Filtered By: Money
Money

Law to free up P122B more in agri-agra loans


The government expects to unlock an additional P122 billion in agricultural fishery loans following the enactment of a measure that finally bars banks from skirting a requirement for them to funnel a quarter of their funds into farm loans. Citing data from the central bank, the Agriculture department said the extra funding would come from financing that banks used to put in nonagricultural investments as alternative compliance with the old Agri-Agra law. "The biggest chunk of this amount — equivalent to P104.034 billion or 63 percent of the nonagricultural-related compliance by banks with Presidential Decree 717 — went to development loans [such as] those given to hospitals and schools, local government units and proponents of socialized housing projects," the agency said. President Gloria Macapagal-Arroyo enacted last month Republic Act 10000 or the Agri-Agra Reform Credit Act of 2009, which eliminates nonagricultural alternative compliance with the law by repealing the presidential decree. Proposals to change the law were filed in Congress as early as 1987, "but none has managed to even pass committee-level public hearings," Agriculture Undersecretary Bernadette Romulo-Puyat said in a statement. "It is only now, or 23 years later… that an amendatory law passed through the Legislature," she added. While PD 717’s intentions were noble, banks circumvented their mandate for a fixed amount of agri-agra loans since these were allowed to engage in a list of nonagricultural investments or transactions considered as alternative compliance with the law, Puyat pointed out. Under the repealed law, banks were deemed to have complied with their 25-percent quota for agricultural loans if they used the money to instead invest in local government and Pag-IBIG bonds, development loans for housing, education or medical institutions, or zero coupon bonds of the Home Guaranty Corp. Banks were also allowed to invest their funds in other nonagricultural activities such as loans to microbusinesses and socialized or low-cost housing projects. These funds will henceforth go to rural credit, Puyat said, since RA 10000 has limited alternative compliance to the following: • wholesale lending to accredited rural financial institutions for retail lending to small farmers or fisherfolk or opening of special deposit accounts with rural financial institutions; • loans for agriculture infrastructure such as farm-to-market roads and post-harvest facilities; • investments in preferred shares of stock of rural financial institutions, including farmers’ cooperatives and mutual benefit associations; • Loans for activities under the government’s farm modernization credit program; and • Traditional agriculture-related alternative compliance modes such as investments in bonds of state banks RA 10000 also provides for stiffer penalties on banks that fail to lend to the farm sector. Before, banks were fined P1,000 to P30,000 daily depending on their asset size, rate and length of noncompliance. Now, banks must pay an amount equivalent to 0.5 percent of the loans that had not been loaned out to farmers. "This new penalty provision is simpler and more transparent," Puyat said. She noted that in 2007, penalties paid by banks reached only P26.59 million. "In contrast, if the new penalty under RA 10000 was already in effect that year, the penalty would have totaled P455 million based on the total undercompliance amount of P91 billion," she pointed out. Unlike before when penalties paid all went to the central bank, only a tenth will go to the Bangko Sentral ng Pilipinas. The balance will go to the Agricultural Guarantee Fund Program and Philippine Crop Insurance Corporation. "With this new law, even the penalty works for the benefit of the agriculture and agrarian reform sectors by buffering the guarantee funds used to secure loans for farmers and fisherfolk," Puyat said. — N.P. Aquino, GMANews.TV

LOADING CONTENT