Republic Act 10000, or the Agri-Agra Reform Credit Act of 2009 enacted in 2010, mandates credit allocation by banks and other financial institutions to farmers, fisherfolk, and agrarian reform beneficiaries.
The law provides that banks should set aside at least 25 per cent of their total loan portfolio for lending to the agriculture and fisheries sector, of which 10 per cent should go to agrarian reform beneficiaries.
The law amended Presidential Decree 717 signed by then President Ferdinand Marcos in 1975.
The rules state that banks can directly comply with the requirements of the law through the actual extension of loans to qualified borrowers or through the purchase of eligible loans on a “without recourse” basis from other banks.
Failure to comply with the mandate is subject to a penalty equivalent to 0.5% of a bank’s non-compliance or under-compliance, which will be computed on a quarterly basis.
Banks, nevertheless, can avail of alterntive modes of compliance, like:
• investment in bonds issued by the Development Bank of the Philippines and the Land Bank of the Philippines that have been declared eligible by the DA, the proceeds of which should be used for lending to the agriculture and agrarian reform sectors;
• investment in other debt securities that have been declared eligible by the DA or any agency authorized by the DA;
• subscription to shares of stock in accredited rural financial institutions (preferred shares only), the Quedan and Rural Credit Guarantee Corp. or the Philippine Crop Insurance Corp.
• investment in the special deposit accounts of rural financial institutions that are accredited by the BSP;
• wholesale lending to accredited rural financial institutions;
• rediscounting by universal and commercial banks of agriculture and agrarian reform credits;
• extension of loans for the construction and upgrade of infrastructure, including farm-to-market roads and post harvest facilities; and
• grant of loans to warehouses or millers or wholesalers accredited by the National Food Authority.
According to a Bangko Sentral ng Pilipinas (BSP) circular, banks’ calculation of loanable funds should be referenced against the start date of April 20, 2010 when the law became effective, premised on the idea that only new funds channeled to the agriculture and agrarian reform sectors are considered, it added.
BSP will accredit the bank-RFIs while the DA will take care of non-bank RFIs such as cooperatives and microfinance nongovernment organizations, among others.
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