The Department of Agriculture-Agricultural Credit Policy Council (DA-ACPC) turned over P40 M to the Philippine Postal Savings Bank, Inc. (Postbank) for the implementation of the Agriculture and Fisheries Financing Program – Value Chain Financing Program (AFFP-VCFP) in a check turn-over ceremony held on September 18, 2015 at the ACPC Conference Room in Pasig City.
DA Secretary and ACPC Chair Proceso J. Alcala signed the implementing guidelines of the Agriculture and Fisheries Financing Program (AFFP), of which the VCFP is one of the credit facilities. The AFFP, on the other hand, is one of the programs under the Agro-Industry Modernization Credit and Financing Program (AMCFP), the umbrella credit program of the DA for agriculture and fisheries.
The AFFP-VCFP was approved by the ACPC Governing Council through Resolution No. 2, Series of 2015. The ACPC Governing Council’s approval of the AFFP-VCFP underscores the importance of putting in place a viable agricultural value-chain financing model that can be adopted by mainstream financing institutions.
The AFFP-VCFP was conceptualized based on Sec. Alcala’s advocacy to improve credit access from institutional sources for small farmers participating in an agribusiness value-chain. With improved credit access, the program hopes to enhance farmers’ production capacities, productivity and incomes. The program is also intended to contribute to the national government’s goal of promoting inclusive growth.
The value-chain approach capitalizes on existing business linkages between farmer-producers and buyers (processors/traders) to lessen the credit risk. The value-chain approach in agricultural financing is recognized globally as one of the financing schemes that have a potential for promoting inclusive growth in rural areas.
Under the AFFP-VCFP, the initial funding of P40 million from ACPC will be used to support the implementation of a value-chain financing facility for farmers or groups of farmers registered in the Registry System for Basic Sectors in Agriculture (RSBSA) and with market tie-up with established buyers. The Postbank shall also match the loan fund with its own counterpart fund equivalent to at least the amount of loans availed under the Program.
Postbank was selected to be the program partner for the AFFP-VCFP because it is presently already implementing a corn value-chain project (production-processing-bulk handling-marketing) with ZDMC Grains, Inc. (ZGI) in Zamboanga del Norte, which is aligned with the DA’s “Road Map” for corn development in Zamboanga del Norte and Bukidnon. The additional funding support from ACPC will enable Postbank to finance value-chain financing activities of small corn farmers in Zamboanga del Norte and Bukidnon that will provide the supply of corn grains needed by ZGI to ensure sustainability of the project and provide corn farmers access to low cost financing, thus, enhancing productivity and income.
Postbank will extend AFFP-VCFP loans at 15% interest per annum to corn farmer-producers who have established/existing market tie-ups with corn buyers.
The Program shall be implemented in the priority areas of the DA, initially in the provinces of Bukidnon and Zamboanga del Norte. Other provinces may be covered subject to criteria to be set by the DA. Sec. Alcala also wants other commodities such as cassava, rubber, banana, and cacao to later be considered for inclusion under the Program.
The Value Chain Financing Project will be implemented within a period of one year. Other programs being implemented by DA-ACPC under the AFFP are: 1) AFFP Sikat Saka II; 2) Agrarian Production Credit Program (APCP); 3) ACPC-PCFC AFFP Agri-Microfinance Program (AMP)- II; 4) Cooperative Banks Agri-Lending Program (CBAP) – II; 5) Value Chain Financing Program (VCFP); and 6) Climate Change Adaptation Financing Program (CCAFP).