Thu. May 26th, 2022
BSP says amended law will boost bank compliance and direct benefits to the agricultural economy.

Senate Bill No. 1924, or the proposed Rural Agricultural and Fisheries Financing Enhancement Act, which provides for an agriculture, fisheries and rural development financing system to improve the productivity, income, competitiveness and welfare of the rural community beneficiaries, such as farmers and fisherfolk, as well as their cooperatives, organizations and associations, through government and private banking institutions, passed the Senate on third and final reading.

The measure will repeal Republic Act No. 10000, or the Agri-Agra Reform Credit Act of 2009, which was initially designed to extend credit access to the agricultural sector.

The former law became controversial because the banking sector, fearing the cumbersome processing and collection process, and default by the debtors on the loans, was permitted the alternative compliance mechanism of investing in government securities such as treasury warrants that had no bearing on the agriculture and agrarian reform,

Most financial institutions were also allowed to just pay penalties for non-compliance. But worse, those penalties did not accrue to the agri-agra sector defeating the intent of the law.

Sen.  Christopher “Bong” Go, who co-authored SB #1924, said “Lalo na sa panahon ngayon na apektado ng krisis ang ating ekonomiya, ‘back to basics’ tayo. Nakita natin kung gaano kahalaga ang agrikultura sa ating bansa at kabuhayan. Mabilis pong maibabalik ang sigla ng ating ekonomiya kung palalakasin natin ang sektor ng agrikultura sa mga probinsya,”

Go highlighted that the existing law needs to be improved since farmers and fisherfolk remain a low-income, impoverished, high-risk sector due to the lack of means and mechanisms to add value to their products.

Under the proposed measure, all banking institutions, whether government or private, except newly-established banks, must now set aside a credit quota, or a minimum mandatory agricultural and fisheries financing requirement of at least 25% of their total loanable fund.

The total loanable funds generated by a banking institution will be defined by the Bangko Sentral ng Pilipinas.

Banks may also comply with the mandatory credit requirement by lending to rural community beneficiaries to finance agricultural and fishery-related activities, among others. The modes of compliance under the proposed measure will be subject to review by the Agricultural and Fisheries Finance and Capacity-Building Council.

An Agribusiness Management Capacity and Institution-Building Fund (Special Fund) shall also be established to finance agricultural and fishery-related activities, as well as other capacity- and institution-building programs. Penalties due from banks on their noncompliance or undercompliance with the mandatory agri-agra credit requirement will form part of the Special Fund.

Through reforms to the existing structure of the financial system for agricultural, fisheries and rural development, Go said that rural communities will have greater access to credit which will help improve their welfare, competitiveness, income and productivity, particularly for farmers and fisherfolk.

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