MANILA, Philippines?The Bangko Sentral ng Pilipinas has allowed all banks, including commercial and universal banks, to engage in direct lending to farmers.

At present, big banks lend to farmers through conduit banks, including rural banks.

The BSP said the move, which was approved during the meeting of the central bank?s Monetary Board last Thursday sought to boost lending to the agriculture sector, whose income is threatened by stiffer competition posed by the further lowering of tariffs on imports.

?We want to open up the opportunity to all banks to offer micro-agricultural loans. This is in line with the advocacy of the BSP to improve financial inclusion (which means making banking services accessible to as many people as possible),? BSP Governor Amando Tetangco Jr. said Friday.

Tetangco said banks, other than rural banks, that want to extend micro-agriculture loans must have the appropriate collection systems particularly for low-income individual borrowers and the required lending standards.

?You have to have the right technology to successfully engage in microfinance lending,? Tetangco said, noting that the process of collecting loans from individual borrowers was more tedious and costly than wholesale lending.

Microfinance lending involves the extension of a loan not more than P150, 000 to an individual borrower. It also extends loans with shorter tenors, such as six months, one month or even one week.

Tetangco said banks that wanted to engage in microfinance lending to farmers must set up guidelines in collecting loans to make sure delinquencies were minimized.

At present, only rural banks that are part of the MABS (Micro Enterprises? Access to Banking Services) program are allowed to extend direct loans to individual farmers.

The MABS is a program that aims to assist participating banks to be able to provide financial services (such as loans, deposit-taking, and money transfers) to micro enterprises and generating income from said activity. It is a joint program of the USAID and the Rural Bankers Association of the Philippines (RBAP), with oversight by Mindanao Economic Development Council.

?Now, we are no longer restricting banks from extending loans directly to the farm sector,? Tetangco said.

The agriculture sector accounts for about a fifth of the country?s overall production.