Overhaul of RP credit policy sought

The Butil Party is seeking the overhaul of the country’s agricultural credit policies to ensure the flow of about P300 billion a year into agricultural lending and end the credit crunch that has hobbled the country’s food production, Rep. Leonila V. Chavez, Butil party-list representative said.

Chavez said the massive and sustained flow of countryside credit will be a certainty once the amendatory bill she has filed to reform the martial law decree Agri-Agra Law , House Bill 3870, or the National Food Security Act, is passed into law. 

The Agri-Agra Law mandates commercial banks to allocate 25 percent of their loan portfolio to agrarian reform beneficiaries and small farmers. The banks would rather comply with the law by buying government securities and investing in housing – which are listed as alternative compliance – than lend to farmers and agrarian reform beneficiaries because of a perception that agri lending is full of risks.

Chavez said the bill intends to encourage the commercial banks to drop their reluctance to go into sustained agricultural lending by assigning cooperative rural banks as conduits for loans the KBs would grant to farmers and agrarian reform beneficiaries.

“It would be a win-win situation for every party. The KBs will lend to farmers through the cooperative rural banks. The coop banks will guarantee the repayment of the agri loans. The farmers will get their loans,” said Chavez .

Full compliance by the KBs with the law would unleash roughly P300 billion a year into much-needed  agricultural lending , said Chavez.

One of the core organizations under the Butil Party is a network of coop rural banks made up of 42 independent coop rural banks spread across farming areas in the country, said Chavez.

Chavez said that the coop banks can guarantee repayment “because of their sheer mastery of the dynamics of countryside lending, such as who to lend to and how to ensure loan repayments.”

The Butil Party celebrates its traditional Farmers Day celebration on Jan. 30 by giving awards to outstanding farming and rural institutions. 

President Arroyo will be the guest of honor. She is expected to announce on that day fresh policies and programs for the agriculture sector.