P1.5B set aside to guarantee loans to affected farmers

The Agriculture department will earmark about P1.5 billion from the Agricultural Guarantee Fund Pool (AGFP) to back up loans to farmers and fishermen affected by the ongoing dry spell and storms in the last quarter of 2009. "We have P4.45 billion in available funds [in the AGFP], but we might set aside P1.5 billion [for] the Philippine Crop Insurance Corp. (PCIC) and cooperative banks because of the drought [now] and the calamities that hit the country last year," Bernadette Romulo Puyat, Agriculture undersecretary for special concerns and chairman of the AGFP Governing Board, told reporters last Friday. "Unlike the AGFP, which only guarantees the loan, the PCIC [provides insurance] directly to [rice] farmers," Puyat said. The AGFP is a credit risk-mitigating mechanism formed to encourage rural and cooperative banks to extend credit to small farmers and fishermen who are deemed high-risk borrowers. The fund got its money from government-owned and -controlled corporations and government financial institutions such as the Philippine Amusement and Gaming Corporation, Philippine Charity Sweepstakes Office, Social Security System and Government Service Insurance System. Administrative Order 225-A, issued in 2008, requires these to allocate 5 percent of their 2007 surplus to food production efforts. The AGFP guarantees up to 85 percent of the principal loan given by banks. It covers the risk of nonpayment due to losses from natural calamities such as drought, typhoons, floods, pests and diseases. The PCIC, created by Presidential Decree 1467 in 1978, insures rice production against losses due to natural disasters and calamities. Puyat said she expects the AGFP to get more funds this year following the enactment of the amended Agri-Agra Law, which provides stricter rules to ensure that banks will channel a quarter of their funds to the agriculture and the agrarian reform sectors. "We now have a new source of fund for the AGFP. We are just waiting for the Bangko Sentral ng Pilipinas to finish the implementing rules and regulations," Puyat said. Under the new law, 90 percent of penalties collected from violators will go to the AGFP and PCIC. — Kristine Jane R. Liu, BusinessWorld