INCREASING ACCESS TO CREDIT OF INCREASING ACCESS TO CREDIT OF SMALL FARMERS & FISHERS: SMALL FARMERS & FISHERS:

THE ACPC EXPERIENCETHE ACPC EXPERIENCEbyby

Jovita M. Corpuz Executive Director

Agricultural Credit Policy Council (ACPC)Department of Agriculture (DA)

andFerdinand L. Paguia

Project Development Officer VPolicy Research and Planning Staff, ACPC

APRACA CEOs Open Forum on Agricultural and Rural FinanceAPRACA CEOs Open Forum on Agricultural and Rural Finance26 February 2013, Bangkok, Thailand26 February 2013, Bangkok, Thailand

The presentation is divided into five (5) parts:

1. Global concern over food security; 2. Agricultural credit in the Philippines: A critical

component of food production and self-sufficiency;

3. The ACPC and its evolving role in agricultural credit;

4. Increasing access of small farmers and fishers to credit: ACPC’s milestone contributions; and

5. The road ahead: What remains to be done.

1. Global concern over food security

http://www.tdaxp.com/archive/2006/07/02/scotland-a-city-of-lovecraftian-dreams.html

Agriculture and food production

affected by:

Industrialization and conversion

of agri lands into commercial

areas Some food commodities

(e.g. corn, sugar) as alternative

energy sources Global warming/climate change

http://www.ewea.com/biodiesel-alternative-energy/get-job-biofuel-renewable-energy/

http://sumansahai-blog.blogspot.com/2010/05/agriculture-and-challenge-of-climate.html

Impact of climate change on food production

Without strong adaptation and mitigation measures, climate change will reduce food crop yields by 16% worldwide, and by 50% in South and South-East Asia in the next 3 decades

(UN-FAO, Worldbank)

http://blogs.chapman.edu/scst/tag/climate-change/

More People, Less Food

The world will have to produce 70% more food to feed a projected 9 billion people by 2050.

In the Philippines, the population stands at 90 million and is growing at 1.8% per year.

By 2050, when climate impacts may be at their worst, the population would have ballooned to 180 million.

http://kuro-kuro.org/archives/2131

http://koreanewsonline.blogspot.com/2012/10/hunger-in-philippines-not-food-but.html

http://www.earthyreport.com/site/how-are-we-going-to-feed-9-billion/past/

The Challenge

How to feed a growing population amidst the threat

of climate change on food production.

Food Self-Sufficiency The thrust of the Philippine

government is for the country to be self-sufficient in production of food staples.

Hence, the Philippine Department of Agriculture has launched the Food Staples Sufficiency Program (FSSP) for 2011-2016.

http://www.philrice.gov.ph/?page=resources&page2=news&id=165

The FSSP is the country’s blueprint for ensuring food security and raising farmers’ income.

http://balita.ph/2012/07/05/president-aquino-receives-the-fssp-document-from-da-secretary-proceso-j-alcala/

2. Agricultural credit in the Philippines: A critical component of food production and self-sufficiency

The FSSP recognizes the provision of timely, adequate and affordable credit to farmers as one of the key interventions for achieving the DA’s goal of attaining food and income security. However, ‘access’ to credit remain a formidable challenge.

What is meant by ‘access’?

Credit is considered accessible when:

formal lenders are present in the area; interest rate is affordable; requirements are simple and easy to comply with;

and loan repayment terms are based on the cashflow of

the household

http://www.clipartof.com/portfolio/jtoons/illustration/money-farming-watering-his-plants-and-planting-new-seeds-70653.html

Credit demand for agri-fisheries production

Estimated credit demand: PHP 377 billion (USD 9.276 billion)

Loans released by banks: PHP 85 billion (USD 2.091 billion)

Credit gap/unmet credit demand: PHP 292 billion (USD 7.185 billion)

Bank lending to agriculture and incidence of formal borrowing

Loans released by banks to the agriculture sector account for only 1.8% of their total loan portfolio.

Only one-third (0.6%) went to agricultural production.

Only 52% of farmers and fisherfolk obtained their loans from formal sources. The rest borrowed from private lenders.

3. The ACPC and its Evolving Role in Agricultural Credit

The ACPC plays a unique and critical strategic role in improving access of small farmers and

fisherfolk to formal credit. It is the only government agency with the legal authority to synchronize all agricultural credit policies and

financing programs of the government to ensure a well coordinated and continually

responsive strategy and intervention in agricultural finance.

Laws and legal issuances that created ACPC and expanded its mandates:

1. Executive Order 113 2. Executive Order No. 116 3. Republic Act 7607 (Magna Carta for Small Farmers of

1992) 4. Republic Act 8435 (Agriculture and Fisheries

Modernization Act of 1997)5. Republic Act 10000 (Agriculture and Agrarian Reform

Credit Act of 2009). 6. Republic Act 10352 (General Appropriations Act of

2013) which provides an additional budgetary allocation of PHP 1.0 billion (USD 24.606 million) under the AMCFP.

4. Increasing Access of Small Farmers and Fishers to Credit: ACPC’s Milestone Contributions

4.1 Played a significant role in establishing a market-based policy framework for agricultural finance to sustain continuous credit delivery to small farmers and fishers.

http://article.wn.com/view/2010/01/04/Congress_to_probe_AFMA_budget_nonallocation/#/related_news

4.2 Developed and pioneered innovative financing schemes (IFS) for small agricultural households, especially for borrowers that have no access to formal financing and have limited assets to offer as collateral.

4.3 Facilitated the continuous provision of institutional capacity building (ICB) program for farmer and fisherfolk organizations; and staff development program for ACPC personnel.

4.4 Was instrumental in crafting, and advocating the passage into law, of Republic Act 10000 or the Revised Agri-Agra Reform Credit Act of 2009.

4.5 Sourced out additional funding to beef up the AMCFP fund base for agricultural lending, resulting in the fresh budgetary allocation of P1.0 (USD 24.606 million) billion for CY 2013.

http://www.rbap.org/2010/10/day-1-files-october-14-2010-53rd-charter-anniversary-symposium-smx-convention-center/

http://www.malaya.com.ph/~malayaco/index.php/30th-anniversary/160-news-flash/17301-finally-p1b-for-agri-credit

5. The Road Ahead: What Remains to be Done

ACPC’s commitment under the Philippine Development Plan (PDP) 2011-2016 is to further increase formal borrowing from 57% in 2008 to 85% by 2016. This entails an annual increase in formal borrowing of 4% until 2016.

http://arnoldpadilla.wordpress.com/2012/01/03/ph-economy-in-2011-part-1-flawed-development-plan/

In support of its commitment, ACPC conducted a National Agriculture and Fisheries Credit Summit

in 2011 to elicit the participation of farmer groups, financing institutions, the academe and

other stakeholders from the government and private sector in developing the Strategic Action

Plan for Agricultural Credit 2011-2016.

Strategic Action Plan for Agricultural Credit 2011-2016

The Strategic Plan aims to make formal credit more accessible to small farm and fishing households and contains key strategies for attaining this goal, namely:

Strengthen lending to small farm and fishing households through the AMCFP and the Land Bank of the Philippines;

Reduce costs of lending and provide incentives for private banks to increase lending to the agriculture and fisheries sector;

Strengthen guarantee and insurance programs;

Establish a small farmers and fisherfolk credit database, intensify information dissemination, and strengthen monitoring and evaluation; and

Expand programs that build the capacity of small farmer and fisherfolk cooperatives and other organizations to manage credit funds.

Conclusion

Funding is critical for executing the abovementioned strategies. The additional budgetary allocation of PHP 1.0 billion (USD 24.606) for 2013 serves as a good indication that funding will continue to be provided in succeeding years.

ACPC is currently developing financing schemes that will maximize the use of the fund and encourage financing institutions to leverage the funds to increase outreach to even more farmers and fisherfolk.

Conclusion

With the additional funding, ACPC will also be able to strengthen its other programs in support of credit delivery such as capacity building, advocacy and information dissemination, policy research, and monitoring and evaluation.