LANDBANK, DAR launch new lending program for small farmers

Friday, July 13, 2018

Department of Agrarian Reform Secretary John Castriciones (2nd from right) led the ceremonial turnover of the ASL Farmers Program symbolic marker together with LANDBANK Agrarian Operations Center II Head/Assistant Vice President Gilbert Barsatan (leftmost) and LANDBANK Nueva Vizcaya Lending Center Head Ernesto Tumanut (2nd from left). 

The Land Bank of the Philippines, in partnership with the Department of Agrarian Reform (DAR) and the Department of Agriculture (DA), developed a new loan program to increase the income of small farmers especially the Agrarian Reform Beneficiaries (ARBs).

DAR Secretary John Castriciones led the launching of the new lending facility – called Accessible and Sustainable Lending Program for Small Farmers or ASL Farmers Program on July 10, 2018. The program launch coincided with the distribution of certificates of land ownership awards (CLOA) to ARBs in Bayombong, Nueva Vizcaya.

The ASL Farmers Program is in compliance with Presidential Directive No. 2018-0176 which directs LANDBANK, in coordination with DA and DAR, to reach out to farmers and provide them with financial assistance for their agricultural needs.

“We have high hopes for this program which will make credit very accessible to most Filipino farmers at a low interest rate of 6% per annum. This complements LANDBANK’s existing agricultural lending programs, as we strive harder to help small farmers increase their productivity and income,” said LANDBANK President and CEO Alex V. Buenaventura.

The program has three lending modules namely: Module 1 – Lending to Individual Small Farmers and through Agri-based Cooperatives/Associations; Module 2 – Lending through LANDBANK-Assisted Agri-based  Cooperatives/Associations; and Module 3 – Lending  Farmers Cooperatives through Farmers Corporative Inclusive Financing Program.

 

Lending to Individual Small Farmers; Agri-Based Cooperatives and Associations

Small farmers and ARBs can avail of a “Crop Production Loan” of up to 90% of the project cost, with interest rate fixed at 6% per annum. Another credit program for individual farmers is the Freedom from Debt Loan, a one-time loan take-out which can cover the debt of farmers from various credit conduits.

LANDBANK also offers lending window to agri-based cooperatives and associations to augment their credit fund for on-lending to their farmer-members for crop production purposes.  Eligible borrowers can avail of either rediscounting line or working capital loan with loanable amount based on the bank’s existing policies, with an interest rate of 6% per annum.

 

Lending to LANDBANK-assisted Agri-based Cooperatives/Associations

To support the crop production/farming activities of the farmers, LANDBANK also provides term loans to Agri-based Cooperatives and Associations. Eligible borrowers can avail of loan for the acquisition of farm machineries and equipment, postharvest and processing facilities. Loanable amount is up to 90% of the total project cost, with 6% interest rate per annum with annual re-pricing.

 

Lending through Farmers Corporative Inclusive Financing Program

Another lending program is the existing “Farmers Corporative Inclusive Financing Program.” This is open to Farmers Cooperatives which 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 handle Fully Integrated Corporate Loan for Production, Postharvest and Processing 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.

This financing scheme is an alternative way of lending to farmers wherein small farms will be consolidated and managed as a corporate farm by big agricultural corporations. These big agri companies described as “Corporatives” will borrow all production cost financing requirements from LANDBANK. “The main objective is to raise the income of each farmer family way above the P10,000 Poverty Line Threshold per month,” explained Buenaventura.

 

Direct Marketing by Supervised Credit Technicians

To ensure that more farmers can gain access to financing, LANDBANK Lending Centers nationwide will provide loans to target borrowers through direct marketing. A master list of small farmers will be generated by LANDBANK in consultation with local representatives of DAR and DA. Trained ASLP Supervised Credit Technicians from the Bank’s Lending Centers will market directly to all farmers in their assigned master list.

 

Agri-Agra Law P460 Billion Funding for the Program

LANDBANK allocated P10 Billion from its own funds for the program which may be increased depending on the credit requirements of the borrowers.

LANDBANK can source additional funding 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.

“With our issuance of LANDBANK Small Farmers Corporative Bonds, we will not only raise funds for our lending to farmers but it will also provide an added instrument for banks to comply with the requirement of the Agri-Agra Law especially on the 10% of loan portfolio requirement for agrarian reform farmers,” according to Buenaventura.