Strengthened partnership of rural banks with DA

Agriculture Secretary Proceso Alcala has expressed his desire to further strengthen his agency’s working relationship with the rural banking industry, particularly in improving farmers’ and fisher folks’ access to credit and capital. His latest wish does not come as a surprise, considering that rural banks have long supported the Department of Agriculture (DA) in a number of programs to enhance the productivity of the aforementioned market segment.

In his speech during the recent 60th Annual National Convention and Corporate Meeting of the Rural Bankers Association of the Philippines (RBAP), Alcala mentioned that rural banks will play an important role in the DA’s target to improve formal borrowing among farmers and fisher folks from 52 percent in 2007 to 61 percent by 2016. One of the DA’s commitments in the Philippine Development Plan for 2011-2016 is to give farmers and fisher folks better access to credit and capital.

Last April, the DA allotted P80 million for various agricultural and fishery products to increase the productivity and income of small farmers and fisher folk in five towns comprising the Polillo group of islands in Quezon province.

The Agriculture chief also noted that, in particular, they want to invite greater participation from rural banks in a number of the DA’s financing programs under the Agriculture and Fisheries Modernization Act of 1997-mandated Agro-Industry Modernization Credit and Financing Program (AMCFP). One such program is the AMCFP-Cooperative Bank Agri-Lending Program (CBAP).

The CBAP aims to expand lending of banks and increase their outreach to small holders in the agriculture and fisheries sector, which will also include credit and institutional capacity building components. The Agricultural Credit Policy Council (ACPC) has provided a budget of P300 million for this program. Created in 1986 by virtue of Executive Order 113, the ACPC assists in synchronizing all credit policies and programs in support of the DA.

In 2012, loan releases under the AMCFP increased by 146 percent year-on-year to P1.12 billion. This year, an additional P1 billion has been provided for the implementation in a new program under the AMCFP.

Another undertaking that the rural banking industry and the DA have been working out together is the Agriculture Guarantee Fund Pool (AGFP), which was created in 2006 to encourage banks to lend to the agriculture sector. The AGFP provides guarantee coverage to unsecured loans extended by financial institutions and other lending conduits to small farmers engaged in rice and/or food production projects.

Alcala was happy to note that the participation of rural banks in the AGFP has been increasing. To date, 118 rural banks have participated in the program, or 21 percent of the entire membership of RBAP. The Agriculture secretary said that he hopes the number will increase over time.

RBAP and the AGFP are also currently forming a Guarantee Partner Support Program that will help members of the association in creating affordable agri-loan products for small farmers and fisher folks.

The DA is likewise strengthening the Philippine Crop Insurance Corp. (PCIC), which directly provides farmers and fisher folks reliable insurance facilities for palay (unmilled rice), corn, high value crops, livestock and other agricultural assets.

The PCIC has signed a memorandum of agreement with RBAP, encouraging RBAP members to participate in PCIC’s agricultural insurance programs. To date, 51 rural banks are participating in PCIC programs.

Under the Agri-Agra Law, or Republic Act 10000, rural banks are mandated to allocate at least 25 percent of their loanable funds to the agriculture sector.

The Bangko Sentral ng Pilipinas has developed a reportorial system to monitor the
compliance of banks under the law.

Under the law’s guidelines, one alternative form of compliance is lending to accredited rural financial institutions (RFIs), which are expected to use the borrowed funds for relending to borrowers from the agriculture sector. The RFIs will then act as direct conduits to the agriculture sector and agrarian reform beneficiaries, by channeling the funds specifically allotted by other banks for the program.

We believe and support the call of Alcala for rural banks to come out with more innovative financing products in support of DA programs. This is in line with the thrust of RBAP member banks in championing financial inclusion, and making sure that the countryside is not left behind in national progress.

The DA has been a valued partner of rural banks for the last 60 years. This enduring partnership has been a boon to the countryside, by ensuring that our agricultural sector stays strong and competitive. Under the responsive leadership of Alcala, the partnership between rural banks and the DA can only get stronger for the greater benefit of our rural communities.

Posted in The Manila Times, 20 June 2013