BSP urged to give banks leeway for agri sector

posted January 30, 2017 at 12:01 am
by  Rio N. Araja
CAMARINES Sur Rep. Luis Ray Villafuerte is urging Bangko Sentral ng Pilipinas to give more leeway to banks to enable them to comply with the Agri-Agra Law.

“I understand that banks are having a hard time complying with the provisions of the law because of the status of the credit worthiness of our farmers, who cannot meet the collateral requirements for loan applications. As for the agrarian reform communities, most banks, even rural banks, do not want to accept the certificates of land ownership awards as collateral,” he said.

He said the BSP should allow more alternative forms of compliance to encourage banks to comply with the provisions of the Agri-Agra Law or Republic Act 10000.

He reacted to reports that loans extended by banks to the agriculture sector in the first nine months of 2016 amounted to P405.78 billion for a 12.96-percent compliance ratio or below the required 15-percent. 

The compliance ratio of the banking system also fell way short of the 10-percent threshold for agrarian reform credit, he said, adding the banks extended loans amounting to only P29.98 billion for a compliance ratio of a paltry 0.96 percent.

Villafuerte noted while the Duterte administration had scored a “very good” satisfaction rating of +61 in the 2016 fourth quarter survey of the Social Weather Stations, its efforts in “ensuring that no family will ever be hungry” was a mere “good” at +34, which was down from a “good” grade of +37 in the September survey.

Its efforts in “fighting inflation” was only “moderate” at +25 in the fourth quarter, which was a grade down from “good” at +33 in September.

Such tracking poll results would only indicate the government must make initiatives to strengthen the farm sector and stabilize food prices, Villafuerte said.

He said the BSP could consider the recommendation of the Bankers’ Association of the Philippines to allow banks to enter into a public-private partnership that would benefit the agriculture sector as part of their compliance with the mandated agri-agra loan threshhold.

Land Bank of the Philippines president Alex Buenaventura has also come up with a proposal

to partner with commercial banks to help small farmers establish “corporatives” as another alternative, he added.

Under the Agri-Agra Law, 25 percent of the banks’ total loanable funds must be set aside for agriculture and fisheries in general, of which at least 10 percent should be made available for agrarian reform beneficiaries.

The old law, Presidential Decree 717, allowed bank loans for the housing and education sectors as alternative forms of compliance.

But the revised law, Republic Act 10000, has limited the alternative forms of compliance to borrowers who intend to use their loans for initiatives that shall also benefit the agriculture sector.

Under RA 10000, the BSP has put in place a stricter monitoring system to oversee compliance and  imposed penalties on banks that fail to meet the law’s provisions, which led many lending institutions to opt to just pay the penalty.

“The government has chronically failed to boost farm yields, let alone attain self-sufficiency in major crops, such as palay, because of insufficient irrigation supply and lack of credit facilities available to small farmers,” Villafuerte said.

Topics: Bangko Sentral ng Pilipinas , BSP , Camarines Sur Rep. Luis Ray Villafuerte , Agri-Agra Law
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