Published 24 February 2023, The Daily Tribune

Food stability is at the heart of every economy, more so, a recovering economy. The pandemic taught the whole world a valuable lesson. The promotion of inclusive and broad-based economic growth by ensuring equal access to opportunities in an environment of sustained growth and expanding productivity as the key to raising the quality of life should be a top priority to ensure survival and, eventually, to pivot to recovery.

Republic Act 11901, or the Agriculture, Fisheries and Rural Development Financing Enhancement Act of 2022, was passed in July last year. The law, also touted as the “New Agri-Agra Law,” seeks to improve rural development by enhancing access of rural communities and agricultural and fisheries households to financial services and programs.

The New Agri-Agra Law imposes a new credit quota on all banking institutions, whether government or private, except newly established banks, for a period of five years from the date of commencement of the banks’ operations. The credit quota refers to a minimum mandatory agricultural and fisheries financing requirement of at least 25 percent of their total loanable funds.

A large number of stakeholders, particularly banks, are interested in what constitutes “agriculture, fisheries, and rural development financing,” to determine their level of compliance. After all, 25 percent of the total loanable funds of a financial institution is a large chunk of a bank’s loan portfolio. Note that during the first year of effectivity of the Act, or from July 2022 to 2023, the total loanable funds generated shall be computed starting from 20 April 2010, the effectivity of Republic Act No. 10000, after which a bank’s total loanable funds shall be determined based on funds generated starting from the second year of the effectivity of the new law. The total loanable funds generated by a banking institution shall be defined by the BSP.

Simply put, this refers to loans and investments to finance activities that shall enhance productivity and increase the incomes of agricultural and fisheries households. This is basically financing of an activity that promotes the productivity and competitiveness of the agricultural sector, as well as those that help with the sustainable development of rural communities.

Activities that qualify as would enable banks and other financing institutions to comply with the requirements are:

• Activities identified in Section 23 of Republic Act No. 8435, or the Agriculture and Fisheries Modernization Act of 1997, such as agriculture and fisheries production; acquisition of work animals, farm and fishery equipment, fertilizer, poultry, livestock, feeds, products for storage; trading, processing of agricultural and fisheries products; and irrigation-related acquisitions. Also included are construction, acquisition, and repair of facilities; working capital for agriculture and fisheries graduates for long-gestating activities; agribusiness activities that support soil and water conservation and ecology-enhancing activities; privately funded and LGU-funded irrigation systems that are designed to protect watersheds; and credit guarantees on uncollateralized loans to farmers and fisherfolk;

• Off-farm/fishery entrepreneurial activities; agricultural mechanization/modernization;

• Agri-tourism, environmental, social, and governance projects, including green projects; digitalization/automation of farming, fishery, and agri-business activities and processes;

• Acquisition of lands authorized under the Agrarian Reform Code of the Philippines and its amendments;

• Efficient and effective marketing, processing, distribution, shipping and logistics, and storage of agricultural and fishery commodities;

• Public rural infrastructure; and

• Programs that promote the health, wellness, and developmental needs of farmers and fisherfolk, such as water and sanitation projects for rural communities; projects that promote livelihood, skills enhancement, and other capacity-building activities; and all other activities consistent or analogous to the foregoing.

Covered financial institutions, including retail banks, and rural and thrift banks shall apply minimum interest rates for wholesale loans obtained from government banks.

(To be continued)

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