The Monetary Board, the policy-making body of the BSP, approved a new regulation that effectively removed the Department of Agrarian Reform (DAR) from the qualification process, leaving it up to the NFA to certify that its loans would ultimately benefit agrarian reform beneficiaries.
The Agri-Agra Law requires a bank to lend at least 25 percent of its loanable funds to the agrarian and agriculture sector but regulators have been having a hard time compelling banks to lend specifically to agrarian reform beneficiaries.
Under this law, a bank is required to lend 15 percent of its portfolio to agriculture ventures and another 10 percent specifically for the beneficiaries of the Comprehensive Agrarian Reform Program (CARP).
BSP Deputy Governor Alberto Reyes said banks had little problem meeting the agri component of the law but it was more difficult to meet the requirement under the agra portion.
Reyes explained that loans granted by banks to the NFA were already qualified as compliance with the Agri Agra Law but there was an added requirement for agrarian reform credit, namely the DAR certification.
The objective of this requirement was to make sure that even if agrarian reform beneficiaries could not borrow directly from banks, they would at least benefit indirectly from loans granted by banks to the NFA.
However, banks have not been able to meet the agra component due in part to the BSP rule that required the NFA to secure a certification from the DAR any agrarian reform credit to the grains body would be used to procure palay from agrarian reform beneficiaries.
To make it easier for banks to comply, Reyes said the BSP would no longer require the NFA to get the DAR certification.
He said the BSP will now accept NFA certification that its palay procurement would be undertaken through "direct and indirect linkage with agrarian reform beneficiaries."