Transcript How AGFP is Helping the Small Farmers?

How AGFP is Helping the Small Farmers?
COCAFM En Banc Meeting
26 May 2011
AGFP Origin
• Administrative Order No. 225-A established the
Agricultural Guarantee Fund Pool (AGFP) in May
2008.
• The AO required the GOCCs and GFIs to
contribute five percent (5%) of their 2007 surplus
initially for rice and corn commodities.
• Through an all-risk guarantee facility, the AGFP
encourages private financial institutions (PFIs) to
expand their unsecured lending to small farmers
and fisherfolks engaged in food production.
Status of Funds: As of May 2011
• Total contributions to the Fund amounted P4.48 billion.
• The contributors to the fund include Land Bank of the
Philippines (LANDBANK), Department of Agriculture (DA),
TRANSCO, NAPOCOR, MWSS, PEZA, PCSO,NEA , etc.
• In compliance with AO, all fund contributions are placed with
LANDBANK Trust Banking Group.
• The Department of Agriculture, in coordination with Land
Bank of the Philippines, exercises direction and supervision
over the AGFP through a Governing Board and a Program
Management Committee. LANDBANK also acts as the program
institutional manager.
Organization and Management
Committee
Composition
Responsibilities
Governing
Board
(GB)
Chair
Members
: DA Undersecretary
: Representative, LBP
Representative, NAPC
Representative, ACPC
Representative, DOF
Representative, Academe
Representative, CFI
• Formulate
policies
relative
to
the
implementation and utilization of the AGFP;
• Oversee effective Fund utilization and
implementation
Program
Management
Committee
(PMC)
Chair
Co-chair
Members
: Representative, LBP
: Representative, DA
: Representative, LBP
Representative, DA (2)
• Execute the Governing Board’s decisions
Program
Management
Office
(PMO)
Program Director
Program Manager
Accountant
Guarantee Officers/Assts.
* housed at LBP-PMG
Mktg. Officer/Asst.
A/R Specialist
MIS Specialist
Admin. Officer
Receiving Clerk
• Provide technical, administrative and
secretariat support to the Governing Board and
PMC
• Perform the day-to-day activities
relevant to AGFP implementation
Main Features of AGFP
• Provides guarantee cover to lending institutions (LIs) catering
to small farmers and fisherfolks.
• Eligible farmers/fisherfolks are those (a) engaged in
agriculture/food-based production, and (b) With no assets
acceptable as collateral
• Eligible lending institutions include: (a) rural banks, (b)
cooperatives, (c) small/medium entrepreneurs (SMEs) and (d)
NGOs, farmer organizations.
• Guarantees up to 85% of the principal eligible loan extended
by LIs.
• Guarantees all risks except fraud on the part of the conduit
• Quick payment of guarantee claims (within 15 days from
receipt of complete documents)
How guarantee works?
• Assuming:
- 5% probability of default
- 20% lending rate
- 15% cost of lending, administrative costs
- 5 % expected margin
• No lending will take place without the guarantee fund (since the
expected loss of 5% plus the 5% of the cost of money (5% times
1.15) is greater than the expected margin of 5%).
• But if 85% of the principal is guaranteed, then the expected or
actuarial loss of the lender will be lower than his expected gain.
• In short, unsecured loans become available because of the
guarantee. Although it’s the conduit that is directly protected by
the AGFP, the biggest beneficiaries are the borrowers who would
not have been able to borrow without the guarantee.
What are the steps in applying for
guarantee coverage?
• A credit conduit must first apply for a guarantee line
with the AGFP.
• Then, the Project Management Office (PMO) will then
validate the application based on the criteria stipulated
in the AGFP Implementing Rules and Regulations (IRR).
• Once a line is approved/established, the conduit may
already request for guarantee coverage based on:
(a) masterlist of small farmers/ fisherfolks with
unsecured loans and
(b) payment of 1% guarantee fee per cropping.
What are the steps in requesting for
claims payment?
• First, write letter-request to PMO with following attached
documents:
– Certification of non-payment issued by the duly-authorized
representative officer of the Credit Conduit;
– Duly-received demand/collection letter issued by the
Credit Conduit to the Sub-borrower
– Statement of Account of the sub-borrower; and
– Proof of occurrence of calamity/pest/disease occurrence,
if applicable.
• Upon completion of field validation , payments may be
effected.
How many farmers have already benefited from AGFP?
• The AGFP is just starting to gain acceptance against a negative
recollection of past supervised credit programs.
• Since 2008, approved guarantee coverage reached P4.89
billion, 85% of which or P4.173 billion were used to cover
palay production.
• Thru AGFP guarantee cover, a total of 124,761 farmers have
availed unsecured loans, of which, 94,886 farmers are palay
producers. With the new participation of CARD Bank and
other big rural banks this year, the farmer outreach is
expected to hit one million mark.
• More than half of the farmer-beneficiaries are in North/
Central Luzon, with Region II posting the highest number of
small farmers.
• As of April 2011, AGFP has paid claims totalling P94.165
million, with North/Central Luzon sharing more than onefourth of total claims paid. Typhoons Ondoy and Juan inflicted
most damages to North/Central Luzon.
Distribution of Farmer-Beneficiaries
Number
%Dist’n
56,833
45.55
North/Central Luzon
37,812
30.30
South Luzon
19,021
15.25
Visayas
12,203
9.78
Mindanao
55,725
44.67
124,761
100.0
Luzon
Total
Challenges to AGFP
• AGFP started slowly due to (a) initial hesitance of many
lending institutions with negative experiences with
unsecured small farmer lending, and (b) untested
implementing policies and guidelines.
• Thru aggressive encouragements by LANDBANK, AGFP started
to gain grounds but its conduits still asked for continued
guidance as to (a) how to go back to small farmer lending and
(b) how to avail of guarantee cover from AGFP.
• While rural banks and cooperatives make up the main clients
of AGFP, efforts are in place (as a special program) to tap the
Irrigators Associations and other farmer organizations as main
platforms for increasing further the small farmer outreach.
• AGFP pays guarantee claims faster than it collects guarantee
fees.
• Climate change poses a threat to the institutional viability of
AGFP.
Next Steps
• For this year, AGFP will:
(a) Increase product knowledge of lending institutions as to how
to avail from AGFP.
(b) Seek DA/DAR/DENR support (convergence) in (i) how to
find/screen eligible small farmers/projects (ii) how to match
farmers/projects with willing lending institutions, and (iii)
funding BDS services pertinent to technical trainings,
management and supervision of small farmers.
(c) Aggressive marketing efforts to enjoin all lending institutions
with credit lines not only with LANDBANK but other
wholesale lending institutions like DBP, other GFIs and
even private commercial banks(those that support micro-agri
of MFIs.)