Loren rues billions in credit denied small farmers
Files bill at Senate to plug loophole, improve Agri-Agra Law

Senator Loren Legarda is seeking to plug a loophole in the Agri-Agra Law that has been denying farmer-beneficiaries of the Agrarian Reform Law billions in pesos in loanable funds from private banks.

Legarda explained that while the Agri-Agra Law mandates banks to set aside 25 percent of their loanable funds for agricultural and agrarian credit, many of them had been investing instead in government securities as a form of alternative compliance to the law.

"In 2002 alone, banks had chosen to invest in government securities P56.6 billion instead of lending the money to agrarian reform beneficiaries," said Legarda, chair of the Senate Economic Affairs Committee.

"The credit being denied our farmers are depriving them of the means to secure seeds, fertilizers and other farm inputs. As a consequence, our agricultural productivity is going down and our food security is being compromised," she stressed.

Legarda has filed Senate Bill No. 75 to remove the option of investing in government securities as a form of alternative compliance to Presidential Decree No. 717 or the Agri-Agra Law issued in 1975.

The senator said the original intent of the law to ensure the availability of more credit to farmers, fisherfolks and agrarian reform beneficiaries had been watered down by subsequent amendments to it.

"By plugging this loophole, we will ensure the availability of credit to agrarian reform beneficiaries, which are the small farmers," she said.

Overall, banks had been complying with the 25 percent Agri-Agra Law requirement, broken down as 15 percent for agricultural loans and 10 percent for agrarian credit, said Legarda. But while banks had been providing the full 15 percent as agriculture credit through the years, they had been availing of the option to buy securities to cover a big chunk of the 10 percent agrarian credit requirement, she rued.

"The P56.6 billion denied agrarian reform beneficiaries in 2002 represented 66.8 percent of the P84.68 billion total amount for agrarian reform credit compliance," she pointed out.

Pending her bill's passage, Legarda appealed to banks to, on their own, allocate the whole 10 percent of the agrarian credit to agrarian reform beneficiaries as their way of boosting the agriculture sector and ensuring the supply of food in the country.

In her bill's explanatory note, Legarda said that despite the overall over-compliance of banks with the Agri-Agra Law, there is still failure to enhance small farmers' access to bank credit due to the loophole.

Legarda is also seeking to remove the distinction between agriculture and agrarian reform credit, thereby treating the 25 percent loan quota as a generic whole.

She said this will allow banks flexibility in allocating their quota among different beneficiary sub-sectors as borrowers are given their share of the responsibility in ensuring the viability of their projects.

Likewise, Legarda's bill proposes to put a ceiling to the capitalization that will be required farmers and fisherfolks by the banks in the amount of P50,000,000. It also seeks to broaden the modes of compliance to include direct support to agriculture such as infrastructure.

From 1993, when the Bangko Sentral ng Pilipinas started to monitor the banks' compliance with the Agri-Agra Law until 2002, the loanable funds allotted agriculture and agrarian reform credit were as follows: P285.01 billion (1993); P386.26 billion (1994); P520.43 billion (1995); P596.43 billion (1996), P714.21 (1997); P776.97 billion (1998); P990.63 billion (1999), P888.42 billion (2000), P935.71 billion (2001) and P956.81 billion (2002).

Over the years, the means of compliance with the Agri-Agra Law has been broadened to include alternatives such as development loans to finance educational institutions, hospitals, socialized housing and local government units, investment in commercial papers issued by firms engaged in agricultural products, investments in the so-called Emergency Readiness Assurance Program, agrarian reform and Pag-Ibig Funds, loans to high-value commercial crops projects; and investments in Quendacor.