UNIT I: Intro to Agricultural Finance Flashcards
the art and science of managing money
FINANCE
concerned with the process, institutions, markets, and instruments
FINANCE
TRUE OR FALSE
finance as a field is limited to dealing with money or cash
FALSE
since it considers wide array of financial services in a financial system
are of fin concerned with design and delivery of advice and fin products to clients/customers
FINANCIAL SERVICES
fin services constitute what 2 types of products?
TANGIBLE (money, goods used as payment)
INTANGIBLE (fin advice, services like online payments, and money tranfers)
study of mgt and provision of fin resources to the agriculture sector (crops, livestock, agri products and services, etc.)
AGRICULTURAL FINANCE
pertains to the array of financial services (i.e., agricultural credit, insurance, saving, and guarantee) provided and utilized in the sector
AGRICULTURAL FINANCE
used to finance agriculture-related activities such as input supply, production, distribution, wholesale, processing, and marketing
AGRICULTURAL FINANCE
the ability of an individual to obtain goods, services, or money at the present time in exchange for a promise to pay at a definite future time
CREDIT
also refers to loans granted by financial institutions to borrowers who pay credit in the form of goods, services, or money
CREDIT
IN ACCOUNTING, it pertains to the entry in an account that increases the liability, revenue, or equity accounts and decreases asset or expense accounts
CREDIT
cash loans extended by financial institutions (formal or informal, individuals or groups) to the different actors in the agri-food supply chains
AGRICULTURAL CREDIT
TRUE OR FALSE
agcredit may only be availed through cash
FALSE
it may be cash or in-kind
examples of in-kind agcredit
MATERIAL INPUTS (lent by agri-supply stores, middlemen, and other input suppliers to the producers, and the manual labor paid
using a portion of the harvest)
THE AGRICULTURAL SUPPLY CHAIN
suppliers—->farming—->
processing—->distribution—->
retail—->consumer
example of agricultural credit
Kapital Access for Young Agripreneurs (KAYA)
Agri-Negosya Loan Program
Sikat Saka
Agrarian Production Credit Program (APCP)
encompasses the range of financial services offered and used in rural areas by people of all income levels.
RURAL FINANCE
as a field of work, it enables access to farmers and all related enterprises to efficient and sustainable financial services which can promote agricultural and economic development
RURAL FINANCE
are all transactions in rural finance agricultural?
no. there are non- agricultural enterprises that operate in rural economies, and their need for financial services is provided through rural financing, and not agricultural financing
is agricultural finance merely a subset of
rural finance?
no. while a large part of agricultural finance is a subset of rural finance since agricultural activities predominantly occur in rural areas, there is still a portion of agricultural finance that is outside the subset of rural finance (i.e., urban farming/agriculture and food processing and manufacturing situated in urban areas).
range of financial services offered to and utilized by individuals or groups who belong to the low-income level in both rural and urban areas
MICROFINANCE
examples of products and services in MICROFINANCE
micro-deposits, micro-insurance, micro-enterprise loan plus, housing microfinance loans, micro-agri loans
“helping the poor help themselves”
TAGLINE OF WHICH TYPE OF FINANCE
MICROFINANCE
NATURE OF AGRICULTURAL FINANCE
FINANCING AGRICULTURE or FINANCING OTHER SECTORS
generally, risk and uncertainties involved in an enterprise can be foreseen and managed
NATURE OF AGRICULTURAL FINANCE
FINANCING AGRICULTURE or FINANCING OTHER SECTORS
ownership of land is difficult to verify as land records are not updated
FINANCING AGRICULTURE
NATURE OF AGRICULTURAL FINANCE
FINANCING AGRICULTURE or FINANCING OTHER SECTORS
sufficient infrastructure is available to implement their schemes
FINANCING OTHER SECTORS
NATURE OF AGRICULTURAL FINANCE
FINANCING AGRICULTURE or FINANCING OTHER SECTORS
very short gestation period
FINANCING OTHER SECTORS
NATURE OF AGRICULTURAL FINANCE
FINANCING AGRICULTURE or FINANCING OTHER SECTORS
monitoring is relatively easier and less time consuming
FINANCING OTHER SECTORS
NATURE OF AGRICULTURAL FINANCE
FINANCING AGRICULTURE or FINANCING OTHER SECTORS
identification of ownership can be easily done by verifying records
FINANCING THE SECTORS
NATURE OF AGRICULTURAL FINANCE
FINANCING AGRICULTURE or FINANCING OTHER SECTORS
entrepreneurs are not usually misled by external influence as they are well organized
FINANCING OTHER SECTORS
NATURE OF AGRICULTURAL FINANCE
FINANCING AGRICULTURE or FINANCING OTHER SECTORS
long gestation period between investment and returns
FINANCING AGRICULTURE
ISSUES AND CHALLENGES IN AGRI FINANCE
TRUE OR FALSE
higher bank density ratio can be found in region 3
FALSE
NCR accounts for higher bank density since concentrated ang banking facilities doon
TRUE OR FALSE
Rural clients outside NCR compete for access to bank credit and other servs with those urban areas, who predictably lag behind in access
FALSE
switch Rural with Urban
ISSUES AND CHALLENGES IN AGRIFIN
TRUE OR FALSE
high transac costs of small farmer loans discourage bank lending
TRUE (mas favorable pa sa banks mag-provide loans nang malakihan)
ISSUES AND CHALLENGES IN AGRIFIN
informal moneylenders operate on a very limited supply of funds, that’s why it’s not???
IT IS NOT SUFFICIENT to service a large number of borrowers
it explains why agri output has not increased despite cheap credit
FUNGIBILITY OF CREDIT
(di naco-control ng rural fin insti kung saan talaga ginagamit yung loans and minsan nga ay hindi for the intended purpose)
misutilization of loans leads to _______ farm output and income AND this negatively impacts the _______ to pay the loans
LOWER; ABILITY
SUPPLY SIDE FACTORS RESULTING TO LOW AGRICULTURAL FINANCING
TRUE OR FALSE
agri and agra loan quota spawned efficiency in funds allocation and decreased banks’ opp costs
FALSE
efficiency—>inefficiency
decreased—>increased
SUPPLY SIDE FACTORS RESULTING TO LOW AGRICULTURAL FINANCING
overly _______ loan provision requirements of CBP to ensure greater prudence made most banks _______ of agriculture sector
STRICT; WARY
SUPPLY SIDE FACTORS RESULTING TO LOW AGRICULTURAL FINANCING
TRUE OR FALSE
reduction in the number of existing banks due to mergers strengthened the impact of interest deregulation
FALSE
strengthened—->weakened
(interest deregulation - large banks control pricing)
SUPPLY SIDE FACTORS RESULTING TO LOW AGRICULTURAL FINANCING
TRUE OR FALSE
banks shield away from extending small farmer loans and low-cost credit following the enactments of the Magna Carta for Small Farmers (RA 7607)
TRUE
SUPPLY SIDE FACTORS RESULTING TO LOW AGRICULTURAL FINANCING
TRUE OR FALSE
Magna Carta for Small Farmers (RA 7607) of 1992 states that interest rates for small farmer loans should be greater than 75% of prevailing commercial rates
FALSE
should be greater—->should not be greater
SUPPLY SIDE FACTORS RESULTING TO LOW AGRICULTURAL FINANCING
this promoted inefficiency fund allocations, prevented rural borrowers from venturing into other rural-based enterprises
CONTINUED IMPLEMENTATION OF DIRECTED CREDIT PROGRAMS
DEMAND SIDE FACTORS RESULTING TO LOW AGRICULTURAL FINANCING
- lack of collateral value of land
- the poor credit rating of small farmers
- financial liberalization coupled with protectionist rural programs
FEATURES OF DIRECTED AGRICULTURAL CREDIT PARADIGM
chief aims
boost agri prod and reduce poverty
FEATURES OF DIRECTED AGRICULTURAL CREDIT PARADIGM
role of financial markets
help the poor and stimulate production
DACP
view of users
beneficiaries; borrowers
FEATURES OF DIRECTED AGRICULTURAL CREDIT PARADIGM
subsidies
heavily subsidy dependent
FEATURES OF DIRECTED AGRICULTURAL CREDIT PARADIGM
sources of funds
vertical: gov’t and donors
FEATURES OF DIRECTED AGRICULTURAL CREDIT PARADIGM
associated information systems
dense, fragmented, and vertical
FEATURES OF DIRECTED AGRICULTURAL CREDIT PARADIGM
sustainability
largely ignored
FEATURES OF DIRECTED AGRICULTURAL CREDIT PARADIGM
outreach
mostly ignored
FEATURES OF DIRECTED AGRICULTURAL CREDIT PARADIGM
evaluations
credit impact on beneficiaries - mainly primary data
REASONS FOR THE FAILURE OF THE DACP
-the emphasis on disbursing ag credit meant that the development of SUSTAINABLE FIN INST AND MARKET WAS NEGLECTED
-perception of rural comms as TOO POOR TO SAVE, so efforts concentrated almost exclusively
-development fin insti were often seen as GOVERNMENT DISBURSEMENT WINDOWS, resulting in a poor loan repayment culture
FEATURES OF FINANCIAL SYSTEMS PARADIGM
chief aims
reduce market imperfections and transac costs for incom expans and poverty reduction
FEATURES OF FINANCIAL SYSTEMS PARADIGM
role of financial markets
intermediate efficiently
FEATURES OF FINANCIAL SYSTEMS PARADIGM
view of users
clients: borrowers and depositors
FEATURES OF FINANCIAL SYSTEMS PARADIGM
subsidies
increasingly independent of subsidies
FEATURES OF FINANCIAL SYSTEMS PARADIGM
sources of funds
horizontal: primarily voluntary deposits
FEATURES OF FINANCIAL SYSTEMS PARADIGM
associated info systems
less dens and mainly horizontal
FEATURES OF FINANCIAL SYSTEMS PARADIGM
sustainability
major concern
FEATURES OF FINANCIAL SYSTEMS PARADIGM
outreach
primary concern
FEATURES OF FINANCIAL SYSTEMS PARADIGM
evaluation
performance of fin insti
