also be looked into.

Aside from reviewing the IRR of the Agri-Agra Credit Reform Act, Guinigundo said other ways to address the housing backlog could include improving access to finance through the bond market for builders and developers, strengthening the government’s secondary mortgage institution, and are tapping other funding resources through the Real Estate Investment Trust Law as well as issuance of overseas Filipino workers’ bonds.

The CREBA had earlier proposed a package of reforms to address the housing backlog estimated at 5.5 million.