Very few social amelioration policies have the sheer grandness of the Agri-Agra Law.
From the Marcos version, the presidential decree, up to its present version, Republic Act 10000, what is written in the law is adequate and sustained credit for small farmers. Credit is the lifeblood of farm production and when you assist farmers with a lifeblood, you are supporting a sector that is still – in the Age of Twitter – the main economic preoccupation of Filipinos.
By “adequate” I mean adequate. According to the law, the Marcos PD and the current RA 10000, at least 25 percent of what the banks lends out annually, the total lending portfolio, should go to agriculture and agrarian reform beneficiaries. That is, on paper, a big deal for agriculture in general and small farmers in particular.
Then, why is agriculture the prostrate sector, the economy’s Slough of Despond, and why are farmers (I am one) literally the wretched of our society. And the young men and women of the yore who transitioned into farming as a matter of tradition are now old farmers with nobody to bequeath the tradition to. The young men and women have mostly taken up service jobs or are now working overseas. The average age of a Filipino farmer is 57 years. I am 64 I can’t find somebody who would till the land and raise animals and continue with the work that my family has done for generations. The unbroken tradition of farming in my family, I am sure of this, would end with me.
The Agri-Agra Law, far from its noble ideals, has been nothing but a long-running con game, state-sponsored scam. It was that way since the Marcos time and it is still a con game now. The law, one of the grandest state programs in the area of socio-economic amelioration is so full of holes and riders that even if the banking system were to only apply 50 percent of the riders and loopholes of the law, it would amount to nothing.
Big on the theoretical side. But a lame duck on its practical applications. The government report on the state of the Agri-Agra Law in the year just passed, tell the tragic story of this long-running con game, bandied about as a great and towering amelioration program of the government.
Here is the level of compliance with the Law as reported by monetary authorities, based on the Sept. 2015 to Sept. 2016 lending report of the banks: big banks (commercial and universal), thrift banks and rural banks. Read the report and weep.
For that period, the total loanable funds of the banking system was P3.13 trillion. Instead of 25 percent, the big banks only loaned out 12.83 percent to agriculture and small farmers. The compliance level of the thrift banks was only 10 percent. The rural banks compliance was 29.5 percent. But before you get the impression that the rural banks did their solemn duty to live up to the mandate of the law I am advising you to hold your breath. There is a reason behind that and it is ugly.
To rub salt on a literally gaping wound, the low level of compliance with the law, especially by the major banks which grant the bulk of the loanable funds, is not only tragic side of this long-running con game.
The law, as I said earlier, is full of holes and riders and these leaky provisions allow the banks to claim that they have complied with the Law without complying with the Law. For example, lending to mass housing.
Banks can lend to real estate giants developing mass housing projects and label these loans as “compliance” with the law. Loans to mass housing are treated as “alternative compliance mechanisms” and the banks would rather lend to mass housing than to lend to agriculture and small farmers. Peasant groups tracking the banks’ compliance with the law have noted this fact. Banks would rather lend under the “alternative compliance” schemes than lend to farmers.
That alone makes a farce of the law.
Peasant groups have also noted that the banking system’s loans to agri-business giants (which are part of even more gigantic conglomerates) are also treated as loans to agriculture. Loans to agri-business giants with contract-out partners are considered as loans to “small farmers.” So, nothing really goes to small farmers..
In the crops sector, for example, the loan beneficiaries are mostly the giant rice millers and rice traders, who are transacting business at the multi-million peso or multibillion peso levels. Not to small rice or corn farmers or small aqua growers.
The rural banks, this is their story, really lend to small farmers. But at the current premium rate for commercial borrowers which is 4 percent or a shade lower a year, the rural banks charge the small farmers an interest rate of 14 percent up a year. The interest charged on a commercial borrower is 10 percent lower than the interest rate charged on a small rice farmer.
No wonder the production cost of rice in our country is double-digit (around P12 and P13 per kilo). In Vietnam, the production cost of rice farmers is P6 per kilo and it is slightly higher in Thailand.
No wonder, small farmers in this Slough of Despond we fondly call an “agricultural country” are doomed.
The institutions, on paper, are good for farmers. In reality, they are shafting and conning the farmers at every turn and opportunity.