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Department of Agriculture Agricultural Credit Policy Council

Department of Agriculture Agricultural Credit Policy Council. Briefing for Sen. Francis N. Pangilinan Hampton Function Room, Astoria Plaza Ortigas Center, Pasig City September 3, 2010. Outline of Presentation Part 1 : ACPC Thrusts and Programs

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Department of Agriculture Agricultural Credit Policy Council

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  1. Department of Agriculture Agricultural Credit Policy Council Briefing for Sen. Francis N. PangilinanHampton Function Room, Astoria Plaza Ortigas Center, Pasig City September 3, 2010

  2. Outline of Presentation Part 1 : ACPC Thrusts and Programs Part 2 : Situationer on the Agricultural Credit, Guarantee and Insurance Cluster

  3. Part 1: ACPC Thrusts and Programs

  4. VISION The ACPC is the institution on agri-credit policy and program development that promote a sustainable and effective delivery of financial services to the countryside. MISSION Develop and advocate agri-credit policies and Orchestrate programs that promote farmers’ and fisherfolk’s access to sustained financial services.

  5. MANDATES Executive Order 113 (1986) • Synchronize all credit policies and programs in support of the DA’s priority programs • Review and evaluate the economic soundness of all ongoing and proposed agricultural credit programs • Approve all proposed agricultural credit programs prior to submission to the approving or funding agency, whether domestic or foreign • Undertake measures of increasing its funds base and of adopting other liquidity interest stabilization and risk cover mechanisms for its various financing programs

  6. MANDATES Republic Act 7607, the Magna Carta for Small Farmers (1992) • Develop special projects to promote innovative financing schemes for small farmers • Conduct institutional capacity building programs • Advocate rural and agricultural finance policies and programs Republic Act 8435 - Agriculture and Fisheries Modernization Act (AFMA of 1997) • Oversee the implementation of the AMCFP

  7. Current Policies in Agri-Credit • Active participation of Government Financial Institutions (GFIs) in the delivery of credit services and non-involvement of government non-financial institutions (NGFIs) in credit decision making • Greater role of the private sector including rural banks, cooperative rural banks, cooperatives and NGOs in the provision of financial services • Provision of critical support and capacity building services that would facilitate increased participation of the private sector in the delivery of credit • Adoption of market-oriented interest rates – As provided under RA 8435 (AFMA) –

  8. ACPC KEY RESULT AREAS • Agro-Industry Modernization Credit and Financing Program (AMCFP) • Innovative Financing Schemes (IFS) • Management of government credit funds for agriculture and fisheries • Institutional capacity building programs for countryside financial institutions • Rural and agricultural finance policy research, planning, monitoring and advocacy

  9. ACPC CURRENT PROGRAMS I. The Agro-Industry Modernization Credit and Financing Program (AMCFP) - Innovative Financing Schemes (IFS) • Agri-Fishery Microfinance Program (AFMP) • Fisheries Financing Program (FFP) • Cooperative Banks Agri-Lending Program (CBAP) • Agri-Fishery Microfinance Program with PCFC • AMCFP for Tobacco Farmers • AMCFP for Tomato Growers II. Direct Market Linkage Development (DMLD) Program

  10. ACPC CURRENT PROGRAMS III. Institutional Capacity Building (ICB) Program IV. Collection/Consolidation of DCP Funds into the AMCFP V. Policy Research, Planning, Monitoring & Advocacy Services

  11. Status of ACPC Programs As of 1st Semester 2010 A. AMCFP Programs

  12. Status of ACPC Programs A. AMCFP Programs (Con’t..)

  13. Status of ACPC Programs As of end of August 2010, a total of P32.8 million has been released under the DMLD Program. These were used to finance marketing activities of 6 farmer organizations, individual farmers and traders in barangay food terminals and bagsakan centers B. Direct Market Linkage Development Program (DMLDP) C. Institutional Capacity Building Activities • Since 2001, about 4,705 farmer cooperatives and organizations with 47,379 officers and members took part in 1,180 capacity building programs and activities (.e.g. training, coaching, technical assistance, business development and management) undertaken by ACPC, jointly with partner training institutions

  14. D. Status of Collection and Consolidation of DCP Funds into the AMCFP To sustain funding for AMCFP projects, the ACPC collects payments for past due loans released under more than 40 phased-out directed credit programs (DCPs) of various agencies of the DA whose funds had been consolidated into the AMCFP. As of August 2010, almost P1.3 billion out of a total P6.5 billion loans granted by DCPs have been collected and deposited into the AMCFP Fund. From AMCFP on-going programs, on the other hand, P908.6 million have been collected as of August 2010. Status of ACPC Programs

  15. E. Policy Research, Planning, Monitoring and Advocacy Since 1987, ACPC completed nearly 100 research studies on rural finance and agricultural credit Advocacy of credit policy reforms in the Agriculture and Fisheries Modernization Act (AFMA) or RA 8435 Formulation of the AMCFP design and guidelines Preparation of the guidelines on the transfer of government agri-credit funds into the AMCFP (DA-DOF-DBM Joint Circular No. 1, Series of 2003) Crafting of guidelines on the extension of loan grace periods for long-gestating agriculture and fisheries projects (BSP Circular 217) Status of ACPC Programs

  16. E. Policy Research, Planning, Monitoring and Advocacy (Con’t…) Participation in the crafting of various proposed legislations relevant to rural finance, i.e. proposed legislation to make agricultural lands acceptable as loan collateral; proposed amendments to the Agri-Agra Law, etc. Establishment of a Credit, Insurance, Guarantee and Investment (CIGI) Cluster in the Department of Agriculture Small Farmer and Fisherfolk Credit Access Survey Monitoring Reports on Bank Lending to Agriculture and Compliance to Agri-Agra Law Status of ACPC Programs

  17. E. Policy Research, Planning, Monitoring and Advocacy (Con’t…) Recent Activities Participation in the crafting of the IRR of the Agri-Agra Credit Reform Act of 2009 or RA 10000 Formulation of activities and strategies for the National Agri-Fishery Council TWC on Credit, Guarantee and Insurance in view of the extension of AFMA until 2015 Profiling and Estimation of the Credit Demand of Small Farmers and Fisherfolk Credit in the Supply and Value Chain of Priority Agriculture and Fishery Commodities Review of ACPC Programs (on-going) Status of ACPC Programs

  18. Part 2: A Situationer on the Agricultural Credit, Guarantee and Insurance Cluster

  19. DA Special Order No. 143(August 2009) Creation of the National Agriculture and Fishery (NAF) Council Technical Working Committees (TWC), one of which is the TWC on Credit, Guarantee and Insurance (or the TWC on Credit)

  20. Composition of TWC on Credit Government Agencies 1. Agricultural Credit Policy Council (ACPC) – ED Jovita M. Corpuz, Chair 2. Land Bank of the Philippines (LBP) – EVP Wilfredo C. Maldia, Co-chair 3. Philippine Crop Insurance Corporation (PCIC) - Atty. Jovy C. Bernabe 4. Quedan and Rural Credit Guarantee Corporation (Quedancor) – Pres. Federico A. Espiritu 5. National Credit Council (NCC) – Dir. Joselito S. Almario 6. Development Bank of the Philippines (DBP) – Pres. Reynaldo David 7. Bangko Sentral ng Pilipinas (BSP) – Asst. Gov. Corazon Guerrero

  21. Composition of TWC on Credit Private Sector 1. Regional Agriculture and Fishery Council (RAFC) – Mr. Jesus Simon, Vice Chair 2. Rural Bankers Association of the Philippines (RBAP) – Mr. Omar O. Andaya 3. Cooperative Union of the Philippines (CUP) – Mr. Felix Borja 4. National Steering Committee on Agri-Farm Mechanization (NSC-AFMech) – Mr. George Canapi

  22. Functions of the TWC on Credit • Identify /prioritize critical problems, issues and concerns to be acted upon by the NAF Council; • Identify and evaluate options available and recommend the best option to the NAF Council and Steering Committee; and • Review and participate in the formulation of the Agriculture and Fisheries Modernization Plan (AFMP) 2010-2015.

  23. Technical Working Group (TWG) on Credit, Guarantee and Insurance • composed of one representative each from the member institutions of the TWC Functions: • Assist in the formulation of the strategic plan on credit, insurance and guarantee; • Formulate the AFMA operational plan and budget for credit, insurance and guarantee; and • Perform other functions assigned by the TWC.

  24. PRIORITY CONCERNS OF THE CLUSTER 1. Limited loan exposure of banks to the agriculture and fisheries sector 2. Inadequate risk-mitigating instruments, i.e., guarantee and insurance 3. Limited participation of banks and other type of FIs in the use of microfinance technology for agriculture and fisheries 4. Inadequate value chain financing (production, post-production, marketing, distribution – ‘production to consumption’)

  25. Lead Agency Areas of Concern Strategies Action Plan 1. Limited loan exposure of banks to the agriculture and fisheries sector 1.1 Lack of acceptable collateral esp. of small farmers and fisherfolk 1.1.1 Credit guarantee program covering 85% of all risks, except fraud 1.1.2 Expansion of crop insurance coverage to include all agri-fishery commodities Establish database needed to estimate credit requirements ACPC Determine credit, guarantee and insurance requirements ACPC Develop expanded guarantee program Quedancor Develop expanded insurance program PCIC Secure necessary government clearances and get appropriation Quedancor PCIC Implementation of the expanded insurance and guarantee programs Quedancor PCIC

  26. Lead Agency Areas of Concern Strategies Action Plan 1. Limited loan exposure of banks to agriculture and fisheries sector 1.1 Lack of acceptable collateral esp. of small farmers and fisherfolk 1.1.3 Revive quedan receipts as collateral Review the quedan system ACPC 1.1.4 Strengthen farmers’ organizations LBP, ACPC, PCIC, Quedancor 1.2.1 Credit guarantee program covering 85% of all risks, except fraud 1.2.2 Expansion of crop insurance coverage to include all agri-fishery commodities Establish database needed to estimate credit requirements 1.2 Systemic risks arising from natural calamities, pests and diseases ACPC Determine credit, guarantee and insurance requirements ACPC Quedancor Develop expanded guarantee program Develop expanded insurance program PCIC PCIC, Quedancor Secure necessary government clearances and get appropriation PCIC, Quedancor Implementation of programs

  27. Lead Agency Areas of Concern Strategies Action Plan 1. Limited loan exposure of banks to agriculture and fisheries sector 1.2 Systemic risks arising from natural calamities, and pests and diseases 1.2.3 Increase government subsidy on premiums for the expansion of insurance coverage to include all agri-fishery commodities Lobby for the release of appropriation DA, PCIC 2. Inadequate risk-mitigating instruments, i.e., guarantee and insurance 2.1 Inadequate guarantee funds 2.1.1 Increase government budget on guarantee programs Lobby for increase in government appropriation for guarantee DA, Quedancor 2.2 Inadequate agriculture insurance funds DA, PCIC 2.2.1 Increase government subsidy on premiums to expand insurance coverage to include all agri-fishery commodities Lobby for the release of government’s share in the premium subsidy and increase the amount of subsidy 2.3.1 Allocate government funds for fisheries insurance Lobby for the appropriation of government funds for fisheries insurance DA, PCIC 2.3 Lack of fisheries insurance funds

  28. Lead Agency Areas of Concern Strategies Action Plan 3. Limited participation of banks and other type of FIs in the use of microfinance technology for agriculture and fisheries Conduct seminars, info campaign thru multi-media, market matching, road shows DA, ACPC, BSP, LBP 3.1.1 Intensify conduct of information dissemination activities on agri-microfinance technologies 3.1 Inadequate information dissemination on existing agri-microfinance technologies 3.2 High transactions cost 3.2.1 Establish database on profile of end-borrowers of AMCFP, LBP, PCIC, Quedancor (similar to an agri-credit bureau) DA, ACPC, LBP, PCIC, Quedancor Develop framework on end-borrower database Provide funding for the database system DA/AFMA, ACPC

  29. Lead Agency Areas of Concern Strategies Action Plan 3. Limited participation of banks and other type of FIs in the use of microfinance technology for agriculture and fisheries DA, ACPC, LBP, PCIC, Quedancor Pilot-test with selected conduits/areas 3.2 High transactions cost Develop data sharing system/ credit rating system DA, ACPC, LBP, PCIC, Quedancor 3.2.2 Provide capacity building activities Provide more funds for ICB DA/AFMA, ACPC Develop standard MIS system for member institutions 3.2.3 MIS for each microfinance program DA, ACPC, LBP,, PCIC, Quedancor 3.3.1 Provide insurance protection and/or guarantee coverage for agri-microfinance 3.3 Very strict classification of portfolio at risk in microfinance Encourage MFIs and other conduits to join the insurance and guarantee programs DA, PCIC, LBP Quedancor

  30. Lead Agency Areas of Concern Strategies Action Plan 3. Limited participation of banks and other type of FIs in the use of microfinance technology for agriculture and fisheries ACPC, LBP 3.4 Lack of appropriate microfinance technology for agri-fisheries 3.4.1 Pilot more agri-microfinance schemes Develop and pilot-test agri-microfinance schemes to showcase the viability of microfinance activities with insurance and guarantee components Conduct study 3.4.2 Documentation of best practices ACPC 3.5.1 Establish database on profile of end-borrowers of AMCFP, LBP, PCIC, Quedancor (similar to an agri-credit bureau) 3.5 Inadequate information on agricultural borrowers Develop framework on end-borrower database DA, ACPC, LBP, PCIC, Quedancor, PCFC Provide funding for the database system DA, ACPC

  31. Lead Agency Areas of Concern Strategies Action Plan 3. Limited participation of banks and other type of FIs in the use of microfinance technology for agriculture and fisheries DA, ACPC, LBP, PCIC, Quedancor 3.5 Inadequate information on agricultural borrowers Pilot-test with selected conduits/areas Develop data sharing system/credit rating system DA, ACPC, LBP, PCIC, Quedancor 3.5.2 Conduct capacity building activities Provide more funds for ICB DA, ACPC

  32. Lead Agency Areas of Concern Strategies Action Plan 4. Inadequate value chain financing (production, post-production, marketing, distribution –‘production to consumption’) 4.1 Make value chain financing available under the AMCFP Funding support from DA and from the proceeds of 25% compliance with RA 10000 DA, ACPC 4.2 Provide capacity building activities based on the needs of the players Provide more funds for ICB DA, ACPC 4.3 Continue credit market matching of FIs and farmers, and producers and buyers Conduct credit market-matching activities nationwide DA, ACPC, LBP, PCIC, Quedancor

  33. Lead Agency Areas of Concern Strategies Action Plan 4. Inadequate value chain financing (production, post-production, marketing, distribution –‘production to consumption’) 4.4 Pilot test value chain financing schemes Develop and pilot-test agri-microfinance schemes to showcase the viability of microfinance activities with insurance & guarantee components. Linkage with other DA agencies DA, ACPC, LBP 4.5 Documentation of best practices Conduct study ACPC 4.6 Implement value chain financing program Replicate value chain financing modality ACPC, LBP

  34. Thank You!

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