MOBILIZING INVESTMENT FOR LOW-EMISSION DEVELOPMENT IN ASIA’S

AGRICULTURE SECTOR

Elaine B. Pagkanlungan

HO CHI MINH CITY, VIETNAMOctober 28, 2015

HISTORICAL PERSPECTIVE

Presidential Decree 717 or the Agri-Agra Law - signed by then President Ferdinand Marcos in May 29, 1975 to facilitate credit for agri-agra sector and spur productivity

Over the years, Congress and the Bangko Sentral ngPilipinas (BSP) have expanded the means of compliance with the law to include alternative modes

Congress proposed various measures to correct flaws. Department of Agriculture consulted various farmer groups in the course of amending PD 717.

PHILIPPINES AGRI-AGRA REFORM CREDIT ACT OF 2009

Republic Act No. 10000 – an Act providing for an Agriculture and Agrarian Reform Credit & Financing System through Banking Institutions approved on February 23, 2010.

Implementing Rules and Regulations (IRR) – signed on July 14, 2011

Circular No. 736 , on the IRR issued by Bangko Sentralng Pilipinas on July 20, 2011

Implementing Agencies: BSP, Department of Agriculture (DA), Department of Agrarian Reform (DAR)

PHILIPPINES AGRI-AGRA REFORM CREDIT ACT OF 2009

Policy of the State:

Promote equal access to opportunities under anenvironment of sustained growth and expandingproductivity as the key to raising the quality of life for all.

To achieve this:

The State shall promote rural development by enhancing access of the rural agricultural sector to financial services and programs that increase market efficiency and promote modernization in the rural agricultural sector.

PHILIPPINES AGRI-AGRA REFORM CREDIT ACT OF 2009

Agriculture and Agrarian Reform Credit – refer to loans granted for the following activities and purposes:

Agricultural production and processing

Promotion of agribusiness and exports

Acquisition of work animals, farm and fishery equipment and machinery

Acquisition of seeds, fertilizers, poultry, livestock, feeds and similar items

Acquisition of lands authorized under the Agrarian Reform Code of the Philippines

Construction, acquisition and repair of facilities for production, processing, storage, transportation and marketing and other facilities

Efficient and effective merchandising of agricultural and fishery commodities stored and/or processed by the facilities

PHILIPPINES AGRI-AGRA REFORM CREDIT ACT OF 2009

Other activities that include:

Procurement of agriculture and fisheries products for storage, trading, processing and distribution

Acquisition of water pumps and tube wells for irrigation

Working capital for fisheries and agriculture graduates and for long gestating projects

Agribusiness activities which support soil and water conservation and ecology-enhancing activities

Irrigation systems that are designed to protect the watershed

Credit guarantees on uncollateralized loans to farmers and fisherfolks

PHILIPPINES AGRI-AGRA REFORM CREDIT ACT OF 2009

Credit Quota – “All banking institutions, whether government or private, shall set aside at least twenty five percent (25%) of their total loanable funds for Agriculture and Fisheries credit in general, of which at least ten percent (10%) of the loanable funds shall be made available for agrarian reform beneficiaries.”

Credit quota is subject to review after 3 years by the implementing government agencies

25% of TLFG

10% Agra

15% Agri

Alternative

Direct

Alternative

Direct

MECHANICS

PHILIPPINES AGRI-AGRA REFORM CREDIT ACT OF 2009

Direct Compliance for Agriculture

Actual extension of loans to qualified borrowers

Bond issues for on-lending to the agriculture and agrarian reform sector by DBP/LBP

Special Deposit Accounts maintained for on-lending to the agriculture and agrarian reform sector of BSP accredited rural financial institution

Wholesale lending of other banks for lending to the agriculture, fisheries and agrarian reform sector of BSP accredited rural financial institutions

PHILIPPINES AGRI-AGRA REFORM CREDIT ACT OF 2009

Allowable Alternative Compliance

1. Eligible securities

Investment in bonds issued by Development Bank of the Philippines and Land Bank of the Philippines

Investment in other debt securities

Paid subscription of shares of stock in accredited rural financial institutions (preferred shares), Quedan and Rural Credit Guarantee Corporation, or Philippine Crop Insurance Corp.

PHILIPPINES AGRI-AGRA REFORM CREDIT ACT OF 2009

Allowable Alternative Compliance

2. Loans and other credits

Investment in SDAs of BSP accredited rural financial institutions

Wholesale lending

Rediscounting facility granted by UBs/ KBs to other banks covering agriculture and agrarian reform credits

Actual extension of loans for the construction and upgrading of infrastructures including farm to market roads and post-harvest facilities; and other public infrastructure

PHILIPPINES AGRI-AGRA REFORM CREDIT ACT OF 2009

Allowable Alternative Compliance

2. Loans and other credits

Loans to NFA and NFA registered warehousemen/ millers/ wholesalers Actual extension of loans to borrowers

Purchase of eligible loans on a “without recourse” basis from other banks and financial institutions.

Loans to Barangay Micro Business Enterprises (BMBE) – computed at twice the amount of the outstanding balance of the loans

PHILIPPINES AGRI-AGRA REFORM CREDIT ACT OF 2009

Excess compliance in the ten percent (10%) agrarian reform credit may be used to offset a deficiency, if any, in the fifteen percent (15%) other agricultural credit, but not vice versa.

Administrative sanctions/ penalties on the lending institutions for noncompliance/ under compliance –computed at One-half of one percent (0.5%) on a quarterly basis.

Collected penalty – 90% allocated to AGFP and PCICequally and 10% to BSP to cover administrative expenses.

PHILIPPINES AGRI-AGRA REFORM CREDIT ACT OF 2009

Application in DBP

1. Prepared programs on Agribusiness, tree plantation, forestry and Fishery

2. Boost loan availments on agriculture projects to improve compliance through

Program presentations, meetings, briefings Coordination with the Department of Agriculture, Department of

Agrarian Reform, Department of Environment & Natural Resources(DENR), and other government units

Coordination with farmers’ groups, cooperatives, associations Networking activities such as joining forums, expo, conferences on

agriculture Use of media such as print media (brochure), newspaper, radio

interview

PHILIPPINES AGRI-AGRA REFORM CREDIT ACT OF 2009

Compliance with Agri-Agra Reform Credit Act as of March 2015

In Billion Pesos All BanksUniversal & Commercial Banks

Thrift Banks

Rural & Cooperative Banks

TOTAL LOANABLE FUNDS GENERATED

2,331 2,158 117 55

MINIMUM ALLOCATION

1. 10% Agra2. 15% Agri

233349

215323

1117

58

COMPLIANCE WITH AGRA 28 (1.24%) 17 (.79%) 2 (1.99%) 9 (17%)

COMPLIANCE WITH AGRI 364 (15.65%) 334 (15.51%) 11 (9.44%) 18 (34.15%)

TOTAL COMPLIANCE

1. Direct Compliance2. Alternative Compliance

3. Total

177216393

138213351

11213

27.4328

PHILIPPINES AGRI-AGRA REFORM CREDIT ACT OF 2009

DBP Compliance as of June 2015

Net Loanable Funds Generated 14.36 B

Agrarian Reform Loan (10%) 1.43 B

Utilization/ Compliance 52.2 M (36.38%)

Deficiency – 1.38B 1.38 B

Other Agricultural Credit Loans (15%) 2.15 B

Utilization/ Compliance 3.14 B

Excess 991 M

Deficiency 393.3 M

PHILIPPINES AGRI-AGRA REFORM CREDIT ACT OF 2009

Computation of Penalty

Amount of Deficiency - 1.384M

x Rate per quarter 0.125%

Amount of Penalty per Quarter - 1.73M

DBP Compliance as of As of September 2015 - 30.89B

Amount of Penalty - 5.4M

PHILIPPINES AGRI-AGRA REFORM CREDIT ACT OF 2009

Actions Being Undertaken

Intensified promotion of credit financing programs for the agriculture and fishery sectors by DBP

Implementing agencies coordinate with banks regarding concerns in implementing the Agri-Agra law.

The government provides financial support to 2 government agencies the AGFP and PCIC for the provision of guarantee/ insurance to farmer borrowers in obtaining bank loan.

Thank you