To help spur agriculture, Bangko Sentral relaxes rules on lending

MANILA, Philippines—The Bangko Sentral ng Pilipinas (BSP) has relaxed rules for banks that lend to farmers to help spur growth of the agriculture sector.

In a Circular No. 817 published Thursday, the BSP said it had eased capitalization requirements for banks that offer micro-agri loans.

At the same time, the BSP also told banks to come up with well-defined policies covering micro-agri products to ensure “that details of the program can be communicated clearly to clients.”

Under the new rules, the provision that required banks to maintain a capital adequacy ratio (CAR) of 12 percent was deleted. The provision that limits micro-agri lending to banks with a Camels rating of “3” was retained.

A bank’s Camels rating is a system used by bank supervisors around the world to measure the health of a lender based on its capital adequacy, assets, management capability, liquidity, and sensitivity to market risks.

Under the Camels system, a rating of 1 is the highest.

Two other provisions, namely the ban on banks with supervisory concerns that may warrant corrective actions by the BSP, and those with arrears on microfinance borrowings from the BSP and other creditors, were also deleted.

These were replaced with a provision that ordered banks to have a track record of at least two years in micro-agri lending.

Meanwhile, the BSP also issued stricter loans for banks offering microfinance housing loans to ensure the safety of banking clients, particularly low-income families.

All housing-related loans under P300,000 are considered housing microfinance loans. This is double the size of the usual microfinance loan of P150,000 each.