UNIT VIII: Agricultural Credit Policies and Programs in the Philippines Flashcards
AGRICULTURAL CREDIT PROGRAMS
credit programs that are directed to a specific sector for a specific purpose and its fin resources come from the gov’t, internal agency funds, or donors, to promote agri development
Directed Credit Programs
AGRICULTURAL CREDIT PROGRAMS
issues with directed credit programs (DCPs)
-limited access
-unsustainable
-credit players did not reach intended markets
-low repayment (–>default)
-costly for gov’t
AGRICULTURAL CREDIT PROGRAMS
what is the RA 8435?
Agriculture and Fisheries Modernization Act (AFMA) of 1997
AGRICULTURAL CREDIT PROGRAMS
in 1990s, two reforms were put into place, namely:
-RA 8435 or the Agriculture and Fisheries Modernization Act (AFMA) of 1997
-National Strategy for Microfinance
AGRICULTURAL CREDIT PROGRAMS
principles of the two major reforms instituted in 1990’s
-increased participation of the private sector/microfinance institutions
(MFIs)
-adoption of market-based financial and credit policies
-focus on proper management and utilization of the loan fund
-active participation of banks and government financial institutions
-government to provide the enabling policy and regulatory
environment and critical support services
AGRICULTURAL CREDIT PROGRAMS
umbrella credit program of the Department of Agriculture (DA), administered by the Agricultural Credit Policy Council (DA-ACPC), to cater to the financial needs of small farmers and fisherfolk
Agro-Industry Modernization Credit and Financing Program (AMCFP)
Agro-Industry Modernization Credit and Financing Program (AMCFP)
AMCFP funds are channeled through which institutions?
government financial institutions
Agro-Industry Modernization Credit and Financing Program (AMCFP)
gov’t fin insti acted as _______ of ag credit funds to private fin insti and as ________ to smallholders
wholesalers; direct retailers
PROGRAMS under Agro-Industry Modernization Credit and Financing Program (AMCFP)
-Sikat Saka Program
-Agriculture and Fisheries Financing Program
-Coop Bank Agri-Lending Program
-Agricultural Microfinance Program.
AGRICULTURAL CREDIT PROGRAMS
main goal of Sikat Sika
to provide credit assistance to small palay and corn farmers for their production activities/projects
AGRICULTURAL CREDIT PROGRAMS
main goal of the Agriculture and Fisheries Financing Program (AFFP)
provides small farmers with fishers access to formal credit to finance their economic activities
AGRICULTURAL CREDIT PROGRAMS
main goal of Cooperative Bank Agri-Lending Program (CBAP)
increase outreach of gov’t ag credit funds by tapping cooperative banks as conduits and to increase access to sustainable fin services among FFH
note: FFH = farmer and fisherfolk households
AGRICULTURAL CREDIT PROGRAMS
Agri-Microfinance Program (AMP) for Small FFH goal
reduce poverty and improve quality of life of marginalized FFH by financing ag projects and acts that will increase their prod and income
AGRICULTURAL INSURANCE
transfers risks of individuals and enterprises to an insurer that spreads the risk either internally or by reinsurance
insurance
AGRICULTURAL INSURANCE
economic rationale for insurance
-factors beyond farmer’s control
-adverse weather events
-it spreads risk across the economy
-see an opportunity for a positive actuarial outcome and profit
-NOT the universal solution sa risk and uncertainties ng farmers
-addresses only a PART of the losses from some perils
AGRICULTURAL INSURANCE
Asymmetric information and insurance availment
high-risk farmers are more likely to purchase crop insurance as they perceive larger benefits from
participating. as a result, indemnity payments are higher than the premiums collected.
adverse selection
AGRICULTURAL INSURANCE
Asymmetric information and insurance availment
occurs when insured farmers worry less about the likelihood of a loss (i.e., due to the insurance coverage), take less care of their fields (i.e., use less inputs than is recommended), and consequently, are more likely to experience a loss
moral hazard
AGRICULTURAL INSURANCE
principal mandate of the Philippine Crop Insurance Corporation (PCIC)
provide insurance protection to farmers against losses arising from natural calamities, plant diseases, and pest infestations of their palay and corn crops
one of a pool of instruments for risk mitigation and credit enhancement measures.
CREDIT GUARANTEE
AGRICULTURAL CREDIT GUARANTEE
economic rationale for guarantees
-ratioining is widely seen in the loan market especiallly for FFH as well as MSMEs
-important policy tools as it can enhance efficiency in providing add fund for FFH $ MSMEs which can be creditworthy but has informational gap
AGRICULTURAL CREDIT GUARANTEE
asymmetric information and guarantee availment
adverse selection
banks that transact with risky small businesses are more likely to offer loans with guarantees
AGRICULTURAL CREDIT GUARANTEE
asymmetric information and guarantee availment
moral hazard
small businesses with guaranteed loans are more likely to default
AGRICULTURAL CREDIT GUARANTEE
provides 85% guarantee cover on agricultural production loans granted by accredited private financing institutions and other lending entities against all types of risks of non repayment
Agricultural Guarantee Fund Program
AGRICULTURAL CREDIT GUARANTEE
OBJECTIVE OF Agricultural Guarantee Fund Program
encourage banks, coops, and other lending insti to increase their loans to small FFH and reduce risk on the lenders’ side
