The Agriculture department is seeking an amendment to the law that compels commercial banks to set aside a certain portion of their loan portfolios to the agricultural sector.
This after the banks are found to be just paying the penalty instead of complying with the provision of the Agrii-Agra Reform Credit Act, which compels banks to set aside 15 to the agricultural sector and another 10% for agrarian reform.
Disappointed with the implementation of the law, Agriculture Secretary William D. Dar said the way forward is to amend it as he has started discussing with lawmakers what could be done to modify it.
“There could be other schemes that will encourage commercial banks” to lend to the sector,” Mr. Dar said during a press conference here Saturday he added as the law in the present form compels commercial banks to lend 20% of their portfolios to the sector, or face a hefty penalty.
Based on news report, the banks paid about P6 billion in the last two years in penalties for not complying with the law.
Earlier, Eugene S. Acevedo, president of the Rizal Commercial Banking Corp., said that the Bankers Association of the Philippines has discussed a possible way to address the issue.
One key way is for the Bangko Sentral ng Pilipinas to allow the banks not only provide loans to the sector but also that their participation in funding the value chain for sector serves as their way of complying with the law. An example, he said, is when a bank funds a construction of the road that will benefit the farmers.
“I hope that there might an alternative compliance (mechanism to the law),” Mr. Acevedo said.
Mr. Dar said he has also asked the Land Bank of the Philippines (LandBank) to simplify the loan process so farmers can access fund from the government bank.
He said he brought the matter to the LandBank during a meeting of the board of directors, where he sits as its member, last week after taking notice that farmers shy away from borrowing from banks.
“Rest assured that in the next three months we can smoothen everything,” Mr. Dar said as he called on farmers to avail of the one-time loan from LBP that will provide them with a P15,000 per hectare funding payable in eight years without any interest rate.
The loan, he said, can only be accessed within the last quarter of the year, although he assured that there are other funds that farmers can access, including a bigger loan packages.
He said his appeal to the bank is part of the implementation of the law that eases the way business is being done in the country. Last year, the national government approved the Ease of Doing Business Act which seeks to correct the so-called bureaucratic red tape.
LandBank president Cecilia C. Borromeo said last month that the government-owned bank will intensify lending to the agricultural sector by increasing it to at least 20%.
Ms. Borromeo’s statement came about after President Rodrigo R. Duterte, during his state-of-the-nation address also last month, hit the bank for failing to lend to the sector.
Mr. Dar added that another source of money for the farmers is the P8 billion a year guarantee fund for the agricultural credit which the farmers can also access. “We have met with the Philippine Guarantee Corp. (PGC) (to discuss) that they increase the guarantee fund (for agriculture) and to make agricultural credit affordable and accessible,” he added.
Last year, President Rodrigo R. Duterte issued Executive Order 58 which merged the Philippine Export-Import Credit Agency and Home Guaranty Corp. and take away the guarantee functions of the Small Business Corporation and the administration of the Agricultural Guarantee Fund Pool and Industrial Guarantee and Loan Fund in forming the PGC.