Agri-Agra Law compliance of universal and commercial banks and thrift banks remain short of the requirements, Bangko Sentral data show.
Banks are required under Republic Act No. 10000, otherwise known as An Act Providing for an Agriculture and Agrarian Reform Credit and Financing System Through Banking Institutions, to allocate 10 percent of their funds for agrarian reform credit and 15 percent for other agricultural credit.
Central bank data show that as of June 2016, U/KBs’s Agra compliance is only 0.67 percent, slightly lower than its 0.68 percent in the previous quarter.
TBs’ compliance rate during the same quarter is 1.45 percent, lower than its 2.04 percent compliance rate in end-March 2016.
Rural banks’ and cooperative banks’ compliance surpassed the requirement at 16.73 percent as of end-June this year, but this is a tad lower than the 17.21 percent in end-March this year.
For Agri compliance, U/KBs’ end-June rate is at 13.09 percent, down from its 13.34 percent in the previous quarter, while TBs’ is at 9.92 percent, also lower than its 10.07 percent compliance at the end of the first quarter.
Still, RBs, and Coop banks’ compliance is high at 30.79 percent, but also a decline compared to its 33.05 percent rate in the previous quarter.
BSP Deputy Governor Nestor Espenilla Jr. said it is really a challenge for bigger banks to comply with the Agri-Agra Law given the financial institutions’ business model.
He cited that for foreign banks, for one, it would be hard to meet the law’s requirement since some of these banks only have one branch located normally in Makati City or away from where the Agri-Agra beneficiaries are.
He said RBs, and Coop banks’ compliance is high because these are based where the law’s beneficiaries are.
Another challenge for bigger banks is locating where the Agri-Agra law beneficiaries are, Espenilla said, pointing out that even the Department of Agriculture does not have a registry of these beneficiaries.
”There are operational problems that are attached to the law. Those are the things that in proper time should be reviewed also so that it can be properly implemented,” he added.