A PARTY-LIST legislator said the central bank needs to treat the Agri-Agra Law as a potential driver of the economic recovery, and exert more effort to ensure bank compliance with the lending quotas set for the agriculture and agrarian reform sectors.
Manila Teachers Representative Virgilio S. Lacson, vice chairman of the Committee on Banks and Financial Intermediaries, asked the Bangko Sentral ng Pilpinas (BSP) to ensure compliance with the quota of at least 10% of lending being extended to agrarian reform beneficiaries and 15% to farmers and fisherfolk.
“I think that’s the solution so I think we ask the BSP to be strict with this Agri-Agra Law, so it can help stimulate the economy immediately,” he said during a committee hearing.
“The compliance of banks is very low. As of 2017, it’s just P573 billion of all the banks combined, in 2018, it’s P707 billion, if all the banks are compliant we can have P1.034 trillion.”
Quirino Rep. Junie E. Cua, panel chairman, said the lapses in compliance will be addressed by House Bill No. 6314, which strengthens the financing system for agriculture, fisheries and rural development.
Mr. Cua said currently banks prefer to pay the penalty for non-compliance or under-compliance rather than lend to borrowers they deem risky.
“This is the reality we’re trying to solve in this bill that we have passed, it is now in the Senate, to amend that Agri-Agra law. We are trying to address the basic problem of why banks are not willing to lend and (prefer to be) penalized,” he said.
“Based on our study, (banks) feel the small farmers, if they are not organized… are poor credit risks (with very low) ability to repay,” he said.
“The cost of lending is also very high because instead of lending P25 million to one organization you need to deal with 1,000 people borrowing P25,000,” he added.
Mr. Lacson also asked the resource persons why micro- and small-sized enterprises are getting a small proportion of bank loans aimed at small businesses.
BSP Managing Director for Policy and Specialized Supervision Lyn I. Javier said the smaller businesses are receiving a proportionate amount of funds.
“Since the micro enterprises are really small businesses, the loans they may have availed of are also small relative to the loans availed of by the medium-sized enterprises,” she said.
“Another factor could be the appetite of the banks also in lending to these sectors… as well as the access to financing (and) availability of banking services in their respective areas.” — Charmaine A. Tadalan