LANDBANK Introduces Innovations in Lending to Small Farmers

Thursday, May 17, 2018

The Land Bank of the Philippines will adopt a direct marketing strategy in lending to farmers as part of its aggressive thrust to channel financial assistance to the farming sector. This was according to LANDBANK President and CEO Alex V. Buenaventura during today’s forum on Agri Financing entitled Can Banks Step up Farm Credit to Prime Countryside Progress? held at the University of Asia and the Pacific.

Buenaventura discussed LANDBANK’s Direct Marketing by Supervised Credit Technicians as a way to ensure that small farmers gain access to financing. Under this strategy, a master list of small farmers will be generated by LANDBANK in consultation with local representatives of the Department of Agrarian Reform and the Department of Agriculture. Trained Supervised Credit Technicians from the Bank’s Lending Centers will market directly to all farmers in their assigned master list.

“Simply put, with this lending strategy, LANDBANK goes to the farmers, and not the farmers going to LANDBANK,” said Buenaventura.

Lending through partner Agri Corporative Corporations

Another innovative lending scheme is LANDBANK’s “Farmers Corporatives Inclusive Financing Program” which is open to Farmers Cooperatives who enter into a “Farm Management and Marketing Agreement (FMMA)” with a big Agri Corporative Corporation (ACC).

Under the program, LANDBANK will take charge of Land Consolidation and Coop Organizing for the small farmers. For the big ACC, LANDBANK will provide a Fully Integrated Corporate Loan for Production, Postharvest and Processing Facilities with lower debt to equity ratio of 90:10 at competitive interest rate. Meanwhile, the ACC’s roles under the program cover the following:  to increase farm production to global standards; to buy from Farmers Cooperative 100% of production at agreed price per kilo as specified in the FMMA; and to hire farm workers from nominees of Farmers Cooperative members.

“The main objective of the Farmers Corporatives Inclusive Financing Program of LANDBANK is to raise the income of each farmer family way above the P10,000 Poverty Line Threshold per month through corporate farming by partner ACCs which will double production and harvest sales net income of small farmers,” explained Buenaventura.

He also said that LANDBANK can source funding for this program by issuing “Small Farmers Corporative Bonds” (against loans extended to Agri Corporative Corporations) which will be auctioned to other banks as alternative compliance to Agri-Agra Law. Latest data from the BSP show that non-compliance of the total banking system to the said law amounted to P459.84 billion as of end-2017.

“Other banks can also lend to their own client Agri Corporative Corporation and said loans may be declared by BSP-ACPC as compliant to Agri-Agra Law,” Buenaventura added.