Senator Cynthia Villar said that the Agri-Agra Reform Credit Act of 2008 should be revised to boost its effectiveness in reaching the agricultural sector and promoting rural development.
This, she said, will strengthen the financing system to provide credit access and banking services to the rural communities.
Villar, chairperson of the Senate agriculture and food committee, said the proposed law allows a wider mode of compliance for banks to achieve a holistic approach to countryside development.
The amendment would remove the distinction between 15 percent for agriculture and 10 percent for agrarian reform beneficiaries (ARBs) in the banks’ portfolios.
It will also broaden the list of loan beneficiaries and activities that can be financed through bank loans or investments, as well as welcoming other alternative modes of compliance.
All banks, whether government or private, except newly-established banks from the effectivity of the law shall set aside a credit quota of at least 25 percent of their total loanable funds for agriculture lending.
For newly established banks, a five-year grace period is given within which no penalty shall be assessed.
Based on BSP data, banks have paid on the average P2 billion in penalties per year for non-compliance with the Agri-Agra Reform Credit Act.
The banks have extended a total of P713.6 billion in agri-agra credit as of end-December 2020.
Agri loans amounting to P642.4 billion accounted for only 9 percent of the 15 percent compliance requirement in agricultural credit.
On the other hand, agrarian reform credit extended by banks amounted to P71.2 billion, a mere 1 percent compliance ratio vis-à-vis the 10-percent requirement under the Agri-Agra law.