The Agricultural Guarantee Fund Pool (AGFP) of the Department of Agriculture (DA) has provided guarantee coverage for nearly P5.21 billion in agricultural loans last year, according to the Agricultural Credit Policy Council (ACPC).
ACPC Executive Director Jovita M. Corpuz said in her presentation that the loans were extended by 101 participating financial institutions to 105,007 farmer-beneficiaries in 2015.
Since its launch in 2008, Corpuz said the AGFP has been able to provide guarantee coverage for P31.1 billion in loans given out by participating financial institutions to more than 745,000 small agricultural producers.
Corpuz said P895 million worth of guarantee claims were paid out by the AGFP since 2008, representing about 3 percent of the total loans covered.
Lending institutions often consider providing credit to the agricultural sector a “risky” undertaking. That is why the AGFP was established in May 2008, with the objective of encouraging banks, cooperatives and other lending institutions to increase their loans to small agricultural borrowers.
It was rolled out in August 2008 with a seed funding of P4.48 billion from government revenues and surplus funds of government corporations and financing institutions.
Through the AGFP, 85 percent of “unsecured” loans extended by financial institutions to small farmer-borrowers are given guarantee coverage.
In case of nonrepayment of the guaranteed loan due to “valid” reasons—weather disturbances, pests and diseases, and other fortuitous events, except those arising from willful default or fraud—the AGFP will pay the lending institution the guaranteed portion or 85 percent of the unpaid loan.
Participating lenders only need to pay a guarantee fee of 2 percent per annum of the outstanding loan amount to avail of the coverage.
Meanwhile, Corpuz also reported that the Philippine Crop Insurance Corp. (PCIC)—another risk-management facility for the agricultural sector—has insured 1.12 million farmers in 2015, 22 percent higher than the 917,814 farmers covered in 2014.
The ACPC, which is part of the governing board of the PCIC and the AGFP, revealed that the amount of insurance covered by the PCIC in 2015 rose by 7 percent to P38 billion, from P35.6 billion in 2014. The PCIC has paid out P1.1 billion in claims, nearly 50-percent higher than the P738 million recorded in the previous year.
Corpuz said the improved performance of the PCIC in 2015 is partly due to the P1.3-billion premium subsidy provided by the national government for famers included in the Registry System on Basic Sectors in Agriculture (RSBSA).
However, despite the improvement in its insurance coverage, she said the 1.12 million farmers insured in 2015 only correspond to about 11 percent of the total farmers registered in the RSBSA.
Corpuz said the government needs to infuse additional capital and premium subsidy into PCIC for the provision of free insurance to more farmers.