Agri-agra penalties reach P13B in 8 years

Penalties imposed on banks that failed to meet the mandated credit allocation for agriculture and agrarian reform totaled more than P13 billion over an eight-year period, according to central bank official.

“We’ve collected around P13.4 billion in agri-agra penalties from 2011 to2018,” Lyn Javier, managing director of the Bangko Sentral ng Pilipinas (BSP) Policy and Specialized Supervision Sub-Sector, told legislators on Thursday’s Senate public hearing of the Committee on Agriculture, Food and Agrarian Reform combined Banks, Financial Institutions and Currencies.

Javier’s presentation showed that 45 percent of the penalties, or P6.03 billion, were remitted to the Agricultural Guarantee Fund Pool, which offers guarantee coverage to banks, cooperatives, farmers/organizations,and corporations financing to small farmers and fisherfolk.

The same sum was also forwarded to the Philippine Crop Insurance Corp., which provides insurance cover to farmers from losses caused by natural disasters, plant diseases and pest infestations for their palay (unmiled rice) and corn crops, among other crops.

In the meantime, the 10 percent or P1.34 billion, went to the BSP.

Banks that fail to completely comply with the 25-percent mandatory credit to recipients of Republic Act 10000, or the “Agri-Agra Reform Credit Act of 2009,” face penalties from the central bank.

Banks are required to allocate 15 percent and 10 percent of their total loan portfolio to farmers and agrarian reform beneficiaries, respectively, under the Agri-Agra law.

At the end of last year, bank loans to the agriculture and the agrarian reform sector fell by 2.76 percent, falling short of the minimum benchmark.

As of end-2020, the banking system has set aside P713.599 billion for the industry, down from P733.921 billion at the end of 2019.

Agriculture and agrarian reform received a combined allocation of 10 percent of total loanable funds, falling short of the 25-percent mandated credit.

The farm sector received only 9 percent of total loanable money from banks. Meanwhile, they only gave agrarian reform beneficiaries 1 percent of their total loanable funds.

BSP Governor Benjamin Diokno has said the central bank’s reform agenda includes amending the Agri-Agra law, which “will strengthen rural development by providing a holistic approach in addressing the financing needs of the broader agricultural financing ecosystem.”