The Peruvian government has sent to Congress a bill that proposes the absorption of Banco Agropecuario, or Agrobanco, by a new financial entity to be called Mi Agro, El Comercio reported.

Mi Agro will be managed as a second-tier bank, according to Council of Ministers' President César Villanueva and Agriculture and Irrigation Minister Gustavo Mostajo. The new entity, which will cater to small-scale farmers, will inherit Agrobanco's assets and liabilities.

The officials noted that Agrobanco, which has been facing rising loan delinquencies and allegations of crimes and irregularities in the granting of loans, was not able to recover even with a capital injection in April. Capital injections from other international entities were also not possible, which spurred the government to develop the proposal, the officials said.

The government's move follows a similar action from Peruvian agriculture group CONVEAGRO, in which it asked Congress to authorize the liquidation of Agrobanco but, instead of creating a new entity, proposes for the creation of a special fund to replace the bank. The special fund will also be called Mi Agro.