2004

Genetically Modified Organisms (GMOs): Issues, Policies, and Impact on Agricultural Economy(pdf file)
Issue No. 3 Series of 2004 October 26, 2004

The advent of modern technology though the application of biotechnology on plants is a positive and innovative step in accelerating agricultural development. However, some compelling issues continue to hound the Department of Agriculture (DA) since the safety and acceptability of GMOs or genetically modified organisms related to economic, health, moral and environmental impact are a paramount concern to consumers, small farmers and fisherfolk, as well. The paper presents the government's policies on GMOs including current efforts on the promotion of safe and responsible application of modern biotechnology in the country.

RURAL CREDIT BUREAU: “A Road Map to Rural Development Thru Accessible and Regulated Credit Delivery”(pdf file)
Issue No. 1 Series of 2004 March 10, 2004

This paper provides the reader with information about the rural credit bureau. It presents a brief historical background on the establishment and use of credit bureaus in the country. Accordingly, the paper also explains the importance and key roles of a credit bureau, i.e., facilitator of information sharing, bridge between formal lenders and borrowers, protector to financial institutions and their clients, enforcer of borrower discipline, etc. Unlike the traditional method of screening the creditworthiness of borrowers, lending institutions benefit from several advantages inherent in utilizing a credit bureau. These are: risk control, increase revenue/profits, administrative savings, and improved customer loyalty. Through the paper, the reader gets an insight on how a credit bureau works as well as on the issues that hinder the development of credit bureaus in the country.

2003

Small Farmers and Fisherfolk: How many are they? (pdf file)
Issue No. 2 Series of 2003 June 2, 2003

This paper presents ACPC's estimate of the number of small farmers and fisherfolk based on available data from various government institutions. Based on what has been gathered, small farmers and fisherfolk constitute a substantial majority (over 90%) of all farmers and fisherfolk. This is around 21% of the total labor force in 2002. Thus, if government is serious in uplifting the lives of a significant segment of the country's population, this information is crucial in

formulating the allocation of resources and investments for this important sector of Philippine society.

 

THE AGRI-AGRA LAW (PD717): A Review of Its Performance (pdf file)

Issue No. 4 Series of 2003 September 18, 2003

 

This paper provides the reader an objective insight on how the Agri-Agra Law has delivered and a factual review of the performance of PD 717 over the period 1975 to 2002. Because lending to agriculture, especially agrarian reform beneficiaries, remains unattractive compared to other sectors due to high credit risks involved, banks still have difficulty complying with PD 717 in spite of the alternative forms of compliance. PD 717 therefore, needs to be amended to correct its flaws. A recent initiative aimed at amending PD 717 is House Bill No. 1930 (substituting House Bill Nos. 104, 658 and 2166). A main feature of the mentioned legislative bills is the provision this time of incentives for banks to lend to the agriculture and agrarian sectors. Among the incentives being considered are (a) the reduction of the gross receipts tax (GRT) rates on interests, commissions and discounts from loans, credit lines and similar credit accommodations extended by financial institutions to small farmers; and (b) the imputation of higher compliance rates to the mandatory loan quota if loans, credit lines and similar credit accommodations are made directly to agrarian reform beneficiaries and/or eligible agricultural activities, to LGUs specifically for rural development. Once these incentives are approved, the banking sector might become more willing to form partnerships with informal lenders or adopt other innovative strategies to expand their Agri-Agra credit outreach.

 

Small farmer and fisherfolk borrowing up, further at 64% in 2002 (pdf file)

Issue No. 3 Series of 2003 September 11, 2003

 

This survey which continues to provide empirical information about farmers' and fisherfolk's demand for credit, pattern of borrowing incidence, and constraints to loan access and repayment, among others, is crucial to the development of policy measures for improving access to financing. The biennial survey conducted by ACPC confirms the reverse in borrowing trend observed years ago that the incidence of borrowing among small farmers and fisherfolk is still increasing. Compared to 47 percent in 1997-1998 and 60 percent in 1999-2000, the share of borrowers in the sector has already reached 64 percent as of the latest survey. More significantly, trends in borrowing from formal sources likewise went up to almost 40 percent during the two more recent periods covering 1999-2000 and 2001-2002, from 24 percent in 1997-98. Moreover, forty (40) percent of rural households are now able to source loans from formal financial institutions, compared to 24 percent in 19997-1998. This could be due to the proliferation of microfinance-oriented programs in recent years. Particularly gaining popularity as loan sources are rural banks and programs of local government units (LGUs).

 

Senate Bill No. 2553: Bane or Boon (pdf file)

Issue No. 5 Series of 2003 September 25, 2003

 

This is a reaction paper to the view that Senate Bill 2553, otherwise known as the Senate version of the Farmland as Collateral Bill, will only set back the implementation of the Comprehensive Agrarian Reform Program (CARP) and result in agrarian reform beneficiaries losing their land. The Farmland as Collateral Bill finds its basis in the policy pronouncement of PGMA for the enactment of "a law making farmland acceptable as loan collateral in order to reduce deterrents to investments in agriculture." The policy statement is by no means lacking in basis. Economic analysts have suggested that one of the factors limiting the availability of credit for more agricultural investments is the eroded collateral value of agricultural land. Farmlands particularly those covered by the CARP generally fail to measure up with the basic prerequisites for the acceptability of collateral namely: (a) Seniority - or the existence of a legal, enforceable priority claim over the collateral; (b) Protection - or the capacity of the collateral to sufficiently repay the lender's exposure; and (c) Marketability - or the easy convertibility of the collateral into cash.

 

SB 2553 is already the Substitute Bill to earlier similarly-aimed legislative bills, which include the Lower House's own approved version - House Bill 5511. Disregarding the guarantee provision contained in HB 5511, SB 2553 instead focuses on how to restore the legal rural land market and, thereby, the formal rural credit market. This is achieved by the Bill mainly through section 27-A which allows the mortgage or sale of awarded lands, formerly prohibited under the CARL.

2002 Agri Credit Highlights

 

Featured in this paper are relevant information about bank's lending to agriculture particularly of loans granted by banks to agriculture and agriculture production for 2001 and 2002. Other statistics include production loans granted by type of agricultural commodity and by each type of bank, agri-agra compliance and performance of Landbank and Quedancor lending to agriculture by purpose/activity. The paper also contains an inventory and assessment of DCPs of the DA showing the profile of DCPs and amount of funds for transfer to the AMCFP.

 

 INNOVATIVE FINANCING SCHEMES (IFS): Are we on the right track? (pdf file)

Issue No. 1 Series of 2003 May 5, 2003

 

The development of Innovative Financing Schemes (IFS) is being supported by ACPC as one of the strategies for stimulating greater growth in the rural economy. The volatile nature of the agriculture sector and the systemic risks often associated with agricultural lending requires continued innovation in designing financial products that can (a) meet the peculiar needs of the sector and (b) consequently be adopted by either government or private rural financial institutions. This paper discusses some of the more recent innovative financing approaches that have been developed and which are being piloted by the ACPC in partnership with government financing institutions (GFIs). Notwithstanding the development of these schemes, this paper also emphasizes that enhancing the availability of rural credit should still be appropriately supported by improved technology, infrastructures, inputs, extension services and markets for more effectiveness.

 

The ACPC Institution Building Program (pdf file)

Issue No. 5 Series of 2002 October 1, 2002

 

 

2002

 

ACPC's Position on the Proposed Amendments to the Agri-Agra Law (pdf file)

Issue No. 4 Series of 2002 March 20, 2002

 

This article features ACPC's position on the proposed amendments to the Agri-Agra Law (Presidential Decree No. 717), which mandates banks to allocate 25 percent of their loanable funds for agriculture and agrarian borrowers. The law's inefficient fund allocation scheme, however, has only served as a disincentive for banks to comply and has further constrained farmers' access to bank credit. For this reason, ACPC is advocating for either the abolition of the law or, at the very least, its amendment to allow for market-determined alternative forms of compliance. Moreover, to increase the flow of credit to the agrarian sector, specific measures/strategies are recommended, including the following: a) implementation of the AFMA-mandated Agro-Industry Modernization Credit and Financing Program (AMCFP); b) design and implementation of Innovative Financing Schemes (IFS) that cater particularly to small rural borrowers who lack capital; and c) improving the creditworthiness and absorptive capacity of small farmers and fisherfolk through institution-building activities and the development of basic rural infrastructure.

 

How Will Farmer's Borrowing Respond to an Increase in Crop Insurance Premiums? (pdf file)

Issue No. 2 Series of 2002 March 13, 2002

 

This article explains the effect/impact of a crop insurance premium adjustment to farmer's credit demand; and factors affecting the demand for crop insurance. Among other things, the study shows that the formal cost of credit, inclusive of the crop insurance premium, has a consistently negative and statistically significant effect on borrowing. This reduction implies, not so much as farmers shifting to informal credit, but rather an increasing reliance on internal funds. There is no evidence, though, that small farmers respond differently to an increase in the premium on formal cost of credit compared to the average-size farm operator.

 

The Fisheries Sector Program (FSP) Credit Component - Another Look at Its Impact (pdf file)

Issue No. 3 Series of 2002 March 15, 2002

 

This paper presents a summary the ACPC evaluation of the effectiveness of the FSP Credit Component as a program support input. Specifically, the evaluation assessed the component's overall accomplishments and impact using a "before-and-after" and "with-and-without" project scenario analysis. The findings reveal that credit outreach under the FSP credit component is low. Only 9 percent of the respondents surveyed in the program priority areas are borrowers under the FSP Credit Component and only 22 percent of the total borrowers in the priority areas obtained FSP loans. Majority of the clients under the program's credit component come from priority bays. The accomplishments of the component could have been improved if focus were maintained in the following areas: a) better dissemination of information to intended beneficiaries about all forms of assistance that were being made available under the FSP; b) installation of mechanisms that would ensure sustainability of the gains derived from the interventions; and c) confinement of the credit intervention in the priority areas of the program.

 

ACPC Position on the Proposed Farmer's Trust System (pdf file)

Issue No. 4 Series of 2002 March 20, 2002

 

To address the problem of declining private investments in the agriculture sector, a proposal was raised for the adoption of a Farmers' Trust System, which aims to provide a market-driven institutional mechanism that will bring together farmer groups, private enterprises and agri-based companies for the purpose of consolidating a raw material base and post-harvest and processing facilities under one integrated business unit in the form of a Trust Enterprise. The proposal, however, suffers from some basic flaws, including its focus on the premise that the "smallness of farm production units" is the reason for the problem in agriculture. The more important factors that influence the profitability of agriculture and other rural-based projects are government's inadequate provision of such fundamental public goods as roads that provide access to markets; irrigation systems that lessen the unpredictability of agricultural yield; economically sound and consistent policy and regulatory frameworks that would provide guidance as well as protection to stakeholders in the sector; and the improvement and maintenance of peace and order conditions. Hence, the proposed strategy of consolidating lands alone is not expected to result in any significant improvement in the viability of agriculture-based businesses.

 

Agri-Credit Fact Sheet- 1st Quarter 2002

 

The fact sheet is a semestral compilation of data and statistics relevant to agricultural credit. The data are drawn largely from the Bangko Sentral ng Pilipinas' (BSP) reports as well as the reports of the ACPC's Monitoring and Evaluation Staff on, among others, loans granted to agriculture (by commodity and by type of bank) and bank's compliance with the Agri-Agra Law (PD 717). It also contains other relevant macroeconomic indicators, such as average Treasury bill, inflation and GDP growth rates.

 

Enhancing Program Coordination Government Institutions involved in Agriculture and Fisheries Finance (pdf file)

Issue No. 6 Series of 2002 October 10, 2002

 

This paper provides a summary of the salient findings and recommendations of the AFMA-mandated review of mandates, programs, policies and performance of each of the government institutions involved in rural finance programs. Among the recommendations contained in the final report are: a) the restructuring/re-organization of government's rural finance institutions to make their delivery of financial services more coordinated and efficient; b) the careful alignment of incentives by government to encourage private sector participation by, among others, aggressively investing in building retail institutions that will deliver financial services to smallholders and aligning the interest rate for credit guarantee programs with market rates, taking into account the risks involved; and b) the maintenance by government of a dual-monitoring system, i.e., ACPC for impact on sector beneficiaries and BSP for the financial viability of institutions. The final report of the review was accepted by its Steering Committee, headed by the DOF, on March 2002. The report was, likewise, submitted to the Congressional Oversight Committee on Agriculture and Fisheries Modernization (COCAFAM), the DA Secretary and the Assistant Secretary for Policy and Planning, the House Committee on Economic Affairs as well as other members of Congress to advocate the translation of the review's recommendations into policies and legislation that could lead to the institutions' improved performance in terms of outreach.

 

2001

 

ACPC: A Catalyst in Rural Finance Policy Reforms (pdf file)

Issue No. 5 Series of 2001 August 16, 2001

 

Since its creation in 1986, the ACPC has pointed to four main factors that influence the lethargic flow of credit to agriculture and fisheries, namely (a) the much greater demand for credit in the sector vis-à-vis available government resources; (b) the non-bankability of most small farmers and fisherfolk; (c) the inadequacy, or even inappropriateness, of the existing credit delivery system to small farmers and fisherfolk; and (d) the high cost involved in lending to agricultural projects. This paper discusses the strategies undertaken by the agency to address the factors inhibiting agriculture and fisheries credit: (1) the rationalization of government intervention; (2) reduction of banks' and borrowers' risks; (3) promotion of farmers'/fisherfolk's bankability; (4) encouragement of innovations in the financing of projects; and (5) the reduction of intermediation costs. A summary of the agency's accomplishments over the years under the said strategies are also presented in the paper.

 

A Brief on the Issue of Agricultural Lands as Loan Collateral (pdf file)

Issue No. 4 Series of 2001 August 13, 2001

 

This paper presents a summary of ACPC's findings on the subject of making farmlands acceptable as loan collateral - one of the petitions made by President Gloria Macapagal-Arroyo to Congress during her first State-of-the-Nation Address (SONA). Based on ACPC's assessment, farmlands can only become acceptable to banks as collateral once distortions in the agricultural land market are removed. This can primarily be done by (a) amending the relevant laws to remove constraints to the marketability of government-issued land instruments, i.e., make the ownership of CLOAs, EPs, and CSCs transferable and at a much earlier date rather than after ten years, and (b) fast-tracking the completion of the CARP's implementation so that government's inappropriate involvement in setting land values and the uncertainties in land ownership can finally end.

 

An Analysis of Quedancor's Financial Condition (pdf file)

 Issue No. 3 Series of 2001 August 10, 2001

 

Drawing its substance from two Agriculture & Fisheries Modernization Act (AFMA) mandated studies undertaken by PSR Consulting, Inc., this analysis presents Quedancor's finances and operating performance. The studies are; 1) the Review, Consolidation and Rationalization of Existing Guarantee Programs for Agriculture and Fisheries, and 2) the Review of the Charters and Performance of the LBP, PCIC, GFSME, ACPC, and Quedancor. Financial statements of the Corporation were also used. Losses from its guarantee operations suggest that Quedancor did not have sufficient market reach due to, among others, shortfalls in NG equity infusion and low fund leveraging.

 

Revisiting the AFMA Chapter on Credit: How Far Have We Gone? (pdf file)

Issue No. 1 Series of 2001 April 10, 2001

 

By revisiting the AFMA Credit Chapter's status of implementation after three years since the passage of the law, this paper provides a classic case study on the process of government policy reform. Several hitches characterize the implementation of the reforms embodied in the AFMA Credit Chapter. Despite the delays, the groundwork for the implementation of the mentioned reforms has finally been put in place. However, the consummation of the reforms still depends on the completion of several unsettled business, including the finalization of the agri-directed credit program (DCP) phase out plans and the immediate allocation of funding out of the annual AFMA budget to support the operationalization of the Agro-Industry Modernization Credit and Financing Program (AMCFP). But above the procedural delays, perhaps the more glaring testimony to the difficulty of carrying out changes is the threat of policy reversal due to incessant but misguided calls from several interest groups. With barely one and a half years remaining for the final consolidation and transfer of funds to the AMCFP, therefore, the AFMA Credit Chapter reforms are already near and yet, remain a distant reality.

 

Revisiting Rural Borrowing Behavior: The Results of the 2000 Survey on Small Farmer and Fisherfolk Indebtedness (pdf file)

Issue No. 2 Series of 2001 August 6, 2001

 

The Small Farmers and Fisherfolk Indebtedness Survey is a continuing biennial activity conducted by ACPC to verify the pattern of borrowing incidence, demand for credit, and possible constraints to loan access and repayment among small farmers and fisherfolk. Among others, the survey results indicate that the proportion of farmer-/fisherfolk-borrowers vis-à-vis non-borrowers has increased from 47 percent in 1997 to 60 percent in 2000. Moreover, the share of borrowers from formal sources increased significantly from 32 percent in 1997 to 40 percent in 2000. The overall increase in borrowing validates reports that indicate increased agricultural lending in the same year. The Bangko Sentral ng Pilipinas (BSP) attributes the increase to stricter regulations on banks' compliance with the Agri-Agra Law (PD 717). However, increasing use of loans for non-production purposes suggests a growing disinclination to prioritize production when credit flows increase.