Rural sector badly needs farm-friendly measures

Let me thank your associate editor, Ms. Marichu Villanueva for mentioning in her column (“Resolve,” 01/02/09) the farm-friendly measures that the Department of Agriculture (DA) is endorsing for congressional approval this year. As she had noted, one of the measures that the DA is supporting is new legislation amending the Agri-Agra Law, also known as Presidential Decree 717.

President Arroyo is truly determined to fulfill her State-of-the-Nation Address commitment to ease the perennial rural credit squeeze, which is why she issued last year Administrative Order No. 225-A. This directive calls for the creation of an Agricultural Guarantee Fund Pool, which will be sourced from the contributions of government financial institutions and government-owned and controlled corporations. The Fund Pool has so far accumulated a total of P2.479 billion which will be used to secure loans obtained by farmers and other small rural borrowers.

However, more initiatives are needed besides the creation of this Fund Pool to open more credit facilities for our farmers and fisherfolk and spur investments in the countryside. This is the reason why were are pushing amendments to the Agri-Agra Law in order to plug loopholes in this law that have allowed commercial banks to buy government securities in lieu of setting aside 10 percent of their loanable funds for agriculture and agrarian reform as mandated under this statute.

The Agri-Agra Law mandates that at least 25 percent of banks’ total loanable funds should be made available to the agriculture sector, 15 percent of which should to go agriculture stakeholders, and the 10 percent balance to agrarian reform beneficiaries (ARBs). But banks have been able to skirt this requirement because the same law considers a number of investments as forms of “alternative compliance.”

In 2007, the total credit requirement of the agriculture sector for palay, corn, coconut, sugarcane and fisheries was estimated at P200 billion, but banks were only able to finance P48 billion or 24 percent of this requirement. Because of the availability of alternative forms of compliance, such as investments in government bonds and development loans for education, hospitals and socialized housing, loanable funds are being redirected to these financial instruments.

As of December 2007, of the total loans to be directed to the agriculture sector, the direct compliance rate was only 9.85 percent of the mandated 15 percent for agricultural lending and only 2.24 percent of the 10 percent quota for ARBs, according to Bangko Sentral ng Pilipinas data.

Energizing and infusing more funds into the countryside has now become even more imperative in the wake of a global financial meltdown that is expected to worsen this year. As part of its measures to realize this goal of funneling more money into the rural sector, the DA is implementing a new policy that gives priority to program beneficiaries ready and able to provide counterpart funds in the implementation of the Department’s projects at the local level. — ARTHUR C. YAP, Secretary, Department of Agriculture