THE Bangko Sentral ng Pilipinas (BSP) has pushed to scrap the mandatory loan allocation to the agrarian reform beneficiaries, citing difficulties of banks in reaching the sector.

Presidential Decree 717 or the Agri-Agra Law mandates banks to allocate 25 percent of their loanable funds to the agricultural sector. Of this amount, 15 percent will be earmarked for the agriculture sector and 10 percent for the loans of the agrarian reform communities.

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“The BSP is not in favor of mandatory credit allocation, but we recognize that agriculture is a very important sector of the economy. There has been over-compliance with the amount of credit to agriculture but problems with credit to agrarian reform beneficiaries. We can take that out. Perhaps we can take out the sub-ceiling of 10%,” BSP Governor Amando M. Tetangco, Jr. said in reports.

In a phone interview with the Cebu Bankers Club (CBC) president John H.C Salas yesterday, he said that the 10 percent allocation for the agrarian reform beneficiaries is “too much” considering that the demand of the sector is fewer than the agricultural sector.

He also added that CBC is amenable to the statements released by the Banker’s Association of the Philippines (BAP) executive director Leonilo Coronel that the sector doesn’t have the absorptive capacity given the 10 percent loan allocation.

Aside from the demand, Salas said most banks have difficulty reaching the sector.

“Some (banks) have limited branch networks. The commercial and universal banks are mostly found in the major metropolis.

Aside from this, it is difficult for us to verify these beneficiaries because they don’t have credit history,” he said.

While BSP is pushing for the mandatory lending to be lifted, CBC also said that aside from the credit access to the agricultural sector, there should also be expansion on the compliance with the law, such as loans for agricultural support services like farm-to-market roads and irrigations as pushed by the BAP.

“These support services help strengthen the agriculture sector as they boost economic activity and make agriculture viable,” he said.

As of October 2009, BSP data showed that loans of universal and commercial banks, excluding their placements, have reached P2 trillion, about P3 billion of which went to the agriculture sector.