As part of their compliance with the Agri-Agra Law, several banks have offered to open a P200-billion loan window to finance the banner projects of the Department of Agriculture (DA).
“The bankers said they have about P200 billion which they could use to fund agriculture and agrarian projects to comply with the Agri-Agra Law,” Agriculture Secretary Emmanuel Piñol said in a Facebook post.
The Agri-Agra Law requires banks to set aside 25 percent of their loanable funds for agricultural and agrarian reform financing, although at present, banks hardly lend to the farm sector due to the perceived risk in investing in the industry. To comply, financial institutions simply invest in government securities that are eligible as substitutes for agricultural loans.
Piñol said Eastern Samar Rep. Ben Evardone, who also chairs the House committee on credit and banking, arranged a meeting on Tuesday with a group of bankers led by Philippine Business Bank founder Alfredo Yao.
Banks that expressed interest in financing the DA’s projects were Metrobank, Bank of the Philippine Islands, East West Bank, Sterling Bank of Asia, Development Bank of the Philippines and members of the Chamber of Thrift Banks.
Projects that may be funded by these institutions include the construction of solar-powered irrigation programs and farm-to-market road (FMR) networks all over the country.
Since the Agri-Agra Law’s enactment during the Marcos administration, banks have never fully complied with their mandate. The law was also never reviewed despite a provision stating that it should be revisited every three years.
From January to September last year, the banking industry was able to carve out 13.74 percent of loanable funds for the agri-agra sector—a significant increase but still way below the 25-percent minimum threshold set by the law.
Piñol said the bankers also supported a proposed bond float that would be led by the DA. The proposal was already welcomed by Evardone, Finance Secretary Carlos Dominguez III and Bangko Sentral ng Pilipinas Governor Nestor Espenilla.
The secretary earlier said the agency would need P140 billion to finish some 13,000 kilometers of FMRs all over the country, while another P60 billion would be required to finance the mechanization of farms and fishing communities nationwide.
Economic managers said the dismal performance of the agriculture industry had been pulling down the country’s overall economic growth over the years.