“You’re very late, but the nation is happy that you have come to life.”
One of the most important of the decisions that the President of the Senate and the Speaker of the House of Representatives have to make is the appointment of the chairperson of the committee on agriculture and food of their respective chambers. The reason for this is that despite the progress that has been made in other sectors of its economy, the Philippines remains an essentially agricultural country, needs to feed a rapidly growing population – the latest unofficial estimate of this is 112 million – and has an external trade that is largely agricultural in character.
The nation cannot afford a bad choice of agriculture and food committee chairperson by the Senate President or the Speaker. If the choice of chairperson is bad, Philippine society will suffer because rural-agricultural experience forms a very large part of this country’s culture and psyche. And the Philippine economy will be hurt by the neglect and mismanagement of one of its key sectors. An incompetent or indifferent agriculture and food committee chairperson will placae the nation’s food security in jeopardy, disturb its socio-economic balance and impair its capacity to earn the financial resources needed for the Philippine economy’s sustenance. A well-chosen agriculture and food committee chairperson will assiduously address the needs – financial, agronomic, tenurial and commercial – of this country’s farmers; a badly chosen chairperson will not.
Perhaps the most important need of Filipino farmers is access to credit. The parcelization of this country’s farms by CARP (Comprehensive Agrarian Reform Program) and the severance of the paternalistic landlord-tenant relationship left millions of Filipino farmers in a little-access-to-credit situation. The banking entities created by the Rural Banks Act were supposed to fill the rural credit gap, but the authors of that law paid scant attention to the fact that banks require applicants to offer good credit records and adequate collaterals. Tenants-turned-landowners typically had no credit records – all the borrowing having been done by their landlords- and their CARP-awarded farms generally were insufficient to secure economic-size production loans. All too often the ARBs (agrarian reform beneficiaries) and other farmers ended up obtaining credit from non-bank lenders at exorbitant interest rates. As a result, Filipino farmers either sank deeper into debt or operated on a subsistence basis.
To provide a remedy, Congress, encouraged by the BSP (Bangko Sentral ng Pilipinas), enacted the Agri(culture)-Agra(rian reform) Credit Act, which was amended by the Agri-Agra Reform Credit Act of 2008. The proponents of the Act could see that banks were disinclined to grant credit to ARBs and other farmers; therefore, lending to the agricultural sector had to be made mandatory. The Agri-Agra Act mandated that henceforth 25 percent of total banking-system credit be extended to the agricultural sector: 10 percent to ARBs and 15 percent to other farmer-borrowers. The banks were given the option of lending to the farm sector indirectly, i.e., through the purchase of agriculture-intended government securities; they had to pay penalties if they failed to comply with the 25 percent requirement.
The Agri-Agra Credit Act has failed to achieve its landatory objective. And blame for this must be laid at the door of the indirect-compliance option. BSP data show this clearly. Rather than grant loans directly to farmers, the banks have preferred to pay penalties averaging P2 billion annually. Of the 15 percent requirement for lending to agriculture, the banking system’s compliance rate has been only 9 percent; of the 10 percent ARB-lending requirement the banks’ compliance rate has been a miniscule 1 percent.
Senator Cynthia Villar was appointed chairman of the Senate committee on agriculture and food in 2016, at the start of the 17th Congress. Up until now, Senator Villar has had nothing about the credit problem of Filipino farmers. Now, almost six years later, the good senator has come to life where agricultural credit is concerned.
Senator Villar wants changes made to the Agri-Agra Credit Reform Act. She wants to make it more effective. She has proposed a law that will “allow a wider mode of compliance for banks to achieve a holistic approach to countryside development.”
Late is always better than never, Senator Cynthia. You’re very late, but the nation is happy that you have come to life. The nation’s farmers are waiting; Please don’t let them down. Give them an effective Agri-Agra Credit Act.