BSP okays housing loans as alternative compliance to Agri-Agra lending

Published December 4, 2020, 5:00 PM

by Lee C. Chipongian

To encourage banks to release more loans to borrowers, the Bangko Sentral ng Pilipinas (BSP) will temporarily consider housing loans as banks’ alternative compliance to the Agri-Agra Reform Credit Act of 2009 (Republic Act 10000) until the end of this year.

Under the law, all private banks are mandated to set aside 25 percent of their loan portfolios for agriculture and fisheries.

BSP Memorandum Order M-2020-086, signed by BSP Governor Benjamin E. Diokno last December 3, said the Monetary Board approved the temporary inclusion of housing loans to comply with RA 10000, and to implement provisions in the Bayanihan to Recover As One Act.

“Private banks are encouraged to reallocate any unutilized loanable funds to housing loans,” said Diokno in the memo.

Housing loans granted from September 15 to December 31 this year will be considered compliance to the 25 percent total mandatory credit allocation for agriculture and agrarian reform. It will be included in banks’ report for the third quarter and fourth quarter this year.

“Banks may utilize eligible housing loans as alternative compliance either for the 10 percent mandatory agrarian reform credit allocation and/or for the 15 percent mandatory other agricultural credit allocation,” said Diokno. Housing loans are all loans granted to individuals that are “fully secured by first mortgage on residential property that is or will be occupied by the borrower as well as housing microfinance loans”.

Banks will also be required to submit a one-time supplemental report on or before January 22, 2021, stating their compliance to the mandatory credit allocation.

On Thursday, the BSP reported that bank lending growth is at a low of 1.9 percent in October from 2.6 percent in September. The COVID-19 pandemic and resulting lockdown and other containment measures have affected banks’ lending standards, they have become more risk-averse while loan demand has also remained luckluster.

Banks have notoriously poor compliance with the 25 percent credit requirement under the Agri-Agra law and would rather pay the fines rather than risk lending to agricultre and fisheries sector.