The new Agri-Agra law gives a much-needed break to the agriculture sector, Senator Cynthia Villar said on Tuesday Aug. 2.
Villar explained that financing for farmers and fisherfolk would be expanded, and reaching the agricultural sector and promoting rural development would be more effective since Republic Act (RA) 11901 or the "Agriculture, Fisheries and Rural Development Financing Enhancement Act of 2022 is now a law.
The lady senator, chairperson of the Senate Committee on Agriculture and Food, is the principal author RA 11901, or the New Agra-Agri Law, which has lapsed into law on July 29, 2022.
Villar thanked Quirino Rep. Junie Cua, her counterpart at the House of Representatives, and then-Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno for their efforts in crafting the new statute.
The new law mandates that all banking institutions, except newly-established banks, must set aside at least 25 percent of their total loanable funds for agricultural and fisheries-related sectors after they have been operating for five years.
Banks are expected to offer new financial products and services that suit the specific requirements of agricultural clients appropriate to their cash flows and production cycles.
"They can comply with the credit quota by lending to rural community beneficiaries to finance agricultural and fishery-related activities, Villar said.
Furthermore, she said banks can also invest in securities where the proceeds are meant to finance these activities, she added.
Both the Land Bank and the Development Bank of the Philippines (DBP) shall use their resources to invest, promote digital banking technology, automation, branchless banking and cash agent operations to reach remote barangays and municipalities; use of e-commerce, mobile phone applications to reach the rural public.
They shall continue to promote savings and credit in rural areas to coops, micro financial institutions, retail banks, and rural and thrift banks with minimal interest for wholesale loans.
The new law also removes the distinction between the 10 percent agrarian reform and the 15 percent agricultural credit to provide banks greater flexibility in extending credit to the agriculture and agrarian reform sectors based on their capabilities.
It also calls for special lending arrangements for agribusiness enterprises with qualified agricultural borrowers and agricultural value chain financing.
It expanded the available modes of compliance with requirements to finance the agricultural sector to promote funding for green finance projects, income-generating activities, and public infrastructure projects. This would benefit both the agrarian reform and agricultural sectors.
The old Agri-Agra Credit Act of 2009 required banks to lend 15 percent of their loan book to the agriculture sector, with a 10 percent quota set for agrarian reform beneficiaries.