Local banks have paid billions in penalties for non-compliance with the Agri-Agra Reform Credit Act of 2009.
“On average, banks pay around P2 billion in penalties every year,” Maria Cynthia Sison, Bangko Sentral ng Pilipinas (BSP) Supervisory Policy and Research Department deputy director, said in a virtual briefing Thursday.
During the same briefing, BSP Governor Benjamin Diokno said banks have extended a total of P713.6 billion in agri-agra credit as of end-December 2020.
“Even with such an amount, banks were still unable to comply with the mandatory agri-agra credit,” he said.
Of the total loans extended by banks, P642.4 billion is accounted for by agricultural credit.
This amount, however, is about 9 percent of the compliance ratio and is below the 15-percent requirement.
Agrarian reform credit extended by banks to date amounts to 71.2 billion, a mere 1 percent compliance ratio vis-à-vis the 10-percent requirement under the Agri-Agra law.
Diokno attributed the low compliance to processing time-related to securities accreditation, borrowers’ difficulties in securing agrarian reform credits, limited availability of agri-agra complaint debt papers, and lack of visible bankable agricultural projects.
The BSP has teamed-up with the Department of Agriculture (DA), Department of Agrarian Reform (DAR), Agricultural Credit Policy Council, and several other government agencies to push for the amendments in the Agri-Agra law since last February amid these challenges.
The amendments in the implementing rules and regulations (IRR) of the law include expanding the modes of compliance, removal of accreditation requirement for debt securities to be considered as agri-agra eligible, allowing investments in shares of stock companies that are primarily engaged in qualified agricultural activities as eligible mode of alternative compliance, and promoting special lending arrangements that consider the holistic requirements of agricultural borrowers like agricultural value chain financing.
Prior to the amendment, debt securities are required to be accredited by the Agricultural Credit Policy Council.
Diokno said these amendments “consider the requirements of the broader agricultural ecosystem.”
“These are also envisioned to strengthen rural development and improve (the) well-being of agricultural and rural community beneficiaries,” he added. SOVEREIGNPH