DA: Lenders can charge 2% interest on agrcultural loans

MANILA, Philippines — The Department of Agriculture allowed its partner lenders to charge an annual two percent interest rate on a state-funded loan product intended to finance agricultural businesses owned by small farmers and fisherfolk.

Agriculture Secretary Francisco Tiu Laurel Jr.  issued Memorandum Circular 10 Series of 2024 that amended the prevailing interest rate of the Agricultural Credit Policy Council (ACPC)’s Agri-Negosyo or ANYO Loan program.

Tiu Laurel made the amendment after the ACPC Governing Council, through Resolution 1 Series of 2024, approved the authorization of partner lending conduits (PLCs) to charge two percent interest per annum for the ANYO program.

With the amendment, the ANYO program, which seeks to finance capital requirements of micro and small agri-fishery enterprises, will now have a total finance charge of 5.5 percent per annum.

Previously, the loan program did not allow PLCs to charge an interest rate. The PLCs only imposed a one-time 3.5 percent service fee.

The ANYO loan program has two products: a micro agri-negosyo loan and a small agri-negosyo loan.

Under the micro agri-negosyo loan, borrowers can get up to P300,000 while the small-agri negosyo loan has a minimum amount of P300,000 and a maximum amount of P15 million.

The ACPC’s loan programs are coursed through PLCs, with the former providing the credit budget and the latter facilitating the loan portfolio.

Monetary Board member V. Bruce Tolentino said the imposition of the interest fee would “incentivize” PLCs to expand their coverage and build up their own loan programs for agricultural start-ups.

The collected interest fees, Tolentino pointed out, would allow the PLCs to bankroll more loans since the budget of the ACPC is miniscule compared to the overall demand of agri-fishery enterprises.

The ACPC has a P2.75-billion budget for its various credit programs this year, including the ANYO loan facility.

“(It will) push the participating banks to find more borrowers and entrepreneurs. We are encouraging them to do a lot more by in effect providing them the opening to increase their service fees,” Tolentino told The STAR in a recent interview.

Tolentino noted that PLCs exert the same effort in facilitating small and big loans.

“If there is no incentive to work, then they will focus on the big loans,” he said, referring to the PLCs.

Tolentino added that the effective 5.5 percent charge of the ANYO program was still lower than the prevailing interest rates of commercial loans for agriculture, which range from eight  to 10 percent.

ANYO is one of the best performing credit programs of the ACPC, posting a 100-percent liquidation rate last year.

In 2023, the ANYO program released P1.886 billion in loans, up 18 percent from the P1.595 billion  in 2022.

The ANYO program had 17,561 end-borrowers last year, a quarter more than the 14,055 recorded in 2022.