MANILA – President Gloria Macapagal-Arroyo has signed a law requiring government and private commercial banks to extend at least 25 percent of their loan facilities particularly to farmers, agrarian reform beneficiaries and fishermen, according to a Malacanang announcement.
Malacanang said the new law, known as the Agri (Agriculture)-Agra (Agrarian) Reform Credit Act of 2009, replaces an old but similar law which was issued through a presidential decree.
Present during the signing ceremonies held in Malacanang were the principal sponsors of the new law, headed by Congressman Abraham Mitra of Palawan province in Southern Luzon, the chairman of the Committee on Agriculture in the House of Representatives.
Mitra hailed the signing, the law would alleviate the plight of farmers and fishermen as it aims mainly to make available to them the financial support they need, particularly during difficult times like the prolonged drought caused by “El Nino,†which is wreaking havoc on the country’s agricultural sector.
For instance, Mitra said that with the new law, the equivalent of at least $4 billion would be made available especially to farmers, fishermen and agrarian reform beneficiaries as he pointed out:
“It should signal the start of the exodus of of capital from the urban centers to the countryside where this is really needed.â€
He noted that under the old law, it also required banks to lend 25 percent of their loan portfolios to the agricultural sector.
But, at the same time, it allowed alternative compliance on the part of banks, like putting the money in non-farming related investments such as government bonds and housing projects, Mitra pointed out.
As a result, the Palawan lawmaker said bankers preferred to invest such funds in debt instruments like bonds and real estate ventures instead of extending these to farmers and fishermen who are considered as credit risks.
Mitra noted the old law imposed penalties like fines on violators but these penalties were so light that these did not discourage the banks from investing their funds to more profitable business undertakings.
According to Mitra, these “defects†emerged during the nationwide consultations he conducted when the new law was proposed amplified by representatives of farmers and fishermen.
The new law, he stressed, limits the modes of alternative compliance by requiring the banks to invest only in projects directly related to farming and fisheries if they don’t way to lend directly to the intended beneficiaries.
The new law imposes a penalty of one-half percent of the amount of funds that banks are required to lend to farmers and fishermen, Mitra said.
He added the Central Bank of the Philippines, in consultation with the Department of Agriculture and Department of Agrarian Reform, is mandated to issue soonest the implementing rules and regulations of the new law.
In addition, Mitra said these agencies are also ordered to review compliance of banks three years after the implementation of the new law takes effect and to report their findings to the House and the Senate.
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