BSP to help banks comply with agri-agra lending

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is looking at further expanding the list of eligible investments to help banks comply with the mandated threshold for agriculture and agrarian reform loans.

BSP Governor Benjamin Diokno said the regulator is looking at including the issuance of green bonds by banks as a way of complying with Republic Act 10000 or the Agri-Agra Reform Credit Act of 2009.

“We want the list of eligible investments to be expanded,” he said.

The BSP chief said the issuance of bonds for specific depressed areas could also be considered as a form of compliance with the mandated threshold for agri-agra loans.

RA 10000 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.

Diokno said the mandated lending hinders the entry of more foreign banks in the country.

“That’s additional tax on them. Your option is the entire world, so why would you go the Philippines if that’s the situation,” he said.

Banks continued to fall short of the mandated threshold for agriculture and agrarian reform loans despite the 18.9 percent increase in the first quarter.

Latest data showed the banking system was able to set aside a total of P711 billion in loanable funds for agriculture and agrarian reform credit under RA 10000, higher than the P597.94 billion disbursed in the period last year.

The total loanable funds of the banking industry increased by 15.3 percent to P4.96 trillion as of end-March from P4.3 trillion in end-March last year.

Despite the increase, the combined allocation of loanable funds for agriculture and agrarian reform of 14.33 percent in the first quarter was way below the minimum threshold set by the law.

The BSP reported the loans extended by banks to the agriculture sector amounted to P652.97 billion for a 13.16 percent compliance ratio or 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 P58.03 billion for a compliance ratio of 1.17 percent.

BSP is pushing for the amendments to the agri-agra law as it continues to punish banks through penalties for failing to meet the thresholds of the mandated lending.