Agriculture guarantee fund reaches P3.68 billion

MANILA, Philippines - Contributions to the Agricultural Guarantee Fund Pool (AGFP) from the National Government, government-owned and controlled corporations (GOCCs) and government financial institutions (GFIs) have reached P3.68 billion as of this month, Land Bank of the Philippines (LBP) president Gilda E. Pico said.

In a press briefing, Pico said with the AGFP, farmers and fisherfolks would be able to secure from credit conduits double or up to P7.36 billion worth of production loans for rice and other food crops.

Landbank is the institutional program manager of the AGFP.

The AGFP is a fund set up in compliance with Administrative Order 225-A requires all GOCCs and GFIs to hand over five percent of their respective net incomes to the AGFP for food productivity programs.

AGFP provides guarantee coverage to unsecured loans of small farmers and fisherfolk extended by credit conduits such as rural, thrift and cooperative banks, small and medium enterprises and large corporations, irrigators’ associations and other farmers’ organizations.

The guarantee would encourage the lending conduits to extend more credit to small farmers who are normally deemed to be high-risk borrowers.

To date, Pico said the approved guarantee line for 65 credit conduits amount to just P1.23 billion. As of September last year, only P366 milion was available under the AGFP.

The low contributions prompted Agriculture Secretary Arthur C. Yap to ask for the release of some P588 million supposedly committed to the AGFP.

The AGFP is intended for five years only, subject to review for extension as agreed upon by the DA and Landbank.

AGFP funds could be availed of by rural banks, thrift banks, irrigators associations (IAs), rice millers and grains traders to guarantee loans of small farmers engaged in rice production.

Farmers tilling a maximum of five hectares each and who have not been able to obtain collateral-free credit from the formal banking sector can borrow from government or private financial institutions with up to 85 percent of their loans secured through the AGFP.

The AGFP extends guarantee cover to eligible loans or financing exposures of eligible institutions of up to 85 percent of the loan or financing principal and a guarantee fee of only three percent per annum of the amount covered by the AGFP.