BSP backs changes to Agri-Agra law

The Bangko Sentral ng Pilipinas is backing the Agri-Agra Reform Credit Act to help ease credit access to small farmers and improve banks’ compliance rate for agrarian reform.

The law retained the mandatory credit allocation in which 25 percent of the banks’ total loanable funds shall be set aside for agriculture and fisheries, of which at least 10 percent shall be made available for agrarian reform beneficiaries.

“We support amendments to the law, “said Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi Fonacier.

Fonacier said amendments must be made to improve the compliance rate for lending to agriculture.

Data from BSP showed that the total banking system’s compliance rate for agrarian reform stood at P460 billion as of end-2017 as most banks opted to just pay the penalty of P5 billion instead of lending to farmers who are considered high-risk.

“BSP’s thrust is full compliance of the entire banking industry that is why we are having this enabling regulation to help banks comply. We are in favor of flexible allocation of the entire 25 percent for lending to agri and agra,” she said.

Funded by the Asian Development Bank, the study is expected to be released in the next six months.

“The results of the study can be a takeoff point for legislators to support the amendment,” Fonacier said.

BSP maintained that addressing the needs of the agriculture sector is crucial in the attainment of inclusive development and broadbased growth.

The central bank aims to promote agrifinancing through enabling innovative financing models, fostering cost efficiency of the design and delivery of financing through digitization and strengthening the agrifinancing infrastructure.