Senator Cynthia Villar sponsors a new Agri Agra Law

PHILIPPINES, January 30 - Press Release January 30, 2022

Senator Cynthia Villar sponsors a new Agri Agra Law

In her sponsorship speech, Senator Cynthia Villar said that the Agri-Agra Reform Credit Act of 2008 or RA10000 should be revised to be more effective in reaching the agricultural sector and promote rural development.

Based on BSP data, banks have paid on the average P2billion in penalties per year for non-compliance with the Agri-Agra Reform Credit Act of 2009.

The banks have extended a total of PHP713.6 billion in agri-agra credit as of

end-December 2020. Agri loans amounting to PHP642.4 billion is only 9 percent of the 15 percent compliance requirement in agricultural credit. While agrarian reform credit extended by banks amounting to PHP71.2 billion, is a mere 1 percent compliance ratio vis-à-vis the 10-percent requirement under the Agri-Agra law.

Hindrances to compliance cited are the limited kinds of allowed loans to purely agricultural production related activities and the targeted borrowers are restricted to farmers and agrarian reform beneficiaries only.

Villar said that the proposed law allows a wider mode of compliance for banks to achieve a wholistic approach to countryside development. This removes the distinction between 15 percent for agriculture and 10 percent for agrarian reform beneficiaries (ARBs) in the banks' portfolios and the broadening of the list of loan beneficiaries and activities that can be financed through bank loans or investments, as well as the welcoming other alternative modes of compliance.

All banks whether government or private, except newly established banks from the effectivity of the law shall set aside a credit quota of at least 25% of their total loanable funds for agriculture lending.

For newly established banks a five-year grace period is given within which no penalty shall be assessed.

Loans shall now cover all activities to include complimentary or agriculture and fisheries related activities to increase agricultural production improve the well-being of farmers and fisherfolk.

The farming family household members, farm workers, their associations and organizations and their Micro-Small-Medium enterprises can now avail of these loans.

Environmental projects such as privately- funded and LGU-funded irrigation systems, climate change mitigation, biodiversity protection and renewable energy projects shall be included.

Lending for the construction and upgrading of infrastructure including but not limited to farm to market roads as well as post harvest facilities that will benefit rural communities.

It shall facilitate the access by private companies engaged in agri activities and financing to avail of loans.

It also included special lending arrangements for agribusiness enterprises with qualified agricultural borrowers and agricultural value chain financing (VCF). The VCF includes not only production but also distribution, manufacturing, processing of agricultural products.

Allowed loans include those requested by all kinds of financial institutions operating and located in rural municipalities and not just rural financial institutions.

Projects that promote livelihood, skills enhancement and capacity-building activities consistent or analogous to the above shall also be recognized.

A special fund shall be set up from the penalties collected from banks which are unable to extend loans according to the provision of the new law, net of 25% - to the General Fund and the 10% for BSP to cover administrative costs.

Percentage of the proposed allocation shall be:

65% - for rural credit with minimal interest rates and minimum collateral requirements, to be shared equally by the LandBank and DBP;

35% for the Department of Agrarian Reform for the individual titling of collective Certificate of Land Ownership Award (CLOA) program.

Villar is hopeful that the new will strengthen the financing system to provide credit access and banking services to the rural communities, resulting in increased productivity, livelihood, employment generation and income.