The central bank has welcomed the passage of the Republic Act (RA) 1901 or “The Agriculture, Fisheries, and Rural Development Financing Enhancement Act of 2022,” which provides a comprehensive financing framework for the development of agriculture and fisheries sectors and rural communities.
“The BSP is committed to the effective implementation of this law, which aims to enhance access of rural communities and agricultural and fisheries households, including their micro, small and medium enterprises [MSMEs], too much needed financial services and programs,” Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said.
“The new Agri-Agra and Rural Financing law has been a priority legislative measure of the BSP since it considers the requirements of rural community beneficiaries from a holistic perspective, taking into account their evolving social networks and complex needs,” the governor added.
The new law broadens agricultural credit and rural development financing activities to include agri-tourism, digitalization of farming activities and processes, public rural infrastructure, programs that promote health and wellness of rural communities, and activities that improve livelihood skills.
It also promotes financing for environmental, social, and governance projects, including green projects that support sustainable and inclusive economic growth.
Moreover, Medalla said that banks are no longer required to reserve 10 percent of their lending portfolio for agrarian reform beneficiaries and 15 percent for agricultural activities.
Instead, this new law allows banks greater flexibility in allocating the combined 25 percent mandatory credit quota to various borrowers in the agriculture, fisheries, and agrarian reform sectors.
Banks unable to directly lend to rural community beneficiaries may contribute through other means, such as investing in debt and equity securities, undertaking agricultural value chain financing, and granting agri-business loans to fund agricultural and community-enhancing activities, the governor said.
In addition, the law provides a mechanism to finance organizational, capacity, and institution-building programs to improve competitiveness and productivity in agriculture, fisheries, and rural communities.
“The enactment of the new Agri-Agra and Rural Financing law is a timely and positive development since it will assist the sector’s recovery from the impact of the COVID-19 pandemic and other natural calamities through private sector financing,” Medalla added.