Banks seek compromise on law requiring lending to agri-agra sector

MANILA, Philippines—The Bankers Association of the Philippines maintains its stand against the new and stricter version of the Agri-Agra law, hoping to strike a compromise deal with regulators and legislators in implementing the law.

Alberto Villarosa, president and chief executive officer of Security Bank, an active member of BAP, said BAP officials have been holding discussions with authorities on how the Agri-Agra law could be less adverse to the lending flexibility of banks in the country.


“We want a mutually beneficial solution to the problem,” Villarosa said in an ambush interview with reporters.

He said BAP has been hoping for an outcome that would consider the banks’ concerns.


The Agri-Agra law mandates banks to allocate 25 percent of their loanable funds to the agriculture sector. The old law provides alternative forms of compliance. For instance, lending to education and housing sectors were deemed alternative means to comply to the law.

The new and stricter version, RA 10000 that was enacted in 2010, has scrapped the alternative forms of compliance with the law. It likewise imposes stiffer penalties on non-compliance.

It further states that of the 25 percent allotted to the agriculture sector, 10 percent must be for agrarian reform beneficiaries, while 15 percent should be for agricultural credit, which includes lending to finance purchase of agriculture equipment.

Legislators earlier said the stricter version of the law was meant to help develop the country’s farm sector, particularly by having banks strictly allocate a portion of their resources for lending to the sector.

Legislators earlier said making the Agri-Agra law stricter was necessary in achieving the intentions of the old law.

Alternative forms of compliance stated in the old law kept banks from truly supporting the growth of the agriculture sector, they said.

The BAP, an organization of universal and commercial banks in the country, however, expressed opposition to the new law, saying it would be counterproductive to its members.


According to the BAP, there are banks, particularly rural banks, that actually cater to the needs of the farm sector, but there are also those, like universal and commercial banks, that do not have the expertise in providing agricultural credit.

The organization also said mandated lending would counter the objective of observing prudent lending practices. With mandated lending, BAP said, banks would be forced to extend credit even to borrowers with low credit-worthiness just so they could comply with the provisions of the law.

Villarosa said he would like to see the relaxing of the requirements of the new Agri-Agra law after the talks among BAP representatives, legislators and regulators.

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