1. INCREASING ACCESS TO CREDIT OF SMALL FARMERS & FISHERS: THE ACPC EXPERIENCE by INCREASING ACCESS TO CREDIT OF SMALL FARMERS & FISHERS: THE ACPC EXPERIENCE by Jovita M. Corpuz Executive Director Agricultural Credit Policy Council (ACPC) Department of Agriculture (DA) and Ferdinand L. Paguia Project Development Officer V Policy Research and Planning Staff, ACPC APRACA CEOs Open Forum on Agricultural and Rural Finance 26 February 2013, Bangkok, Thailand

2. 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.

3. 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

4. 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/

5. 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/hung er-in-philippines-not-food-but.html

6. 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.

7. 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&pag e2=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/

8. 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.

9. 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

10. 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)

11. 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.

12. 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.

13. 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.

14. 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

15. 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.

16. 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

17. 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/

18. 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

19. 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;

20.  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.

21. 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.

22. 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.