Bare Truth by Rose de la Cruz
Bare Truth

When did banks meet their agri- agra quota?

Jan 4, 2022, 11:34 PM
Rose De La Cruz

Rose De La Cruz

Columnist

BACK in the days while I was covering the then Departments of Agriculture and Natural Resources or DANR--(which means since the time of the dictator Ferdinand Marcos, whose namesake is running for the same high post) and the Department of Agrarian Reform, never had the commercial, rural and cooperative rural banks met their targets of allocating 25 percent of their loanable funds to agriculture and agrarian reform.

But why should they—is the usual question I encounter. Farmers and agrarian reform beneficiaries are not bankable individually and most of them are just tenants and not farm owners. The banks since time immemorial require collaterals (basically farmlands) for loans to be granted to the sector.

But let me be frank in saying that they would loan billions in a jiffy to traders, millers, viajeros and importers because they have sure bucks to pay for such loans.

Republic Act No. 6389, (Code of Agrarian Reform) and RA No. 6390 of 1971—both enacted under Marcos who assumed the presidency in 1965 to 1986 -- created the Department of Agrarian Reform and the Agrarian Reform Special Account Fund. It strengthens the position of farmers and expanded the scope of agrarian reform.

But the law that mandated government and private banks to allocate at least 25 percent of their total loanable funds to agriculture and agrarian reform beneficiaries was passed in 2009 or the Agri-Agra Reform Credit Act.

The law on comprehensive agrarian reform program (CARP) was first passed by the late President Corazon C. Aquino through Presidential Proclamation 131 and Executive Order 229 on June 22, 1987, and it was enacted by the 8th Congress of the Philippines on June 10, 1988.

Farm owners who opt to transfer their lands under CARP would be paid by Land Bank over time while farmers tilling the land were supposed to be given loan support by banks through the mandated 25 percent of their loanable funds.

BSP records show non-compliance

Lenders were not able to meet the required credit for the agriculture and agrarian (agri-agra) reform sectors in the July-to-September period, based on central bank data. But that has always been the case.

Banks disbursed loans worth P804.17 billion in the third quarter for the two sectors, according to preliminary data released by the Bangko Sentral ng Pilipinas (BSP), BusinessWorld said.

In the same period, total loanable funds stood at P7.493 trillion.

With the 10 percent agrarian reform and 15 percent agriculture credit required under Republic Act 10000 or the Agri-Agra Reform Credit Act of 2009, the minimum credit allocation was at P1.124 trillion.

Broken down, credit allocation for the agrarian reform sector amounted to P68.932 billion, which is only 0.92 percent of banks’ total loanable funds or way below the 10 percent quota.

Credit to the sector disbursed by big, thrift, and rural banks stood at P55.042 billion, P3.053 billion, and P10.837 billion, respectively. All have failed to meet the minimum required lending.

Compliance to agri lending falls

Meanwhile, compliance for the agriculture sector amounted to P735.241 billion or 9.81 percent of banks’ total loanable funds. This is short of the 15 percent minimum requirement.

Big, thrift, and rural banks did not meet the quota with financing to the sector during the period amounting to P700.148 billion, P16.944 billion, and P18.149 billion, respectively.

The central bank earlier said lenders pay about P2 billion on average in penalties every year since 2011 due to their noncompliance with the Agri-Agra law.

Expanding loan coverage

BSP officials have been pushing for amending the measure to include loans in the agricultural value chain as part of compliance with the quotas. This would include distribution, manufacturing, processing, and manufacturing, which are part of the agribusiness production chain.

In March, BSP issued Circular 1111 which allowed credit for activities that cover converting an agricultural product from raw material to its consumption form as part of the agri-agra compliance. It is seen as an interim measure while the law has yet to be amended.

House Bill 1634, which provides for the expansion of eligible agri-agra loans, was passed on third reading in March 2020 and was transmitted to the Senate. Its counterpart bill remains pending at the committee level.

Summary: Farmers—landed and tenants—have never had their fair share of the Agri-Agra law (requiring all banks including thrift and rural banks) to allocate 25 percent of their total loanable funds to the agriculture and agrarian reform beneficiaries. But never was this law complied with because banks never considered them creditworthy.

Tags: #BSP, #banksnevercompliedwithagriagralaw, #farmersatdisadvantageasalways, #agriculture


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