Banks given option for agri-agra compliance

MANILA, Philippines - Banks that fail to meet the mandated threshold under the Agri-Agra Reform Law could invest in accredited rural financial institutions (ARFI), the Bangko Sentral ng Pilipinas (BSP) said.

BSP Deputy Governor Nestor Espenilla said the BSP has accredited 10 rural banks certifying that the loan portfolio of the ARFI has complied with the requirements prescribed under the relevant law.

“Such exposure to the ARFI would be eligible for determining compliance with the agri-agra requirement for as long as the ARFI remains accredited with the BSP,” Espenilla said.

Banks accredited as ARFI by the BSP include Rural Bank of Kiamba, Producers Savings Bank, Rural Bank of Sta. Catalina, Philippine Resources Savings Bank, Rural Bank of Pilar (Bataan), Common Wealth Rural Bank, Rang-Ay Bank, Agri-Business Rural Bank, Rural Bank of Gattaran (Cagayan) and Rural Bank of Bay.

“Such accreditation is valid until sooner revoked for non-renewal or non-compliance with the qualification requirements prescribed under existing rules and regulations,” Espenilla said.

The Agri-Agra Reform Credit Act of 2009 retained the mandatory credit allocation in Presidential Decree 717 where 25 percent of banks’ total loanable funds are to be set aside for agriculture and fisheries in general, of which at least 10 percent should be made available for agrarian reform beneficiaries.

“Under existing regulations, the lending and/or investing bank is required to disclose in its Agri-Agra Report submitted to the BSP its exposure to the ARFI along with the corresponding Accreditation Reference Number of said ARFI, should such lending and/or investing bank intend to utilize its exposure for agri-agra compliance,” Espenilla said.

Latest data from the central bank showed loans extended for agriculture and agrarian reform surged 20.6 percent to P432.73 billion last year from P358.67 billion in 2014 but still fell short of the threshold mandated under the law.

The total loanable funds of the banking industry surged 32.2 percent to P2.84 trillion last year from P2.15 trillion in 2014.

Despite the increase, the combined allocation of loanable funds from agriculture and agrarian reform of 15.22 percent last year was way below the minimum threshold set by the law.

The BSP reported the loans extended by the banks to the agriculture sector amounted to P401.23 billion for a 14.11 percent compliance ratio or slightly below the required 15 percent.

Likewise, the compliance ratio of the banking system fell way short of the 10 percent threshold for agrarian reform credit as banks only extended loans amounting to P31.49 billion for a compliance ratio of 1.11 percent.

Last month, the BSP issued the guidelines and incentives to the agriculture sector to entice banks to extend credit to farmers and fisherfolks.

The guidelines on agricultural value chain financing is aimed at addressing the associated credit risks with the agriculture and fisheries sector by shifting the focus of lending from individual farmers and fisherfolks to the whole value chain.

The country’s agriculture and fisheries sectors have traditionally been significant contributors to the economy accounting for 10 percent of the domestic output as measured by the gross domestic product.