Introduction With the advent of the Agriculture and Fisheries Modernization Act (AFMA) in 1997, the Agricultural Credit Policy Council (ACPC) took the lead in efforts to develop a system whereby government credit resources are administered more efficiently through a single, umbrella financing program for agriculture and fisheries the AFMA-mandated Agro-Industry Modernization Credit and Financing Program (AMCFP). The AMCFP is designed to make credit more accessible to small farmers by including rural banks, cooperative rural banks, cooperatives, self-help groups, farmers' associations and non-government organizations as retailers of the AMCFP fund. It is the AMCFP's objective to make credit delivery more efficient and effective through financial institutions that have adequate experience, expertise and resources; and less costly by removing the lending task from non-financial agencies of the government. The AMCFP aims to establish an efficient, responsive and sustainable credit or financial system for small farmers, fisherfolk, those engaged in food and non-food production, processing and trading, cooperatives, farmers' and fisherfolk's organizations, and small and medium-scale enterprises (SMEs) in pursuit of a modernized and self-sufficient agriculture and fisheries sector. The AMCFP differs from the past government credit programs: (i) it is demand-driven and not supply-led; (ii) it is not commodity-specific but covers a whole gamut of income-generating projects; (iii) it does not involve the government in any credit decision-making because it is implemented as a         two step loan program with government financial institutions (GFIs) as wholesalers and qualified         private banks as retailers; and (iv) it adopts market-determined rates as opposed to the subsidized rates of the past. Basic Policy Principles The emphasis of AFMA with respect to agricultural and fisheries finance is on the proper management and utilization of credit, through the following policy principles: 1. Enhancing access to credit by the small farmers and fisherfolk and SMEs engaged in agriculture and     fisheries while minimizing inefficiencies in rural financial intermediation; 2. Greater role of the private sector in providing financial services to the above mentioned sectors; 3. Adoption of market-determined interest rates in government lending to sustain the availability of     credit funds; 4. Active participation of the banking sector and GFIs in the rural financial system, and exclusion of     government corporations and non-financial agencies in the implementation of credit programs; and 5. Government provision of enabling policy environment, critical support and capacity-building services     to spur increased private sector participation in the delivery of credit services. Program Administration The ACPC is the Oversight Body of the AMCFP, steering its implementation. It reviews and approves proposed credit programs and serves as the venue for identifying and addressing policy issues affecting the AMCFP. The ACPC monitors and evaluates the performance of the AMCFP and conducts policy and action research studies to equip itself with empirical data necessary for policy formulation. The ACPC also oversees the inflow of loanable funds from the rationalized DCPs - including loan receivables - and the outflow of these funds through qualified wholesalers. It conducts inventory and accounting of all directed credit programs (DCPs) in agriculture and reviews their enabling laws/instruments. The ACPC ensures that loans released under these DCPs are collected and the funds are transferred to the AMCFP. This is to ascertain increased credit access of its intended beneficiaries, i.e., the small farmers and fisherfolk as well as ensure the program's sustainability. In support of the AMCFP, the ACPC implements two other programs that are equally crucial to the success of the local credit system. One is the development and pilot testing of "innovative financing schemes" (or IFS), programs that address the peculiar needs of poor farmers and fisherfolk, particularly their inability to meet the collateral and other requirements imposed by banks. The second is "institution capacity building" (or ICB), through which the ACPC provides grassroots and rural finance institutions funding assistance for institutional strengthening in order that they may become effective and efficient lending and collection entities in the countryside. Program Beneficiaries The eligible end-borrowers/beneficiaries of the AMCFP are the following: Small farmers and fisherfolk; Rural women engaged in production, processing and/or trading of agriculture and fisheries products; Agri/fishery based small and medium enterprises (SMEs) provided that if such is a single proprietorship or a partnership, the enterprise is classified as "micro-enterprise" and if such is a cooperative or corporation, majority of its stockholders/members are small farmers and fisherfolk. Eligible Projects A. Projects that can be financed by the AMCFP (Section 23 of AFMA) are: Agriculture and fisheries production including processing of fisheries and agri-based products and farm inputs; Acquisition of work animals, farm and fishery equipment and machinery; Acquisition of seeds, fertilizer, poultry, livestock, feeds and other similar items; Procurement of agriculture and fisheries products for storage, trading, processing and distribution; Acquisition of water pumps and installation of tube wells for irrigation; Construction, acquisition and repair of facilities for production, processing, storage, transportation, communication, marketing and such other facilities in support of agriculture and fisheries; Working capital for agriculture and fisheries graduates to enable them to engage in agriculture and fisheries-related economic activities; Agribusiness activities which support soil and water conservation and ecology-enhancing activities; Privately-funded and LGU-funded irrigation systems that are designed to protect the watershed; Working capital for long-gestating projects; and Credit guarantees on uncollateralized loans to farmers and fisherfolk. B. Projects to be financed shall be demand driven. However, priority will be given to viable projects under the    categories listed above and which promote the competitiveness of small farmers/fisherfolks such as but not    limited to the following: Projects that adopt or showcase new / modern technology that enhances yield and/or quality of produce; Acquisition of modern machinery / equipment and/or adoption of new methodologies that improve productivity and quality of processed or traded agriculture and fishery products; Projects that introduce upgrading of quality of local breed of fishery, poultry or livestock or introduce new / modern technology that improves quality and productivity of local stock; Projects that adopt diversification, including non-farm or off-farm economic activities, particularly in the case of marginalized or subsistence farmers and fisherfolk. Eligible Fund Wholesalers As overseer of the AMCFP, the ACPC approves and provides financing to agricultural credit programs and projects of GFIs which shall serve as the Fund Wholesale Lenders. Eligible Fund Retailers To screen and evaluate Private Financial Institutions (PFIs) applying as fund retailers, the Fund Wholesalers shall adopt its existing accreditation and eligibility criteria under its rediscounting or wholesaling programs. However, if PFIs are currently tapped by the Fund Wholesalers in its regular rediscounting / wholesaling programs, the Fund Wholesalers shall formulate the appropriate accreditation criteria. subject to the review of the Technical Review Team. PFIs which may qualify as fund retailers are: Private banks such as cooperative banks, rural banks, thrift banks; Cooperatives duly registered with the Cooperative Development Authority; Non-Government Organizations (NGOs) and People's Organizations (POs) with juridical personalities. Interest Rates A. Interest rates to Fund Retailers. The Fund Wholesalers shall charge interest rates to the Fund Retailers, regardless of financing mode adopted, as follows: For short term loans 91-day Treasury Bill Weighted Average Interest Rate (WAIR) plus spread; For term loans WAIR on government bonds / securities of equivalent maturity plus spread for fixed rate or if a variable rate is adopted, the loan will be repriced quarterly equivalent to the 91-day Treasury Bill WAIR plus spread. The spread shall be set by the Fund Wholesalers taking into account the associated risk which shall range from one percent (1%) per annum for secured notes/loans and two percent (2%) for unsecured notes / loans. B. Interest Rate to End-Borrowers. The PFI retailer may charge interest rate according to its existing policies, which    takes into consideration recovery of its total lending costs and associated credit risks. However, to promote    efficiency and discourage "excessive" charging, the Technical Review Team shall recommend an interest rate    spread for participating PFIs for which shall be reviewed periodically based on the actual spread interest rates    charged by the PFIs.

For more information, you may contact: AGRICULTURAL CREDIT POLICY COUNCIL 28/F One San Miguel Ave. Bldg. San Miguel Ave. Cor. Shaw, Ortigas Center, Pasig City, 1605, Philippine E-mail us: acpcinfo@yahoo.com Contact us: Tel. No. 634-3320-21; 636-3391/93 Fax. No. 634-3319; 636-3393 Website: www.acpc.gov.ph