A leader of the House of Representatives on Monday asked the Bangko Sentral ng Pilipinas (BSP) Monetary Board (MB) to include water districts and local government unit (LGU)-led water works providers under qualified borrowers under the Agri-Agra law.
House Committee on Ways and Means Chairman Joey Sarte Salceda said the Agri-Agra Law requires that banks extend 25 percent of their total loanable funds to the agriculture, agrarian, fisheries, and rural development sectors.
“Every year, you have around P2 trillion in loanable funds that should be earmarked towards agriculture and rural development. But banks pay as much as P2 billion in penalties every year, and they would rather do so than lend to these sectors,” Salceda said.
“Local water districts and LGU-run waterworks are crucial to rural development. Running water is crucial for agriculture and fisheries. It’s the lifeblood of rural communities. So, it goes without saying that it should be part of lending to rural development,” he said.
As of 2015, Salceda said 113 of 461 water districts are credit worthy.
“But they still find it difficult to borrow from private banks. Meanwhile, banks are looking for credit-worthy borrowers so they can comply with the Agri-Agra law better. It’s a match,” he added.
Salceda had written the BSP to request “the consideration…of the following concerns with the Implementing Rules and Regulations of the Mandatory Agriculture, Fisheries and Rural Development Financing [AFRD] under Republic Act [RA] No. 11901 or The Agriculture, Fisheries and Rural Development Financing Enhancement Act of 2022.”
“Under Qualified rural community beneficiaries,’ may we recommend the inclusion of water service providers in rural communities under entities qualified for AFRD financing. This will help clarify that water districts, private water service providers, and other water service entities can access AFRD financing —currently only explicitly extended by the IRR towards a more limited set of water service providers,” he said.
Salceda explained that under the revised IRR of the law, water service providers such as LGUs and local water districts are not explicitly mentioned as qualified beneficiaries. Salceda added that no clarifying language to this effect has been issued by the BSP, despite the interest of some local water districts to borrow from banks.
Expanding borrowing to these providers, Salceda added, will help them improve their distribution systems, fund the shift towards more sustainable sources of water, and expand access to sanitation.
“They need cheap financing for long-term projects such as safer pipes and new sources of water,” he said.
“This amendment and relevant clarification will help expand private sector financing towards water and sanitation access in rural communities and in improving the resiliency of the country’s water infrastructure,” Salceda added.