Agri-Agra loans from banks total P848 B at end of June – Manila Bulletin

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Bank lending to the agricultural sector through compulsory credits amounted to 847.95 billion pesos at the end of June this year, up 7.4% from the same period last year of 789, 66 billion pesos, based on the latest Bangko Sentral ng Pilipinas (BSP) data.

The amount was less than the compulsory credit allocated as agricultural loans in the now revised Agri-Agra Act. Under the previous law, banks are required to set aside 25% of their loan portfolios for agriculture and fisheries. Ten percent of this portion is specifically for lending related to land reform and the remaining 15 percent is for agriculture-related projects.

The Agri-Agra Act or the “Agricultural Credit Reform Act of 2009” was recently revised as Republic Act No. 11901 or the “Strengthening Agriculture, Fisheries and rural development”. BSP is currently preparing rules and regulations to implement the revised Agri-Agra Act. RA No. 11901 became law on July 28, 2022.

Photo by the Ministry of Agriculture / DA

The BSP said banks are no longer required to allocate 10% of their loan portfolio to land reform beneficiaries and 15% to agricultural activities. Instead, the law now offers banks “greater flexibility in allocating the combined 25% compulsory credit quota to a range of borrowers in the agricultural, fisheries and reform sectors. agrarian”.

The new law expanded agricultural credit and rural development financing to include agrotourism, digitization of agricultural activities and processes, public rural infrastructure, programs that promote the health and well-being of rural communities, and activities that improve livelihood skills. It also promotes funding for environmental, social and governance projects, including green projects that support sustainable and inclusive economic growth.

Of the 847.95 billion pesos, direct bank compliance totaled 436.07 billion pesos while alternative compliance under the law amounted to 411.89 billion pesos during the period. Based on BSP data, banks should have lent P822.34 billion as direct compliance and P1.23 trillion as alternative compliance under the previous Agri-Agra Act.

At the end of June, banks’ compliance with the Land Reform Credit, which is expected to be 10% of their total loanable amount of 8.22 trillion pesos, was just 0.78%. Meanwhile, the percentage or ratio of compliance with the 15% of other agricultural credits was only 9.53%.

Major banks or universal and commercial banks released 796.59 billion pesos of Agri-Agra loans at the end of June, up 7.6% from the same period in 2021 of 740.32 billion pesos.

Loans from savings banks to the agricultural sector and enterprises linked to the agrarian reform also increased by 9.06% to reach 22.73 billion pesos against 20.84 billion pesos. Lending by small rural and cooperative banks was little changed, increasing only 0.45% to 28.63 billion pesos from 28.50 billion pesos.

Last week, BSP released proposed rules and regulations that will govern mandatory funding for agriculture, fisheries, and rural development (AFRD) under the revised law. A better Agri-Agra law should improve banks’ compliance with the law in terms of amounts lendable to relevant sectors. The amendments expand the land reform sector’s access to bank financing and also streamline the process for banks to invest in Agri-Agra eligible securities.

BSP Governor Felipe M. Medalla said in the draft circular that BSP expects banking institutions to design and offer financial products and services that meet the specific needs of their agricultural clients, taking into account their cash flow and the gestation and harvest period of farming. product, activity and project financed. AFRD financing refers to loans and investments intended to increase the productivity and competitiveness of the agricultural sector and to finance the sustainable development of rural areas.

State-owned banks Land Bank of the Philippines and Development Bank of the Philippines will continue to be important sources of credit for rural communities through basic deposit accounts and by offering low-interest loans. Meanwhile, credit unions, microfinance institutions, retail banks, rural and savings banks will also apply minimum interest rates for wholesale loans obtained from government banks.

The proposed rules and regulations are also expected to improve the access of rural communities and farming and fishing households to financial services and programs. More credit results to productivity, market efficiency and modernization.

Funding will be provided for the following activities: off-farm/fishery entrepreneurial activities; agricultural mechanization/modernization; agritourism; environmental, social and governance projects, including green projects; land acquisition permitted under the Land Reform Code of the Philippines and its amendments; digitization/automation of agriculture, fisheries and agro-industry activities and processes; and for the efficient and effective marketing, processing, distribution, shipping, logistics and storage of agricultural and fishery products.

Loans and investments will also extend to public rural infrastructure as well as programs that: promote the health and well-being of farmers, fishers and beneficiaries of land reform or ARB; and to meet the development needs of rural communities, such as, but not limited to, projects that promote livelihoods, skills enhancement and other capacity building activities of rural community beneficiaries.

The draft circular will also require banks to lend and invest in activities identified under the Agribusiness Modernization Credit and Finance Program (AMCFP), such as agricultural and fisheries production, acquisition of draft animals, agricultural and fishery equipment and machinery, as well as the acquisition of seeds, fertilizers, poultry, livestock, animal feed and other similar items.

The supply of agricultural and fishery products for storage, trade, processing and distribution and the acquisition of water pumps and the installation of tube wells for irrigation as well as the construction, acquisition and repair production, processing, storage and transport facilities, among others, are also activities under the AMCFP.

It also includes other funding such as: working capital for agriculture and fisheries, agro-industrial activities that support soil and water conservation and ecology improvement activities; privately funded irrigation systems and LGUs that are designed to protect the watershed; working capital for long-term projects; and credit guarantees on unsecured loans to farmers and fishers.

Medalla said PASB will effectively and efficiently implement RA 11901 to help the agriculture sector recover from the impact of the pandemic and other natural calamities through private sector funding.

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