There is now a legislative proposal recognizing lender participation in a public-private partnership (PPP) project as alternative compliance to the oft-ignored agri-agra law, latest data of which show continuing dismal performance by an industry whose support has sorely been found wanting then and now by legislators.

The original idea was first floated by the influential Bankers Association of the Philippines (BAP).

Nacionalista Party Rep. Luis F. Raymund F. Villafuerte Jr. of Camarines Sur, member of the House Committee on Agriculture and Food, on Sunday urged the Bangko Sentral ng Pilipinas (BSP) to ease a putative rural credit squeeze by strictly enforcing bank compliance to the agri-agra law.

Legislators find it odd that no matter repeated regulatory support for greater financial inclusion across the economic sectors, the availability of loans in rural areas need a serious think through.

Villafuerte said the BSP should crack the whip on banks that abet the continued tight rural credit squeeze by failing to provide adequate agriculture and agrarian-reform loans and in this manner violate the letter and spirit of the agri-agra law.

“I understand that banks have a hard time complying with the provisions of the law because of the credit worthiness of our farmers, who cannot meet the collateral requirements for loan applications. As for ARCs (agrarian reform communities), most banks, even rural banks, do not want to accept the CLOAs (certificates of land ownership awards) as collateral. Thus, the BSP should allow more alternative forms of compliance to encourage banks to comply with the provisions of the agri-agra law,” he said.

Villafuerte, also vice chairman of the House Committee on Appropriations, issued the statement following a report quoting the BSP as saying the loans extended to the agriculture sector in the first nine months of 2016 amounted to P405.78 billion for a 12.96-percent compliance ratio. The law requires compliance of at least 15 percent.

According to the lawmaker, the bank-compliance ratio fell way short of the 10-percent threshold for agrarian-reform credit, as banks extended loans amounting to only P29.98 billion, for a compliance ratio of a paltry 0.96 percent.

Villafuerte said this compels the BSP to allow for more alternative ways for banks to comply with the agri-agra law and encourage these institutions to lend more to the agriculture sector instead of merely paying fines for their continued noncompliance.

He said the BSP may also consider the recommendation of the BAP to allow banks to enter into PPPs, provided these are for projects that would benefit the agriculture sector, as part of their compliance to the mandated agri-agra loan threshold.

He said Land Bank of the Philippines President Alex V. Buenaventura has came up with a proposal for commercial banks to partner and help small farmers establish “corporatives” that the BSP may also allow as an alternative form of compliance.

Under the agri-agra law, 25 percent of the banks’ total loanable funds must be set aside for agriculture and fisheries in general, of which at least 10 percent must be made available to agrarian-reform beneficiaries.

Presidential Decree 717 recognize bank loans to the housing and education sectors as alternative forms of compliance.

But the revised law—Republic Act (RA) 10000­—limited the alternative compliance to borrowers who intend to use their loans for initiatives that will also benefit the agriculture sector.

Under RA 10000, the BSP put in place a stricter monitoring system to ensure compliance and imposed penalties on banks that fail to meet the provisions, which led many lending institutions merely to pay the penalty than take the
risk.

29 January 2107