Agri-Agra Law changes to free up more funds

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) said farmers, fisherfolk, and micro, small, and medium enterprise (MSME) in the agriculture, agribusiness, and related sectors are expected to get a shot in the arm once the amendments to the mandated threshold for agriculture and agrarian reform lending are enacted.

BSP Governor Benjamin Diokno made the statement after Senate approved Senate Bill 2494 or the amendments to Republic Act 10000 or the Agri-Agra Reform Credit Act of 2009 on Feb. 2.

The House of Representatives approved its version via House Bill 6134 on third and final reading in March 2020.

The next in the legislative process are bicameral proceedings.

“The Agri-Agra bill will strengthen rural development through a holistic approach in addressing the financing needs of the agricultural financing ecosystem,” Diokno said.

A priority legislative measure of the BSP, the proposed amendments to the Agri-Agra bill seek to improve the creditworthiness of agricultural workers and their enterprises by enhancing their capabilities, modernizing their business operations, and integrating them into profitable domestic and export-oriented value chains.

Under the current law, banks are mandated to set aside 15 percent of total loanable funds for agriculture and another 10 percent should be made available for agrarian reform beneficiaries as mandated under Presidential Decree 717.

As of end September last year, loans disbursed by the banking sector for agriculture and agrarian reform jumped by 21.4 percent to P804.16 billion from P662.62 billion in the same period in 2020, but the industry continued to fall short of the mandated threshold for the sector.

BSP data showed the banking system was only able to allocate about 10.73 percent of its total loanable funds during the nine-month period, way below the 25 percent threshold.

Total loanable fund generated by Philippine banks went up by 15 percent to P7.49 trillion in end September last year from P6.51 trillion in end September in 2020.

According to the BSP, the loans extended by the banks to the agriculture sector surged by 21.2 percent to P735.24 billion from P606.79 billion for a 9.81 percent compliance ratio or below the required 15 percent.

On the other hand, loans for agrarian reform extended by banks also jumped by 23.4 percent to P68.93 billion from P55.84 billion. However, the amount still fell short of the mandated 10 percent with a compliance ratio of only 0.77 percent.

The BSP earlier said banks paid around P2 billion on average in penalties annually since 2011 due to their noncompliance with the Agri-Agra Law. In fact, the industry shelled out P13.4 billion between 2011 and 2018 to settle fines.