The loans were extended to 61 of the total 64 coconut-growing provinces nationwide through its subsidiary, UCPB CIIF Finance and Development Corp. (UCFDC) formed in 1995.
According to the UCFDC president Edgardo C. Amistad, they charge lower interest rates on loans as compared to those charged by rural banks. Rural banks and cooperative s serve as the conduits of the UCFDC.
UCFDC charges rural banks either 91-day Treasury Bill rate or 10.5 percent whichever is higher. It charges cooperatives a flat 10.5 percent. ‘Effectively, the conduits are allowed a maximum nine-percent mark-up meaning farmers are slapped a maximum 19.5-percent interest rate. That is lower that the 22 to 24 percent slapped by rural banks on their lenders," Amistad explained.
To check on the interest rates, the UCFDC and its sister company, the UCPB CIIF Foundation Inc., go directly to the farmer-borrowers. "We go straight to the farmers and spot-check the lending rates slapped on them. There are penalties for those lending over 19.5-percent."
Fund source for the loans comes principally from mother unit UCPB although it is uncommon that the UCFDC or the Foundation establish lending ties with either the Asian Development Bank (ADB) or the World Bank. The Foundation undertakes non-credit activities like training.
The coconut beneficiaries, who own from one to five hectares of land, belong to the 864 farmers’ cooperatives that have so far been accredited to the bank’s special social credit program. These accredited cooperatives have a combined farmer membership of 350,000.
Loan sizes vary depending on the need with no ceiling placed by the UCFDC although these normally ranges from a low of P20, 000 per borrower. Depending on the size of the cooperative, total loans could reach a few thousands to millions of pesos.
Likewise, repayment periods vary depending on the capability and type of loan and project. Shortest term is three months.
The lending program for coconut farmers’ cooperatives differs from the lending that UCPB does as a commercial bank. The former is more developmental in nature, the goal being to raise the quality of life of the small coconut farmers, which is the central social concern of the entire UCPB organizations.
The developmental aspect is covered by the Foundation, which ensures that the loans have a long-term impact to the borrowers. It provides the accredited cooperatives training in project management and assistance in forging market linkages. – TPT