MB – Sun, Apr 3, 2011 1:58 PM PHT
MANILA, Philippines -- The Bangko Sentral ng Pilipinas (BSP) has approved a 20 percent risk weighting of bank loans guaranteed by the P4.5-billion Department of Agriculture (DA)-supervised Agricultural Guarantee Fund Pool (AGFP), which was created three years ago to encourage conduit banks and to cushion risks of lending to the agricultural sector.
The BSP also reiterated its suggestion earlier, and now for implementation, of dividing the fund into two separate funds. One will be used solely for guaranteeing loans of bank conduits and the other fund set up as a guarantee for non-banks, according to a memo presented to the Monetary Board on the week the new Circular No. 713 called the Risk Weighting of Bank Loans Guaranteed by AGFP, was approved. The circular also instructed that the maximum allowable leveraging ratio of the fund maintained for bank loans should be invested in assets that are zero risk weighted under BSP's risk-based capital adequacy framework.
Another revision made to the AGFP guidelines is that conduit banks will include universal and commercial banks besides thrift and rural banks, and the loans and guarantees will be extended to fisherfolk, not just small farmers.
On December 7, two months before approval of the new circular, the AGFP forwarded to the BSP its amended implementing rules and regulations, signed by the DA secretary. In the letter, the amendment that was incorporated included the allocation of 50 percent of the fund for conduit banks amounting to P2.24 billion.
Credit conduit banks, as defined by the BSP, are banks such as commercial, thrift or rural banks, or non-banks (co-operatives, SMEs, NGOs) allowed to provide financial assistance to small farmers and fisherfolk.
The fund allocation has been divided to 50 percent equal or P2.42 billion each to banks and non-banks.
The AGFP IRR has also been amended three times since 2008. The latest amendment now covers loans granted to fisherfolk in addition to palay farmers. Conduit banks were also expanded to include commercial and universal banks, not just thrift or rural banks.
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