BSP now allows use of agricultural free patent as collateral
MANILA, Philippines — Farmers who have continuously occupied and cultivated tracts of agricultural public land may now tap the central bank’s peso rediscounting windows to avail of funds, the Bangko Sentral ng Pilipinas (BSP) said.
BSP Governor Benjamin Diokno issued Circular No. 1072 removing the restriction on agricultural free patents as collateral for rediscounting loans through amendments to the Manual of Regulations for Banks (MORB).
Diokno said agricultural free patents are now accepted as underlying collateral for rediscounting loans after President Duterte signed Republic Act 11231 or the Agricultural Free Patent Act in February last year.
“A certificate of title issued by virtue of free patent may be accepted as underlying collateral for loans offered for rediscounting with the BSP in view of the passage of RA 11231, otherwise known as the Agricultural Free Patent Act,” the BSP chief stated in the circular.
Agriculture patents are land grants to farmers given title under the Public Land Act, especially those processing or cultivating the land and paying the taxes for 30 years.
The new law removed the restrictions on agricultural free patents under Commonwealth Act 141 or the Public Land Act of 1936, including the five-year prohibition on encumbrance and alienation as well as the five-year right to repurchase.
These restrictions give landowners no choice but to sell their land in the informal market at a cheaper price, resulting in higher revenue losses from taxes and fees on the part of the government.
Likewise, the previous prohibitions also deny access to formal credit market.
Rediscounting is a BSP credit facility extended to qualified banks with active rediscounting lines to meet their temporary liquidity needs by refinancing the loans they extend to their clients using the eligible papers of its end-user borrowers.
Loans from the peso rediscount window of the central bank jumped 71 percent to a record high of P122.17 billion last year from P71.52 billion in 2018.
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