Shifting strategies under a new leadership

The damage inflicted by Supertyphoons Harurot and Niña in the third quarter as well as the tail-end effect of El Niño in the first semester added to the shaky investment climate in 2003 caused by political uncertainty as the country started to brace itself for the national and local elections coming in 2004.

In spite of the low interest environment that the Bangko Sentral ng Pilipinas (BSP) continued to provide during the year, lending activities therefore generally remained sluggish as demand in practically all sectors stayed weak.

Under the management of a new leadership headed by Secretary Luis P. Lorenzo, Jr., the Department of Agriculture (DA) therefore adopted for the agriculture and fisheries sector a shift in focus to the microeconomy and in increasing productivity at the industry level.

Among other things, this shift in approach succeeded in bringing about steady growth in bank lending to the farm sector during the year, which helped make agricultural production grow by 3.77 percent and the economy by 4.4 percent.        

Providing support to the DA's thrust: The accomplishments of ACPC

Instrumental in promoting more participation from the formal banking sector in lending to agricultural production were the accomplishments of ACPC in 2003.

One of the activities to which ACPC gave particular importance during the year was the development and piloting of innovative financing schemes (IFS). The IFS play a significant role in the agenda of government in view of its specific targeted clientele - the small rural borrowers who lack collateral. Two innovative schemes that were piloted during the year are the (1) Special Agricultural Financing Window (SAFW) and (2) Rural Household Business Financing (RHBF) Program. A total of P85M loans released through the innovative schemes during the year reached about 1,177 farmers/fisherfolk beneficiaries.

Likewise, ACPC saw to the immediate implementation of the AFMA's Agro-Industry Modernization Credit and Financing Program (AMCFP) by facilitating the approval of the DBM-DOF-DA Joint Circular No. 1, Series of 2003 and DA Administrative Order No. 16 on the transfer of directed credit program (DCP) funds to the AMCFP. Through these instruments, ACPC was able to initiate the process for phasing into the AMCFP the credit facilities under the DA Banner Programs and European Union (EU)-funded programs, such as the Multi-Livestock Development Loan Program (MLDLP), the Upland Development Program (UDP), the Catanduanes Agricultural Support Program (CatAG), and the Aurora Integrated Area Development Program (AIADP).

The transfer of funds into the AMCFP as provided for in RA 8435, or the Agriculture and Fisheries Modernization Act (AFMA) of 1997, will potentially generate an estimated P6 billion total fund pool for the agriculture and fisheries sector from DCPs alone. For the year, ACPC was able to collect a total of P541M receivables from various credit programs to be transferred to the AMCFP. Out of the total collections, P505M constitute principal payments and the balance of P36M is interest payments. A total of P559 million was already collected under the AMCFP including collections made in 2002.

ACPC's implementation of Institutional Capacity-Building (ICB) activities, meanwhile, also supported credit facilitation by improving the capability of rural financial institutions to access credit funds for relending to individual borrowers. For 2003, under its regular grant assisted projects, ACPC was able to package and fund ICB programs and allocate grant funds amounting to P1.425M to nine (9) organizations/federations. The ICB programs supported by ACPC include management and development programs, salary subsidies for micro-finance staff, systems installation on micro-credit, technical trainings on micro-finance methodologies, cross visits to successful farmers financial institutions, improvement of audit and monitoring systems, introduction of new and efficient savings and credit technology and other related activities pertaining to enhancing delivery of credit by farmers' organizations. These projects/activities benefited 127 organizations and 2,000 small farmers and fisherfolk.

For the special tie-up IB Programs, an ICB program was established with the EU and the DA for cooperatives and savings and loan associations (SLAs) in the areas covered by the Central Cordillera Agricultural Program (CECAP). The signing of the Memorandum of Agreement paved the way for the ICB program's full implementation with P0.9 million in grants released to CECAP assisted organizations. For this program, 30 organizations were assisted with 3,889 small farmers assisted/trained. Likewise, a tie-up program with the Agricultural Credit and Cooperative Institute (ACCI-UPLB) for enhancing the competency, management and decision-making skills of the Board of Directors of credit cooperatives was established.

In policy research, ACPC completed studies on (1) Rural Finance and Developments in Philippine Rural Financial Markets: Issues and Policy Research Challenges, (2) An Impact Evaluation of Quedancor's Credit and Guarantee Programs, (3) The 2003-2005 Medium-Term Agri-Credit Plan, and (4) The Credit Requirement of the Rice Sector

Moreover, policy briefs that were prepared and circulated in 2003 include articles and position papers on (1) Estimating the Number of Small Farmers and Fisherfolk, (2) Developments in the Agri-Agra Law (PD 717), (3) 2002 Small Farmers and Fisherfolk Credit Accessibility Survey Report, (4) Senate Bill No. 2553: Bane or Boon, and (5) Piloting a Rural Credit Bureau: An Action Research Proposal, (6) 2002 Agri-Credit Highlights Through its monitoring system, the agency also continued to document bank lending to agriculture; as well as the performance of government credit, guarantee and insurance programs for agriculture and fisheries. Reports from these monitoring activities, likewise, provide important inputs in the formulation of rural finance policy.

Meanwhile, to improve awareness and support for credit programs of the government, ACPC conducted 9 Credit Facilitation Seminars/ Workshops/ Roadshows for the DA Priority Commodity Programs in Regions 3, 4, 5, 6, 7, 8, 9, 10, 11 and CARAGA for the DA-RFUs, implementors of foreign assisted projects and other stakeholders.