PCIC tasked to overhaul finances

MANILA, Philippines — Finance officials are working out a plan to overhaul the finances of state-run Philippine Crop Insurance Corp. (PCIC), as funding for the agency will soon be trimmed by executive and legislative reforms.

Finance Secretary Carlos Dominguez III has ordered the Government Service Insurance System (GSIS) and the Land Bank of the Philippines to assist the PCIC in reducing its expenditures as a ratio of its insurance.

He said the two state-run firms should lead the crop insurer by example on how to manage risks, especially the GSIS for its capacity to handle P1 trillion in investments.

Based on data, the PCIC spends at least 35 centavos for every peso that goes out, an expenditure pattern that Dominguez called as “the perfect example of how not to manage risks.”

When compared to provident funds, the GSIS spends just up to five centavos for every peso that it gives out to members. Dominguez, who chairs the Social Security Commission, said the agency only spends about six centavos for every peso it releases to beneficiaries.

National Treasurer Rosalia de Leon also scored the PCIC for relying on state subsidies to sustain its operations, warning that the agency may collapse once the government reduces its funding support.

De Leon said a portion of the budget that the PCIC used to pursue its mandate comes from the loan penalties collected from banks.

Under the Agri-Agra Reform Credit Act of 2009, banks are mandated to pay a yearly sanction for failure to comply with the loan quota of 25 percent for agriculture and agrarian reform borrowers. At least 90 percent of the fines go to the Agriculture Guarantee Fund and the PCIC.

However, in the proposed reforms to the law, the sanctions will no longer flow into the PCIC, but the lending portfolio of the Development Bank of the Philippines and Landbank. A portion of the funds will also be remitted to the Support to Parcelization of Lands for Individual Titling Program of the Department of Agrarian Reform.

“So, in this case, the PCIC would need to have a more efficient operation so that they would be able to conserve their resources to provide more insurance coverage for our small farmers,” De Leon said.