Department of Agriculture
Agricultural Credit Policy Council
in cooperation with

 

 LandBank of the Philippines
and
Quedan Rural Credit & Guarantee Corporation

    The Innovative Financing Schemes


 
RURAL HOUSEHOLD BUSINESS FINANCING (RHBF) PROGRAM

 The Location Specific Financing Schemes (LSFS) is the second component part of the DA/ACPC-Landbank Innovative Financing Schemes (IFS) Program that seeks to improve the credit access of small farmers/fisherfolk particularly those without or are deficient in collateral. This component seeks to find workable alternative financing schemes that are locally evolved and are tailor-fit to the characteristics of the collateral short rural agri/fishery-based borrowers.

The Rural Household Business Financing (RHBF) Program shall be the first scheme to be pilot-tested. Other scheme(s) that may later be developed shall likewise be implemented adopting this set of guidelines.


 Obective

  • To support collateral short, cash flow-based financing scheme(s) for small agri/fishery households in partnership with lending agents
  • To encourage agri/fishery households to engage in livelihood diversification activities and improve household income.

 ELIGIBILITY CRITERIA

For Banks

  • Risk asset ratio of not less than12%
  • Past due rate of not more than 25%
  • Profitable operations for the last three years
  • Not experiencing liquidity problems
  • No serious irregularities and exceptions found per latest BSP and LBP examination
  • With no outstanding past due obligations with its creditors

    For Banks
  • Registered with the Cooperative Dev’t Authority
  • With lending experience of at least three years
  • Past due rate of not more than 25%
  • With written policies, systems and procedures on lending, accounting and bookkeeping and with installed books of accounts
  • With a Core Mgt. Team composed of at least a full-time manager, duly bonded treasurer and bookkeeper
  • With installed Capital Build-Up and Savings Mobilization Program
  • With no outstanding past due obligations with its creditors

For NGOs, POs & Other Institutions

  • Registered with the Securities and Exchange Commission or other registering government entity
  • With lending experience of at least three years
  • Past due rate of not more than 25%
  • With written policies, systems and procedures on lending, accounting and bookkeeping and with installed books of accounts
  • With a Core Mgt. Team composed of at least a full-time manager, duly bonded treasurer and bookkeeper; and,
  • Authorized to borrow and lend under its Articles of Incorporation or Charter (in case of State Colleges or Universities)

 Term of the Sub-Loan

The loan maturity shall not exceed one year and the amortization shall be based on the household’s cash flow. The amortization shall be at shortest interval possible. A borrower must have at least a monthly payment.

Documentary Requirements
  • Board Resolution authorizing the organization to participate in the Program
  • Copy of the approved accreditation/credit line with LandBank
  • Credit Project Plan to include microlending guidelines and procedures, description of the target market and loan budget

 Program Scheme

The Program shall provide support to private financial institutions in piloting innovative cash flow based financing schemes for particular target sectors and in selected areas identified by the Program. The Program shall have the following components:

  • Technical Assistance (thru ACPC IFS Program Secretariat) - in the design and development of the credit project.
  • Loan Component (thru Landbank Lending Centers) - for the credit provision to sub-borrowers using the designed innovative scheme.
  • DA/ACPC IFS Seed Fund - to serve as deposit hold-out for the loan principal exposure of Landbank to the participating institutions

 Lending Agents

  1. Universal banks, commercial banks, rural banks, cooperative banks, thrift banks (to include savings and loan associations) and private development banks;
  2. Cooperatives duly registered with CDA;
  3. Non-government organizations (NGOs), People’s Organizations (POs)
Eligible Projects

Any viable income generating activity(ies) of the agri/fishery household that can generate cash flows within the short term.
  • Farm/fishery project(s) provided that the household has another existing source of monthly income
  • Farm/fishery project(s) plus off-farm/non-farm activity(ies) operational for at least one year
  • Off-farm/non-farm activity(ies) provided that the household has existing farm project(s)
Collateral Requirements

Loans to all lending agents shall be secured with Deed of Assignment of Promissory Notes of sub-borrowers together with the underlying securities which includes, but not limited to Crop Insurance and QuedanCor guarantee coverage.

Interest Rates

LBP to lending agents:

For banks except commercial and universal banks
     91-day Treasury Bills rate at the time of availment plus 1%

For all other lending agents
     12% plus 2% service fee

Lending agents to sub-borrowers:

The pass-on rate shall include a reasonable spread for the lending agent.
Other Eligibility Requirements

Lending Agents qualified to participate in the pilot implementation of RHBF must meet the following requirements:

  • Operating in the identified coverage areas of the Program
  • Currently accredited with or must pass the accreditation criteria of Landbank under the IFS and/or other credit/ rediscounting facilities
  • With at least six months experience in microfinance program (i.e., MABS, ASA, Grameen)
  • With a maximum Portfolio At Risk (PAR) of 10%
  • With built-in working loan tracking system for the micro finance operations
  • With a manpower complement for the micro finance project
  • With proposed eligible credit projects