The Bangko Sentral ng Pilipinas (BSP) anticipates the repeal of the Agri-Agra law as the Bicameral Conference Committee in Congress has ratified a new bill that seeks to improve financing for the agri-fisheries sector and rural development.
The BSP said in a statement that the proposed Agriculture, Fisheries and Rural Development Financing Enhancement Act of 2022 will soon be transmitted to Malacañang for the President’s signature, and is expected to unlock credit for the agricultural financing ecosystem and for rural community development needs.
The Agri-Agra law or Republic Act No. 10000 requires all government and private banking institutions to allocate at least 25 percent of their total loanable funds for agriculture and agrarian reform beneficiaries (ARBs).
In particular, 15 percent of the loanable funds must be allocated to the agriculture sector and 10 percent to ARBs.
“The BSP has long pushed for the repeal of [RA 10000] to make it more responsive to the financing needs of farmers, fisherfolk and agri-based micro, small, and medium enterprises,” BSP Governor Benjamin Diokno said.
Diokno said that the repeal of RA 10000 was aimed at further providing capacity to farmers and fisherfolk—modernizing their operations, and integrating them into profitable domestic and export-oriented value chains.
“Expanding the available modes of compliance with requirements to finance the agricultural sector will promote funding for green finance projects, income-generating activities, and public infrastructure projects, to the benefit of the rural agrarian reform and agricultural sector,” Diokno said.
The new bill removes the distinction between the 10 percent agrarian reform and the 15 percent agricultural credit. This is expected to provide banks greater flexibility in providing credit to the agriculture and agrarian reform sectors based on their capabilities.
Also, banks that reach out to ARBs and agrarian reform communities will be able to allocate the entire 25-percent mandatory credit quota to the said sector, instead of just 10 percent.
Meanwhile, banks that are unable to directly lend to rural community beneficiaries may contribute through other means, such as investing in debt and equity securities, undertaking agricultural value chain financing, and granting agri-business loans to fund agricultural and community-enhancing activities.
Further, the new bill encourages funding toward environmentally sustainable projects that will help mitigate the impact of climate risk on the agricultural sector.