Yap lauds House move to strengthen Agri-Agra Law

Agriculture Secretary Arthur Yap over the weekend hailed the approval by the House committee on agriculture of a measure that would compel banks to pump more loanable funds into the farm and fisheries sectors.

Yap thanked Palawan Rep. Abraham Mitra for facilitating the approval of amendments to the three-decade old Presidential Decree 717, otherwise known as the Agri-Agra Law, which mandates banks to make available at least 25 percent of the total loanable funds to the agriculture sector.

“With the timely action of the committee on this urgent legislative measure, we are inching closer to seeing Congress eventually pass a new law that will be an effective instrument to ease the tight rural credit squeeze and help our farmers fight off the negative impact of the global financial crisis,” he said.

Yap said Mitra, chairman of the House agriculture committee, was “correct in pointing out that the Agri-Agra Law, in its present form, is a weak law without teeth or compelling force.”

The Agri-Agra Law mandates that at least 25 percent of banks’ total loanable funds should be made available to the agriculture sector, 15 percent of which is for agriculture stakeholders, and the 10 percent balance for agrarian reform beneficiaries.

Panel members voted to endorse the bill, which calls for a more sensitive penalty scheme.

According to Mitra, it is more responsive to the degree of a bank’s non-compliance without “being too punitive at one percent of non-compliance.”

“While the total compliance of banks to the law was P91 billion short of that mandated, the collected penalties (due to non-compliance) for 2007 stood at a measly total of P 26.51 million,” he said.

This figure, he said, is “not even a percent of the gap between mandated and actual compliance – a mere 0.00029 percent to be exact.”

He added that with the credit gap in the farming sector standing at a whopping P157 billion at the end of 2007, some 1.68 million farmers were forced to run to informal sources of funds to acquire loans.

The bill likewise provides that 90 percent of the collected penalties go to the Agricultural Guarantee Fund Pool to strengthen the country’s guarantee system and protect banks from the risks of lending.

The Department of Agriculture-backed measure provides for a review mechanism after five years of the law’s implementation to allow the DA, the Department of Agrarian Reform and the Bangko Sentral ng Pilipinas to assess whether the law has achieved its purpose.

Both Mitra and Yap agreed that amendments to the Agri-Agra Law have now become an “utmost necessity” in the wake of the ongoing financial crisis sweeping across the globe, which could prompt banks to further tighten their lending to the agriculture sector.

Mitra said the Food and Agriculture Organization had warned nations against overlooking the possibility of another food crisis in its preoccupation with the current chaos in the financial markets.

Yap said the emergency program that the government is mapping out to check the looming global recession will have to address the anemic private investments in agriculture, a job-generating sector that accounts for nearly a fifth of the country’s Gross Domestic Product.

He added that greater investments from the banking sector will enable the government to sustain and even boost the growth momentum of Philippine farms, and overhauling the alternative programs in the Agri-Agra Law could attain this.