The Monetary Board approved on 17 October 2008, the twenty percent (20%) risk weighting of bank loans to the extent guaranteed by the Agricultural Guarantee Fund Pool (AGFP).
The AGFP resulted from the implementation of Administrative Order (AO) No. 225 dated 1 April 2008, as amended by AO No. 225-A dated 26 May 2008. The said AOs directed Government Owned and Controlled Corporations (GOCCs) and Government Financial Institutions (GFIs) to allocate five percent (5%) of their 2007 surplus for projects in rice and food production. They were issued in support of the national government’s thrust of increasing rice production to achieve food sufficiency.
The AGFP, which will be placed in trust with the Land Bank of the Philippines, shall be used to provide guarantee to loans extended by GFIs and private financial institutions, such as rural banks and cooperative banks, to farmers engaged in rice production.
The lower risk weight approved by the MB is expected to expand the banks’ exposure to the agricultural sector, taking full advantage of the AGFP facility.