Philippine Banks Allowed to Extend Micro Credit to Farmers –Â Starting this year, micro credit to farmers is livelier than the past years. Because the Bangko Sentral ng Pilipinas (BSP) has issued the new circular that will allow banks to offer micro-agri loans as credit to small farmers.
The BSP Monetary Board approved Circular No. 680 for the new rules and regulations of the new bank credit and although small in size or not exceeding P150,000 per borrower, the test program for the new loan generated almost P500 million in three years.
BSP adapted minimum criteria so that more banks will offer the micro-agri loans as micro credit. Based on the circular signed last February 3, any bank with a track record of at least two years in microfinance and with an acceptable portfolio-at-risk level will be allowed to offer the micro-agri loans.
Though, the micro-agri loans will be subject to the same risk management mechanism, such as clients’ ability to repay based on cash flow analysis.
Micro-agri loans that meet the standards will be classified and treated as microfinance loans. Therefore, farmer entrepreneurs will enjoy the same benefits as microfinance loans such as exemption from the requirement of traditional collateral, complex documentary requirements and application procedures.
Micro-agri loans are granted to borrowers engaged in farming for at least two years but have other sources of non-farm income. Payment terms are very flexible because it allowed lump sum payment of micro-agri loans up to 40 percent of the total amount during agricultural production season and cycles.
With this circular, a good opportunity is opened for all interested banks to show their hearts to unbankable farmer entrepreneurs who really need micro credit to finance their agricultural production.