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Directed CreditPrograms:Issues and
Framework forReform
G I L B E R T O M . L L A N T O
M A . P I E D A D S . G E R O N
M A R I E C H R I S T I N E G . T A N G
2
Published by theCredit Policy Improvement ProgramDepartment of Finance – National Credit Council
The Credit Policy Improvement Program (CPIP) is a technicalassistance provided by the United States Agency for InternationalDevelopment (USAID) to the Department of Finance (DOF) –National Credit Council (NCC). The Project is being implemented bythe International Management and Communication Corporation(IMCC). The findings, interpretations and conclusions in this book arethose of the author/s and should not be attributed to the USAID,IMCC or DOF-NCC.
Please address all inquiries to:
National Credit Council Secretariat Credit Policy Improvement ProgramDepartment of Finance Project Management Office
Gil S. Beltran Gilberto M. Llanto, Ph.DMa. Teresa S. Habitan Ma. Piedad S. Geron, Ph.DJoselito S. Almario Susan R. ElizondoMa. Lourdes V. Dedal Mary Ann D. RodolfoAurora Luz D. VillavirayFebe J. Lim 4th Floor Executive Tower BuildingEric C. Tipgos Bangko Sentral ng Pilipinas Complex
Malate, Manila4th Floor Executive Tower Building Telephone No: (632) 525-0487Bangko Sentral ng Pilipinas Complex Telefax No: (632) 525-0497Roxas Boulevard, Manila E-mail: [email protected] Nos: (632) 523-3825 and 525-3305Fax No: (632) 524-4287
3
In the 1970s, there was a proliferation of directed creditprograms, mainly implemented in the agriculture sector.Loanable funds were earmarked for direct availment by targetedborrowers at highly concessional rates. The funds came fromthree sources: government budget, special time deposits at theCentral Bank, and the Central Bank’s rediscounting window.Most of the loans under the directed credit programs wereextended by specialized banks, e.g., rural banks, developmentbanks, and government financial institutions. Massive creditsubsidies were provided to bring down the cost of borrowingfor targeted sectors. This resulted in credit rationing of smallborrowers, high default rates, and the capture of credit subsidiesby large borrowers. Deposit mobilization was also neglecteddue to the availability of cheap loanable funds from thegovernment.2
In the mid-1980s, the government introduced a numberof financial market reforms, among them the adoption ofmarket-based interest rates, termination of subsidizedrediscounting programs at the Central Bank, consolidation ofexisting credit programs into the Comprehensive AgriculturalLoan Fund (CALF) to serve as a guarantee for agricultural loansgranted by banks, and termination of direct lending by
2 Esguerra (1980); Neri and Llanto (1985)
Introduction
4
government agencies implementing credit programs. However,while these reforms were introduced and implemented inagriculture finance, there was an increased proliferation ofsubsidized credit in the industry and manufacturing sector,especially for the small- and medium-scale industries. Anumber of livelihood projects were implemented asintervention for poverty alleviation. As a result, a number ofgovernment agencies went into the financing of livelihood andincome generating projects, which were actually directed creditprograms.
On October 8, 1993, a Social Pact on Credit was establishedby a broad alliance of government, non-government, andpeople’s organizations concerned with the delivery of credit tothe countryside. To make formal credit available to the basicsectors, the Social Pact recommended, among other things,the rationalization of credit programs. In the case of directedcredit programs, the first step to rationalize them was toinventory all operating government directed credit programs.
This survey provides baseline data of all directed creditprograms. The analysis of data presented in this survey willprovide the National Credit Council (NCC) criticalinformation that can be used as basis for the rationalizationmandate of the NCC. Aside from the information, this studyalso brings out the issues and a policy reform agenda that needto be considered by the NCC in its task of providing a policyenvironment that would facilitate the development of a viableand sustainable financial market.
I n t r o d u c t i o n
5
Directed credit programs (DCPs) have always been used asa convenient policy tool to direct the flow of financial resourcesto a specific sector of the population for a specific purpose. Inmost cases, the targeted sectors are those perceived bypolicymakers to be in need of financial resources to conduct aspecific activity considered essential for development (e.g.,production loan, working capital loan, processing loan, etc).DCPs are thus used as a policy tool. They are relatively easy toimplement and provide government high visibility, unlikeinfrastructures which take a long time to build and implement.Thus, DCPs are deemed essential in alleviating the plight ofthe perceived disadvantaged sector of the economy. In view oftheir easy implementation3 and their immediate effect on thetarget beneficiaries, they are usually preferred by policymakersespecially when immediate results4 are considered a priority inthe design of policies.
The implementation of DCPs over the years has turnedout to be a series of learning experiences. Critics pointed outvarious disadvantages of DCPs, a number of which are listed
3 In most cases, DCPs are implemented by setting aside a specific amount of money for re-lendingunder a specific program which defines clientele, purpose and the loan terms and conditions.
4 A specific program is considered to have positive results when the desired amount of financialresources have been channeled to the targeted sector.
Frameworkof Analysis
6
F r a m e w o r k o f A n a l y s i s
in Adam and Vogel (1996). The review of literature in thesucceeding section traces the evolution of DCPs in thePhilippines as they have been altered over time to addressspecific concerns. On the whole, DCPs channel financialresources of the government to a targeted sector for a specificpurpose. Usually provided through concessional lending, theyentail hidden fiscal costs and create distortions in the creditmarkets.
For purposes of this study, DCPs are defined as creditprograms directed toward a specific sector, with funding comingfrom sources external to the implementing organization. Inmost cases, DCP funds are either budgetary allocation, grantsor loan proceeds from bilateral or multilateral donororganizations.5 DCPs use subsidized interest rates. Creditprograms using funds internally generated by the agencyconcerned are excluded from the survey, even if the funds aregiven at below-market interest rates.6
Several modes of implementation have been used for DCPs.Figure 2.1 shows a schematic diagram of two basic models –
5 These include credit programs with donor funding wherein the government assumes credit risks(through government guarantees) and/or foreign exchange risks, or wherein government counterpart(whether in cash or in kind) is required.
6 They are excluded since they do not have hidden fiscal costs. These include credit programs of SSS,GSIS and HDMF for their members as well as internally-funded programs of GFIs.
7 These refer to funds specially constituted for the purpose of implementing directed credit programs.These include the Comprehensive Agricultural Loan Fund (CALF), the Agrarian Reform Fund(ARF), the National Livelihood Support Fund (NLSF), and the Self-Employment AssistanceRevolving and Settlement Fund. The CALF, established under E.O. 113 (1986), consolidated allagricultural and agriculture-related loan funds into one general fund. The ARF was created underE.O. 229 (1987) with funds coming from the proceeds of sales of the Asset Privatization Trust,among others. The NLSF (NOTE: MISSING WORDS HERE) The SEA Fund, established underRA 5416, consolidated the SEA Recovery Fund at the DSWD Central Office and the SEA TrustFunds at the DSWD Regional Offices.
7
F r a m e w o r k o f A n a l y s i s
the direct and the indirect models. Prior to discussing thesemodels, it may be useful to provide the following definitions:
• Fund source (FS) – the source of credit funds. It includesbudgetary allocations, special funds,7 grants, loan proceeds,or internally generated funds.
• Executing organization (EO) – the agency which was giventhe funds for the credit program.
• Fund administrator/manager (FA) – the agency thatadministers and manages the funds earmarked for the creditprogram.
• Lending conduit (LC) – the institution through whichfunds are channeled to the end-user.
Fund Source
Direct Mode
End User
Indirect Mode
End User
LC
FA
EA
LC
EA/FA
End User
EA/FA/LC
Figure 2.1Implementation Models of Direct Credit Programs
8
F r a m e w o r k o f A n a l y s i s
Under the direct model, credit resources are lent directlyto the end-user by the executing agency, which also acts as thefund administrator. Under the indirect model, two modes areidentified. In the first mode, the executing agency doubles asthe fund administrator and channels the credit funds throughlending conduits for re-lending to end-users. In the secondmode, the executing agency channels the credit funds througha fund administrator or manager which lends the funds tolending conduits for re-lending to end-users.
To gather information on the directed credit programsimplemented in the country, a complete enumeration of theseprograms was made through a survey. The survey wasimplemented at the program administration level only, i.e.,gathered data on program profile, operational performance,and broad financial performance. Also conducted wereinterviews with key program officials, including key personnelin government financial institutions (DBP and LBP) whichwere mainly used as conduits of a number of DCPs in reachingthe end-users. Specific credit data on borrowing terms andconditions of end-users were excluded from this survey.
The framework discussed in this section is used in thedescription and analysis of data gathered from the survey.Directed credit programs are analyzed in terms of their fiscalcosts, outreach, and sustainability. Management andimplementation issues are also discussed.
9
This section gives a brief review of recent literature evaluatingDCPs in the Philippines. Except for the paper by Lamberte andLim (1987), the review covers only studies done in the 1990s,largely on existing credit programs (see Annex 1).
Lamberte and Lim provided a comprehensive backgroundon rural financial markets, and discussed nearly all issues relatedto rural finance – rural formal and informal markets, ruralsavings, borrower behavior, and monetary and credit policieson rural financial markets. Of particular interest to this surveyis their finding that massive credit subsidy to the rural sector –in the form of 38 agricultural credit programs implemented inthe 1970s and early 1980s – did not work because they couldnot substitute for the failures in agricultural development. Theythus prescribed that the government move away fromspecialized, supervised and subsidized credit and concentrateinstead on freeing interest rates and on making macroeconomicpolicies neutral to all sectors of the economy.
With the shift toward market-oriented policies in the late1980s, a new crop of literature on rural finance emerged,focusing on market failures and identifying areas forgovernment intervention. The more recent literature centeredon issues related to the design, financial viability, outreach,
Review of RelatedLocal Literature
10
and impact on beneficiaries of the DCPs. A few (OECF 1995;Llanto 1993) called for the termination of DCPs implementedthrough non-financial government agencies.
Design issues. Esguerra (1995) and Lamberte (1992)reviewed Philippine experience with supervised credit andidentified the following distinguishing features in today’s creditprograms: (i) the trend toward group lending rather thanindividual lending; (ii) the increasing use of lending conduitsto implement the programs; (iii) the grant of morecomprehensive financing packages rather than commodity- andactivity-specific loans; (iv) the incorporation of savingsmobilization features; and (v) the targeting of a much broaderset of beneficiaries.
On group lending. The merits of group lending is well-known due to the experience of Bangladesh’s Grameen Bank.In group lending, a loan is granted to a group of like-borrowerswhich re-lends the loan to its individual members. As the entiregroup is accountable for the loan, it effectively acts as guarantorfor the individual member loans, thereby reducing the overallrisk on the loan. What is crucial then to the success of thisscheme is the formation and preparation of the group. Inparticular, Esguerra (1995) noted that group size, thedevelopment of “positive expectations,” equity contribution,training and information on member-borrowers are criticalfactors for sustaining a group lending scheme. Indeed, manyfailed experiences with group lending can be traced to thegroup’s lack of maturity and skill in fund management.
On the use of lending conduits. Given the generally poorperformance of line agencies in implementing DCPs, thegovernment has increasingly turned to financial institutions
R e v i e w o f R e l a t e d L o c a l L i t e r a t u r e
11
R e v i e w o f R e l a t e d L o c a l L i t e r a t u r e
to administer the programs. The obvious advantage of usingfinancial institutions is that these institutions are in the businessof lending and, therefore, have comparative advantage inlending operations. This is borne out by Lamberte (1992), whoexamined programs managed by government financialinstitutions (GFIs) such as the LandBank and the DevelopmentBank of the Philippines. He noted that the programs benefitedin terms of: (i) scale and scope economies; (ii) credit marketexpertise of bankers; (iii) minimized political interference; and(iv) more flexibility in responding to the changing environment.
This may be contrasted with the programs implementedby government agencies, which not only suffered from lack ofstaff expertise in credit evaluation, monitoring and collection,but were also susceptible to political interference in the agencies’credit judgments (OECF 1995). Moreover, Llanto (1993) heldthat the participation of government non-financial institutionscreated distortions in the credit markets and discouraged bankexpansion in rural areas. Thus, the authors are one in callingfor the termination of direct lending by government agenciesand argued instead for the transfer of credit programs currentlymanaged by non-financial government agencies to GFIs.
In addition to financial institutions (private or government,commercial, thrift or rural), non-government organizations(NGOs) and cooperatives have also gained acceptance asalternative channels for DCPs, particularly to the “non-bankable” sectors. Due to their proximity to borrowers, theNGOs and cooperatives have informational edge over financialinstitutions and are, thus, able to realize lower screening costs.In fact, the OECF (1995) reported that cooperatives and NGOshave become a major source of formal credit in the rural areas.Nonetheless, despite their popularity, Lamberte cautioned
12
against the promotion and nourishing of such alternative creditdelivery systems, noting that some NGOs realize very highspreads from administering the credit programs. More recently,Llanto et al. (1995) pointed out the sustainability andgovernance problems of NGOs which prevent them from beingefficient micro credit institutions.
On savings mobilization. The incorporation of savingsmobilization schemes in DCPs aimed primarily to enhancethe internal fund generation capacity of cooperatives and allowthem to disengage themselves from external sources of fundsfor credit. Usually, savings mobilization involves capital build-up (forced savings from members) for the cooperative,supplemented by voluntary savings from members. Today,many DCPs that are coursed through cooperatives requiredeposit generation as a condition for loan access. An exampleis the Grameen Bank Replication Program (GBRP) whichdemonstrated that the poor were capable of (forced) savingson a regular basis (ACPC 1995).
Financial Viability. Most DCPs involve governmentsubsidies in one form or another.8 As there are competingdemands for government’s limited resources, the costs ofrunning the programs are crucial to their sustainability. Whilethere is no study estimating the overall cost involved inimplementing all the DCPs in the Philippines, many studieshave looked into individual programs’ administrative andoperational costs in terms of the lending process, manpowerrequirements, paperworks involved, processing time, andtransaction costs.
Subbarao et al. (1996), ACPC (1995), and Llanto (1993)all pointed to the high administrative cost of running suchprograms as the GBRP and the DAPCOPO. In particular,
R e v i e w o f R e l a t e d L o c a l L i t e r a t u r e
13
Subbarao et al. claimed that the operational costs of the GBRPin the Philippines were four to five times higher than theoperational costs of Grameen Bank in Bangladesh, which meanthigh government subsidy for the program. This was validatedby the ACPC, which calculated an average governmentassistance of P0.64 per peso loan granted under the GBRP.9
Another concern is the poor repayment rates of DCPs. Thereason behind the poor repayment is the doleout mentality ofborrowers who view the loans as government money whichneed not be repaid. This was validated by Subbarao et al. (1996),who concluded that the unsatisfactory repayment rates of thelivelihood programs they reviewed were due to anunwillingness, not incapacity, of the borrowers to repay theloans.
The use of financial institutions as program implementorsaugured well for DCPs. The usual finding is that programsrun by financial institutions have higher repayment ratescompared to those handled by non-financial institutions. Thismay be attributed to the fact that financial institutions havetheir own criteria in approving loan applications over and abovethe criteria set by the individual programs, so that they areable to reduce their risk exposure (Lamberte 1992). On theother hand, non-financial institutions, such as the Departmentof Agriculture, cater largely to small rural borrowers, so thatthe poor repayment performance reflected problems attendantto small farmer lending (Esguerra 1995).
8 Subsidies may come in such forms as direct budgetary allocation, lower-than-market interest rates,loan guarantees, and administrative support.
9 In the case of the IRF, Llanto noted that it has lower administration cost due to the credit linefinancing approach it followed.
R e v i e w o f R e l a t e d L o c a l L i t e r a t u r e
14
Outreach and impact on beneficiaries. The ultimatemeasure of success for DCPs is whether or not they were ableto reach their target beneficiaries. The usual indicators includethe number and type of beneficiaries, their income level, andprogram impact in terms of employment generation and betteraccess to credit. The number of beneficiaries who are able tograduate into the formal financial system is another test of aDCP’s success.
The use of non-conventional lending conduits toimplement the programs has considerably improved theoutreach of DCPs. The DCPs have particularly benefited fromthe existence of branches of financial institutions in the ruralareas. On the other hand, the use of financial institutions alsoproved to be advantageous to end-borrowers as credit becamemore accessible and transaction costs were reduced (Lamberte1992).10 In general, Llanto (1993) found that, to some extent,agricultural DCPs were able to increase the access of the ruralsector to credit. However, he noted that such access remainsinsignificant compared to the loans extended to big borrowersby the banking system.
In terms of program impact, studies on individual creditprograms gave varying results on how the programs affectedthe beneficiaries’ standard of living. For example, the ACPC(1995) reported that the GBRP has made a significant impacton the standard of living of its beneficiaries. In contrast,Subbarao et al. (1996), in a study of 54 livelihood programs,concluded that the benefit-cost ratios of the programs wereunfavorable (except two) and that the incremental employmentand income effects were negligible. Further, they noted thatthe programs served the nearpoor and nonpoor householdsmore than the ultrapoor households.
R e v i e w o f R e l a t e d L o c a l L i t e r a t u r e
15
Several other issues remain. One has to do with theproliferation of credit programs in the country. A recent OECF(1995) study in the Philippines counted 111 government-sponsored credit programs covering the following areas:agriculture, livelihood, forestry, young professionals andstudentry, technology transfer, exports, business, government,hospital, education, housing and others.11 The study foundthat many of the DCPs have similar functions and clienteleleading to duplication and waste of government resources. Itthus argued for a credit coordinating body to put order intothe various programs, determine the mobilization of resourcesfor DCPs, and ensure their efficient utilization.
A second issue has to do with the monitoring and datacollection systems of the agencies implementing DCPs. Manyof the programs were found to have weak monitoring systems,making any measurement of accomplishments, or morerealistically, program implementation costs, difficult. Hence,the general prescription is to have the implementing agenciesput in place more effective monitoring systems to allowperformance evaluations of the DCPs.
A third and more important issue relates to the role of thegovernment in credit markets. In theory, the role of thegovernment is limited to cases of market failure. For instance,the government has a role to play in producing information toaddress the information asymmetry in credit markets (Llanto1990). In this respect, this role takes on the form of creatingan environment conducive to financial intermediation
10 Likewise, in a paper focused on credit unions, Lamberte (1995) noted that coursing loans throughcredit unions could widen further the range of income classes that could benefit from the programs.
11 The study included the programs of the SSS and the GSIS which this survey excluded.
R e v i e w o f R e l a t e d L o c a l L i t e r a t u r e
16
primarily through the provision of physical and institutionalinfrastructure to support rural development (Esguerra 1995).In contrast, the DCP approach involves the direct interventionof government by way of channeling subsidized financialresources to target sectors.
R e v i e w o f R e l a t e d L o c a l L i t e r a t u r e
17
15%
11%
25%
49%
Ongoing DCPs
Ongoing Member
Loans
Internally-Funded
Programs of GFIs
Terminated
Programs
Survey Results
Figure 4.1Credit Programs of Government Institutions by Program Status
For the period 1994-1996, the survey identified a total of177 DCPs administered by various government institutions(Figure 4.1). As of December 1996, 89% of these programswere still ongoing; the rest have been terminated (but are,nonetheless, being serviced for collection). Of the 157 ongoingprograms, 71 are either member-loan programs of governmentpension funds (SSS, GSIS, HDMF) or are internally fundedprograms of government financial institutions. For purposesof this survey, these programs were excluded since they lendout funds generated from their own members. Thus, the surveyeffectively covers 86 DCPs implemented by 21 executingagencies.
18
5
16
4
4
1
4
9
4
1
4
10
21
0 5 10 15 20 25
CDA
DA
DAR
DOST
DSWD
DOLE
DTI
OP
NFA
TLRC
DBP
LBP
Figure 4.2Government Institutions Implementing DCPs
S u r v e y R e s u l t s
Executing agencies may be government line agencies andtheir attached bureaus, government non-bank financialinstitutions (NBFIs), government-owned and controlledcorporations (GOCCs), and government financial institutions(GFIs). Government line agencies own the most number ofDCPs, followed by the GFIs (Figure 4.2). Together, theymanage almost 80% of the programs, with line agenciesoverseeing 37 programs and GFIs handling 31 programs.Among the former, the more active agencies are the DA (12programs), the DTI (9 programs), and the CDA (5 programs).On the other hand, the two GFIs – LBP and DBP – manage21 and 10 programs, respectively.
Ag
ency
Nam
e
Number of Programs
19
S u r v e y R e s u l t s
Figure 4.3 summarizes the 86 ongoing programs in termsof their source of funds, who owns them, how they areimplemented, and what sector they target. Each of these aspectswill be discussed in the following sections. It is enough to pointout at this time that the complex structure of the programsmakes it quite difficult to trace program funds from source toend-user, which entails moving through a labyrinth of creditconduits of varied shapes and sizes.
Program Profile
By Fund SourceThe major sources of funding for DCPs are budgetary
allocation, foreign loans, internal agency funds, special fundsconstituted for the programs, and foreign grants. Budgetary
Budgetary
Allocation
Local Funds(External to EA)
InternalAgency Funds
Special Fund
Foreign Loan
Foreign Grant
NBFI
(11)
GFI(31)
Agriculture
and Related
Activities
(34)
Large
Enterprises
(13)
Livelihood
and SMEs
(37)
Others
(2)
Fund
SourceExecutingAgency
Target
Sector
GovernmentLine Agency
(37)
Financial
Institutions(26)
NGOs
(5)
Cooperatives
(11)
Mixed Groups(FIs/NGOs/Coops/
Others) (14)
Lending
Conduits
Directly
Implemented(20)
FIs
(5)
Mixed(2)
NGO
(2)
(1)
(4)
(2)
GOCC
(7)
Direct andThru Conduits
(8)
(1)
(1)
Figure 4.3Flow of Funds Chart for Directed Credit Programs
20
Figure 4.4Profile of DCPs By Fund Source, By Agency Type
S u r v e y R e s u l t s
12 These six programs do not include the LBP’s 5:25:70 Countryside Partnership Scheme, whichcombines CIA/CDF with internal LBP funds. It may also be worthwhile to note that some agenciesreceiving CIA/CDF do not allocate the funds to any specific program but use the funds tosupplement other program funds. The authors believe that there are many more DCPs funded byCIA/CDF, but these remain unreported. Some of these are directly implemented by various staffmembers of the legislators.
appropriation is most important for programs of governmentline agencies. Of the 20 programs funded out of governmentbudget, 15 are programs of government line agencies (Figure4.4). Moreover, in another nine programs of line agencies,budgetary allocation is supplemented by other fund sourcesfor additional support. An important component ofgovernment budgetary appropriation consists of CongressionalInitiative Allocation (CIA) of senators and CongressionalDevelopment Fund (CDF) of congressmen. The surveyidentified six programs funded solely from CIA/CDF.12
Fund Source / Agency Type
Nu
mb
er o
f P
rog
ram
s
0
5
10
15
20
25
GFI
GOCC
NBFI
Line Agency
Bug
etar
yA
lloca
tion
Spe
cial
Fun
d
For
eign
Gra
nts
For
eign
Loa
n
Inte
rnal
Fun
ds
Ext
erna
l (lo
cal)
Fun
ds
Mie
xd F
unds
21
Foreign funds, particularly from multilateral organizationssuch as the World Bank and the Asian Development Bank(ADB), are another major source of funds. Almost all DCPsfunded by foreign loans are programs of GFIs (carryingNational Government guarantees) while programs funded byforeign grants belong to line agencies. Overall, foreign loansfinance 21 programs, 20 of which are under GFIs, while foreigngrants finance five programs, all under line agencies. The latterare mostly non-credit programs (e.g., infrastructure) of theDepartment of Agriculture, which merely include credits asminor components of the programs.
Meanwhile, special funds finance eight programs, with theCALF funding four of them. The ARF solely funds oneprogram but is also used in combination with internal LBPfunds to finance five LBP programs. Internally generated fundsof government NBFIs and GOCCs are also utilized for creditprograms, providing capital for 10 of these institutions’programs. Meanwhile, two programs of DOST source theirfunds from DBP, which is mandated by law to provide fundsfor the programs.
By Mode of ImplementationAs discussed in Section 2, there are three primary modes
of DCP implementation — direct from executing agency toend-users, indirect through lending conduits to end-users andindirect using fund administrators through lending conduitsto end-users. Of the 86 programs classified by model type,only 20 programs (23%) follow the traditional direct lendingapproach by the executing agency (Figure 4.5). Moreover,among the 20, only eight are directly implemented bygovernment line agencies (notably CDA and DOST), whilesix are run by GFIs. The rest are divided between NBFIs andGOCCs.
S u r v e y R e s u l t s
22
Figure 4.5Profile of DCPs By Mode of Implementation, By Agency Type
0
5
10
15
20
25
Line
Agency
NBFI GOCC GFI
Model 1
Model 2
Model 3
Models 1 & 2
The majority of the programs (48 out of 86) channel fundsthrough lending conduits (Model 2). Again, these are mostlyprograms of line agencies and GFIs. However, more than halfof the programs under NBFI management also channel fundsthrough conduits. Meanwhile, Model 3 programs, whereinfunds are coursed through a fund administrator, which in turnuses lending conduits to reach the target beneficiaries, comprise11% of the programs. The bulk of these programs are ownedby line agencies using financial institutions to administerprogram funds.
In addition to the three basic models, some programs followa combination of Models 1 and 2. In these case, the executingagency lends directly to program beneficiaries and at the sametime uses lending conduits. These programs are mostlymanaged by GFIs which give loans both for group (e.g., NGOs,cooperatives) projects and for re-lending to individual projectsof group members.
S u r v e y R e s u l t s
Nu
mb
er o
f P
rog
ram
s
Agency Type / Mode of Implementation
23
By Lending ConduitsIn all, 58 programs adopt Models 2 and 3 using a varied
mix of lending conduits — financial institutions, cooperatives,NGOs and other organized groups. By far, the most popularconduits are financial institutions, with 25 programs tappingthese institutions’ expertise in credit delivery (Figure 4.6).Almost half of these are GFI programs channeling fundsthrough other financial institutions (i.e., private commercialbanks, thrift banks and rural banks). There are also nineprograms of government line agencies that use financialinstitutions (both government and private) as conduits.
Figure 4.6Profile of DCPs By Type of Lending Conduit, By Agency Type
0 5 10 15 20 25
Direct
Thru NBFI
Thru FIs
Thru Coops
Thru NGOs
Mixed Groups*
Combo - Direct
and Thru Conduits
Banks
GOCC
NBFI
Line Agency
S u r v e y R e s u l t s
Len
din
g C
on
du
its
Number of Programs
24
Since DCPs are theoretically designed for the basic sectorswhich are outside the reach of financial institutions,community-based groups such as NGOs, cooperatives,associations and people’s organizations are increasingly usedfor credit delivery. Cooperatives are the favorite among thepresent crop of DCPs coursed through such groups, especiallyamong LBP and DA programs. On the other hand, NGOs areprincipally used under the programs of DTI. A relativelysignificant number of programs (26% of the 58 Models 2 & 3programs) use other types of organized groups or a mixture ofsuch groups to reach their target beneficiaries.
By Program TypeDCPs today are divided into three main types — purely
credit programs, credit programs with various support features,and programs in which credit is only a portion of the entireintervention process. Recognizing that credit alone does notwork, many of today’s DCPs supplement credit with suchfeatures as institution building (IB), social preparation (SP),savings mobilization, technical assistance, marketing assistance,and the like. Of the 86 ongoing programs, only 30 are purelycredit programs, almost half of which are programs of GFIs,particulary DBP (Figure 4.7). On the other hand, 40 of theprograms involve institution building of cooperatives orassociations and social preparation of their respective members.Some of these programs also include technical assistance forprogram beneficiaries.13 Active in these types of programs aregovernment line agencies and the LBP; together, they manage35 of the 40 programs.
S u r v e y R e s u l t s
25
0
2
4
6
8
10
12
14
Purely Credit
Credit with
IB/SP
Credit with
TA
Credit as a
component
An important feature of institution building programs issavings mobilization, which may involve capital build-up forthe group (cooperatives, associations, etc.) as a whole, andsavings generation for group members. In whatever form,savings in credit programs are mainly “forced” and are tied toloans. Usually, the cooperative either deducts a percentage ofthe borrower’s loan as his contribution to the group’s savingseffort or adds in some percentage in the borrower’s loanamortization as forced savings. In the case of some institutionslike LBP and CDA, the existence of a capital build-up programis one of the criteria used to accredit cooperatives.14 Hence,even some purely credit programs effectively require savings
S u r v e y R e s u l t s
13 Funding for these extra components may be included in the program funds or may be sourced fromthe interest earnings on program funds deposited with the conduit bank. In many cases, governmentagencies or NGOs negotiate with banks (such as LBP) for a tie-up scheme, in which the formerprovide training and technical assistance while the latter provide credit assistance.
14 Specifically, the criteria states that the cooperative must have an “ongoing capital build-up programresulting in annual incremental equity equivalent to P500 per member.”
Figure 4.7Profile of PDPs By Agency Type, By Program Type
Nu
mb
er o
f P
rog
ram
s
Line
Age
ncy
NB
FI
GO
CC
GF
I
Agency Type / Program Type
26
Required
Without
No Info
Finally, a good number of programs include credit only asminor components of the programs, or use credit in tandemwith other financial assistance (e.g., loan guarantees). Most ofthese are programs of government line agencies, such as thoseof the DA mentioned above.
By Target SectorCompared to DCPs in the 1970s, today’s DCPs target a
wider range of sectors – agriculture, enterprises of small,medium and large scale (SMEs and SM&L), and livelihood.
S u r v e y R e s u l t s
mobilization for accessing loan. In still other programs ofgovernment agencies, group members are required to save apercentage of their loan as forced savings.15 In all, 37 programsrequire borrowers to save in order to access loans (Figure 4.8).
Figure 4.8Profile of DCPs By Agency Type, By Savings Features
15 For instance, DSWD’s SEA-K requires association members to give an additional 50% for theirweekly payment as part of their savings under the program.
Agency Type / Savings Features
Nu
mb
er o
f P
rog
ram
s
Line
Age
ncy
NB
FI
GO
CC
GF
I
27
S u r v e y R e s u l t s
Figure 4.9Profile of DCPs By Agency Type, By Program Objectives
Agriculture continues to be the favorite target of DCPs, with40% of them catering to agriculture and related activities. Morethan half (19 programs) of the agricultural programs areimplemented by government line agencies, while one-third (10programs) are under GFIs (Figure 4.9). Programs for agricultureconsist of loans for production and seasonal operating capital,fixed asset acquisition (e.g., post harvest facilities), andmarketing activities. Most of these are directed at farmercooperatives and their members and involve institutionbuilding, social preparation, or technical assistancecomponents.
Besides agriculture, line agencies are also active in providingcredit for livelihood activities. Of the 17 livelihood programs,nine are run by line agencies. Livelihood programs consist offinancial assistance for income-generating projects ofbeneficiaries and usually involve institution building. Thereare several programs for small- and medium-scale enterprises
0
2
4
6
8
10
12
14
16
18
20
LineAgency
NBFI GOCC GFI
A
L
SE
G
Agency Type / Program Objectives
Nu
mb
er o
f P
rog
ram
s
Agri & RelatedActivities
Livelihood /SMEs
Small, Med &Large Ent.
GovernmentProjects
28
S u r v e y R e s u l t s
Figure 4.10Profile of DCPs By Agency Type, By Target Sector
(SMEs) supported mostly by line agencies and NBFI. Theseprograms generally aim to encourage entrepreneurship andprovide loans to expand the operations and increase the capacityof small businesses. In comparison to line agencies, GFIs aremore inclined to provide credit to small, medium, or largeagricultural or industrial enterprises. The bulk of this creditcomes from foreign-funded programs of DBP for plantconstruction, expansion or modernization, as well as formachinery and equipment acquisition.
In terms of the basic sectors, a classification of programsby their stated objectives indicate that 53 of the 86 programsare targeted at such groups as the poor and the non-bankable(Figure 4.10). As expected, the majority of these programs areadministered by line agencies. In comparison, there are 33DCPs which cater to sectors that normally would have moreaccess to regular bank credit. Some of these programs providecredit at subsidized interest rates either at the conduit or at theend-user level.
Agency Type
Nu
mb
er o
f P
rog
ram
s
Targ
etS
ecto
r
Line
Age
ncy
N
BF
I
G
OC
C
G
FI
Basic
Not basic
0
5
10
15
20
25
30
35
29
0
510
15
2025
30
3540
General /
Miscellaneous
Disadvantaged
groups
Entrepreneurs
Farmers/
Fisherfolks
In terms of specific groups, seemingly anyone can haveaccess to any credit program. There are DCPs for marketvendors, inventors, military personnel, rebel returnees,employees, traders, etc. However, farmers and fisherfolkcontinue to be the main beneficiaries of DCPs (Figure 4.11),particularly of programs managed by line agencies and GFIs(in particular, LBP). Entrepreneurs are likewise a favorite group,especially among banks. Almost half of the 27 programs forentrepreneurs are under bank management.
A total of 18 DCPs serve a more general mix of beneficiaries(no specific target group) and non-traditional groups such asOCWs and inventors, while six others cater to thedisadvantaged sectors such as the ultra poor, the disabled, thehomeless, women, and victims of disasters. Government lineagencies are expectedly more active in servicing such groups.
S u r v e y R e s u l t s
Figure 4.11Profile of DCPs By Agency Type, By Target Beneficiaries
Agency Type / Target Beneficiaries
Nu
mb
er o
f P
rog
ram
s
Line
Age
ncy
N
BF
I
G
OC
C
G
FI
30
By Interest Rates at Various Levels16
There are various levels of interest rate from fund source toend-user, starting with the cost at which funds are transferredfrom source to the executing agency. From the executing agency,funds may either be transferred to the lending conduit or tothe end-user at different interest rates. If the program involvesa fund administrator, another level of interest charges is added.Since the survey covers only the program level, interest ratecharges from the conduit to the end-user are not reported inthe survey.
From fund source to executing agency. Based on availableinformation on 71 programs, program funds are mostly passedon from the fund source to the executing agency at zero cost tothe executing agency (35 programs) (Table 4.1a, b). Themajority, or 29 of the programs, are of line agencies with fundscoming mostly from government budget and foreign grants.For 11 foreign loan-financed programs, funds are passed on tothe executing agency at interest rates between 0.75% and 10%.However, despite the low interest rates, foreign loans carry othercosts for the executing agency. For LBP, for instance, these othercosts include service fees (ranging from 0.1% to 1%), foreignexchange risk cover (3% average), and guarantee fee (1%) paidto the national government for the latter’s guarantee on theloan.
16 Initial survey results indicate that some programs provide loans at “market” rates. This will be thesubject of an ensuing CPIP study on “Formulation of Appropriate Interest Rate Structure on Loans.”
S u r v e y R e s u l t s
31
S u r v e y R e s u l t s
Table 4.1bProfile of Directed Credit ProgramsBy Fund Source,By Interest Rate from Fund Source to Executing Agency
Budgetary Special Foreign Foreign Internal External MixedFund Source Allocation Fund Grants Loan Funds (lc) funds Funds Total
0% 20 5 5 5 35
0.75% - 5% 0 0 0 4 0 0 0 4
6% - 1a0% 0 0 0 7 0 0 0 7
0% + fund gen cost of banks 0 0 0 0 0 0 4 4
Fund gen cost of agency 10 2 9 21
No Information 3 10 2 15
Total 20 8 5 21 10 2 20 86
LineInterest Rate Agency NBFI GOCC GFI Total
0% 29 1 3 2 35
0.75% - 5% 0 0 0 4 4
6% - 10% 0 0 0 7 7
0% + fund gen. cost of banks 3 0 0 1 4
Fund gen. cost of agency 2 9 3 7 21
No Information 3 1 1 10 15
Total 37 11 7 31 86
Table 4.1aProfile of Directed Credit ProgramsBy Agency Type,By Interest Rate from Fund Source to Executing Agency
32
For 21 of the programs (primarily of NBFIs and GFIs),the pass on rate from fund source to the executing agencydepends on the fund generation cost of these agencies sincethe programs are funded out of internal agency funds.Generally, for bank-managed programs, the cost of funds forinternally funded programs is the average deposit rate, whilefor NBFIs and government corporations, the pass on rate isnot based on an explicit cost of funds. Thus, non-financialgovernment agencies involved in DCPs will have varying “costof funds” depending on its sourcing and utilization of agencybudgets.
Finally, in 12 of the programs, the average cost of programfunds for the executing agency is equal to the weighted averagerate on funds from various sources. For instance, the DAR-LBP Countryside Partnership Program has 25% of the fundsat 0%, and 70% at LBP’s average fund generation rate.
From executing agency to fund administrator. If the executingagency doubles as fund administrator, then at the next level,funds are directed either at lending conduits or end-users.However, if another entity is used as fund administrator, thenfunds may be transferred in either of two ways: (a) as a loanwith corresponding interest charges; or (b) as a trust fundaccount for which the fund administrator charges a percentagemanagement fee. Based on available information on 10 DCPs,the executing agencies are usually line agencies and the fundadministrators either GFIs or government NBFIs. The pass onrate from executing agencies to fund administrators range from0% to 6%.
From executing agency or fund administrator to lendingconduits. Interest rates to lending conduits may be applieduniformly across conduits or depending on such characteristics
S u r v e y R e s u l t s
33
as loan purpose and loan maturity. Uniform interest rates mayrange from 0% to any “market-based” rate. On the other hand,programs with interest rates based on loan purpose typicallydepend on whether the loan will be used for working capital,fixed asset acquisition or marketing. Generally, working capitalloans are charged lower interest rates than fixed asset loans.
Some programs with mixed funding sources use differentinterest rates for each fund source. This is done since somefund contributors specify the maximum or minimum rate tobe charged.17 Still, in other programs, interest rates depend onloan maturity, giving premium to longer-term loans.
From executing agency to end-user. Interest rates to end-users are likewise applied in various ways. In many cases, therates are applied uniformly across borrower types and loan typesand generally, range from 0% to 24%. In other cases, they arebased on loan purpose (higher for fixed asset loans than forworking capital loans), maturity (higher for medium- to long-term loans than for short-term loans), collateral requirements(higher for non-fully collaterized loans than for fullycollateralized loans) and firm size (higher for larger SMEs thanfor smaller SMEs). Moreover, interest rates to end-users maybe applied either on diminishing loan balance (e.g., GFIprograms) or on a flat-rate basis (e.g., PITC program).
Program PerformanceThis survey tried to compile background information on
the programs from program documents and interviews withkey agency officials. It was, however, not as successful ingathering financial data on the DCPs. The main reason is that
17 For instance, under ACPC-LBP 5:25:70 scheme, ACPC funds are lent at 0% interest while LBPfunds are lent depending on loan purpose. Production and working capital loans are charged 12%interest, while fixed asset acquisition loans are charged 14%. In addition, a 2% fee is included asLBP’s supervision cost.
S u r v e y R e s u l t sS u r v e y R e s u l t s
34
most of the agencies do not generate the data on individualprograms in the form requested by the survey. Rather, most ofthe programs have available only basic data (e.g., loans granted,loans outstanding, loans matured and collected, number ofborrowers). Others have a minimal set of data which are noteven enough to calculate repayment rates. Still other programs,mainly internally funded programs of banks and GOCCs, donot have their own sets of data as program funds are managedtogether with other agency funds. In all, there are only fourprograms with complete data, including individual financialstatements (Figure 4.12). Half of the rest of the programsgenerated only a basic set of data, while one-third did notsubmit financial information because: (a) they were newlylaunched programs and have not granted loans as yet; (b) theagencies managing the programs were not able to fill out theforms on time; and (c ) the data were simply not generated bythe concerned agencies.
Figure 4.12Data Availability for Directed Credit Programs*
* Data gathered updated using the data in the following studies: a) Assessment ofthe Role and Performance of Government Non Financial Agencies (GNFAs) inImplementing Directed Credit Programs; and b) Assessment of the Performanceof Government Financial Institutions (GFIs) and Government Owned andControlled Corporations (GOCCs)/Non-Bank Financial Institutions (NBFIs) inImplementing Directed Credit Programs.
Co
( )(Not Provided(14)
Limited Data(8)
Not Provided(3)
Basic Data Available(29)
Complete Data(32)
S u r v e y R e s u l t s
35
Given data limitations, the following discussion on programperformance is restricted only to those programs that providedthe needed information. Care must be taken in generalizingthe results considering the number of programs reporting foreach variable.
Fiscal CostData on initial fund allocation for 63 DCPs (representing
73.3% of the total number of DCPs) show that more than P40billion, or 1.8% of GNP in 1996,18 were invested in theprograms of the different agencies (Table 4.2). The bulk of thesefunds were sourced from foreign loans which provided a total ofmore than P34 billion for 19 programs (representing 90% oftotal foreign loan-funded programs). On the average, foreignloans provided funding of P1.8 billion per program, which is 22times larger than the average size of a government budget-fundedprogram. While most of these funds are GFI borrowings, theynonetheless carry national government guarantees.
18 GNP for 1996 is P2,283 billion.
S u r v e y R e s u l t s
Table 4.2Directed Credit ProgramsInitial Fund Allocation, In millions of pesos
* Budgetary allocation and foreign funds
Line Agency NBFI GOCC GFI Total
Fund Source # Amount # Amount # Amount # Amount # AmountRep Rep Rep Rep Rep
Budgetary 13 1,280.78 3 119.79 3 62.71 19 1,463.28
Allocation o/w CIA/CDF 5 457.11 1 85.40 6 542.51
Special Fund 5 511.80 1 202.00 1 355.00 7 1,068.80
Foreign Grants 4 398.50 4 398.50
Foreign Loan 1 663.61 18 33,555.65 19 34,219.26
Internal Funds 3 1,416.41 3 1,416.41
Mixed Funds* 5 1,375.04 5 1,375.04
Total 33 4,686.84 4 1,618.41 3 119.79 23 40,510.86 63 40,483.80
36
Budgetary allocation furnished a total of P2,006 millionfor twenty-five programs (representing 95% of programsfunded from the budget), or an average of P80 million perprogram. Most of these funds (or P1,281 million) were infusedinto programs of line agencies. Funding for six of the programscame from CIA/CDF of senators and congressmen amountingto P542 million. This translates into P 90 million per program,indicating that programs funded from the budget properreceived lower-than-average funding allocation than programsfunded from CIA/CDF.
Combined funds from foreign sources and budgetaryallocation contributed another P1.4 billion to five programsof line agencies, or P275 million per program. On the otherhand, internal funds of government NBFIs furnished anotherP1.4 billion to support three DCPs, or an average of P472million per program.
Loans Outstanding. As of December 1996, loansoutstanding under 63 DCPs (representing 73.3% of totalDCPs) amounted to P39.6 billion (Figure 4.13). This translatesinto P628 million per program which is a little bit lower thanthe initial allocation per program. The bulk (82.7%) ofoutstanding loans belong to 22 programs of GFIs totaling P32.7billion, or an average of P1.5 billion per program. In contrast,outstanding loans of programs under other agency types aremuch smaller. Line agencies reported a total of P5.9 billionoutstanding loans for 32 programs or about P184 million perprogram. In the case of 5 programs of NBFIs, their loansamounted to P652.6 million or P130 million per program.On the other hand, GOCCs have the smallest loans outstandingat P275.9 for 4 programs or P 69 million per program.
S u r v e y R e s u l t s
37
In terms of target sector, the same data set shows that P30.7billion are outstanding loans of small, medium and large(SM&L) enterprises under 12 programs (Figure 4.14). Theseare mostly foreign loan-funded programs of the DBP with loansizes in the tens and hundreds of million pesos. On the average,outstanding loans per program catering to the sector is P2.6billion. In comparison, outstanding loans of programs servingthe agricultural sector follow a far second with loans of P6.7billion for 28 programs, or an average of P238 million perprogram which are 11 times lower than the average loans underthe SM&L program.
S u r v e y R e s u l t sS u r v e y R e s u l t s
Figure 4.13Loans Outstanding Under 63 DCPs* By Agency Type, As of Dec. 1996
276
32, 745
5, 903
653
1
10
100
1,000
10,000
100,000
* The number of reporting programs by agency type is as follows: 32 for line agencies,5 for NBFI, 22 for GFI, and 4 for GOCC
Agency Type
In M
illio
n P
eso
s
Line Agency NBFI GFI GOCC
38
OutreachTotal Borrowers. Data on 64 DCPs (representing 74.4% of
total DCPs) for the two years 1995-96 show that a total of67,821 borrowers received loans under the programs (Table4.3). These borrowers include not only individual and corporateborrowers but also group borrowers, such as NGOs andcooperatives which use the funds both for their own projectsand for re-lending to group members. There was a huge jumpin the number of borrowers from 1995 to 1996. This increaseis due primarily to the DA’s Gintong Ani Program whichintroduced direct lending to individuals in 1996 and to someprograms which started in 1996.
Figure 4.14Loans Outstanding Under 63 DCPs By Target Sector, As of Dec. 1996
6,6642,195
30,718
1
10
100
1,000
10,000
100,000
A i & R l L i lih d & S ll M d L
* The number of reporting programs by agency type is as follows: 28 for agriculture andrelated activities, 23 for livelihood and SMEs, 12 for small, medium and large enterprises.
S u r v e y R e s u l t s
Agency Type
In M
illio
n P
eso
s
Agri & Rel Livelihood & Small, Med, LargeActivities SMEs Ent.
39
S u r v e y R e s u l t sS u r v e y R e s u l t s
Number of BorrowersPrograms
Reporting* Individuals NGOs Coops PPC Others Total
Line Agencies
1995 27 164 1,455 4,974 0 0 6,593
1996 30 37,995 3,887 4,961 2 0 46,845
NBFI
1995 4 4,314 0 207 228 0 4,749
1996 8 3,654 0 242 299 0 4,195
GOCC
1995 3 0 0 56 0 1 57
1996 5 0 0 27 0 25 52
GFI
1995 19 0 0 1,738 1,043 0 2,781
1996 21 0 0 1,323 1,225 1 2,549
Total
1995 53 4,478 1,455 6,975 1,271 1 14,180
1996 64 41,649 3,887 6,553 1,526 26 53,641
Table 4.3Number of Borrowers Under 64 DCPs For period 1995-1996
* The number of reporting programs for 1995 and 1996 does not tally since some programs started only in 1996.
Individual borrowers under the Gintong Ani Program madeup the bulk of total borrowers for the past two years. However,ignoring for the moment the individual borrowers under theGintong Ani Program (to make data for the two yearscomparable), the table shows that there are more cooperativeborrowers in the last two years than any other borrower type.In 1996 however, the numbers went down by 6% comparedto 1995. On the other hand, a remarkable increase of 167%was registered by NGO borrowers, indicating that these grouphad been actively participating in the directed credit market.
40
Besides the increasing number of group borrowers, theirwider outreach is also attested by the data. For 1995-1996,data on 24 DCPs (subgroup of the 64 programs discussedabove) show indirect beneficiaries reaching 685,794, or 15times as many as the direct individual beneficiaries of the 64programs (including Gintong Ani) (Table 4.4). More than half(14) of the 24 DCPs coursed its funds through 7,125cooperatives with 577,015 beneficiaries or an average of 81individuals per cooperatives. Except for a program which courseits funds through an NGO, the rest were coursed thrucooperatives/federations.
Looking at the figures by agency type, the widest outreachmay be traced to programs of line agencies and GFIs. For thetwo-year period, line agencies and GFIs averaged 27,195 and57,713, respectively in terms of indirect beneficiaries perprogram. On a year to year basis, however, the data showedthat beneficiaries under bank and GOCC programs declined
ProgramsReporting 1995 1996 Total
Line Agencies 12 131,273 195,070 326,343
NBFI 4 18,603 47,814 66,417
GOCC 3 9,388 5,079 14,467
GFI 5 164,681 113,886 278,567
Total 24 323,945 361,849 685,794
Table 4.4Number of Indirect Beneficiaries Under 24 DCPsFor period 1995-1996
S u r v e y R e s u l t s
41
by 31% and 46%, respectively. On the other hand, beneficiariesunder NBFI and line agency programs rose by 157% and49%, respectively.
Average loans granted per account. Data on loan sizes peraccount for 64 DCPs (representing 74.4% of total DCPs) showaverage loans granted of about P13 million per loan in 1996.19
These refer to loans granted to all types of borrowers –individuals, corporations, cooperatives, NGOs, and otherorganized groups. Hence, the large average loan size. However,a breakdown of the data by agency type showsdisproportionately large loan sizes for programs of GFIscompared to programs of the other agency types (Table 4.5).For the two years 1995-1996, GFIs granted average loans ofP32.5 million per account (for 22 reporting programs)compared to line agencies’ P900,000 per loan (30 reportingprograms) and NBFI’s P700,000 per loan (8 reportingprograms).
S u r v e y R e s u l t sS u r v e y R e s u l t s
19 An account refers to one loan transaction, not borrower account.
Agency Type # Reporting 1995 1996
Line Agency 30 1.0 0.8
NBFI 8 0.5 0.9
GFI 22 29.1 35.9
GOCC 4 0.4 0.8
Total 64 10.6 12.9
Table 4.5Average Loans Granted Per Account By Agency Type, 1995-1996(Amounts in million pesos)
42
Figure 4.15Distribution of Average Loans Granted Per Account, 1996
1
10
100
1000
10000
100000
1000000
Data on the distribution of average loan sizes by agencytype show that the smallest loan size (P11,000 in 1995 andP13,000 in 1996) was granted by a line agency, while the largestloan (P207 million in 1995 and P371 million in 1996) wasgranted by a GFI (Figure 4.15). Further, most of the loansgranted of reporting NBFI and line agency programs werebelow P1 million, while 50% of the reporting GFI programsgranted loans above P5 million. This result seems to supportthe contention of line agencies and NBFIs that their creditprograms cater to the low end of the market, most of whichare considered non-bankable.
S u r v e y R e s u l t s
Selected Programs
In T
ho
usa
nd
Pes
os
Line Agency NBFI GFI GOCC
43
The big average loan size of GFI programs may be tracedto the fact that the reporting GFI programs mostly cater to theSM&L sector. Data on the sectoral breakdown of average loansgranted per account reveal huge average 1995-96 loan size ofP 57.1 million per loan for 12 programs catering to the SM&Lsector (Table 4.6). In contrast, the average loans granted underthe programs serving the other sectors are smaller, such as thosefor livelihood/SMEs which amounted to only P500,000 in1996 (6 reporting programs). The same is true with livelihoodand agricultural programs which averaged P600,000 andP700,000, respectively. More than half of these programsreported below P500,000 loan sizes.
Agency Type # Reporting 1995 1996
Agriculture 21 0.9 0.7
Agri & Rel Activities 6 1.1 6.8
Livelihood 14 0.3 0.6
SMEs 5 1.8 1.1
Livelihood / SMEs 6 0.6 0.5
Sm, Med, Lrg Ent. 12 51.8 62.4
Total 64 10.6 12.9
Table 4.6Average Loans Granted Per Account By Program Objective, 1995-1996(In Million Pesos)
S u r v e y R e s u l t s
44
Agency Type # Reporting 1995 1996
Directly Implemented 14 2.6 4.3
Thru NBFI 2 1.6 0.4
Thru Financial Institutions 20 28.3 37.2
Thru Cooperatives 13 0.7 0.5
Thru NGOs 6 0.2 0.5
Thru Mixed Groups 8 0.6 1.2
Combo- direct and thru conduits 1 0.5 0.5
Total 64 10.6 12.9
Table 4.7Average Loans Granted Per Account By Mode of Implementation, 1995-1996(In million pesos)
In terms of average loans granted per account by variousconduit types, the data show that programs coursed throughfinancial institutions were larger in loan size compared to otherconduit types (Table 4.7). For 1995 and 1996, the financialinstitutions granted an average of P33 million per loan, withloans in 1996 ranging from a low of P48,000 to a high ofP371 million. For directly implemented programs the averagewas P3.5 million per loan (14 reporting programs). This wasmerely pulled up by one program with loans averaging P35million and 4 programs with loans averaging more than P1million. The rest of the programs granted and average loanlower than P1 million. Similarly, programs lending throughorganized groups granted relatively smaller loans, averaging
S u r v e y R e s u l t s
45
P600,000 for cooperatives (13 reporting programs) andP350,000 for NGOs (6 reporting programs), with most of theprograms granting average loans below P500,000.
Viability and SustainabilityRepayment Rate.20 Forty-nine percent of 86 DCPs performed
fairly well in 1996 with an average repayment rate of 82.6%,slightly lower than the 1995 figure (83.9%) (Figure 4.15).
20 Computed based on loans collected and matured in 1995 and 1996.
S u r v e y R e s u l t s
Figure 4.16Average Repayment Rates for 42 Programs 1995 vs. 1996
81.882
82.282.4
82.682.8
8383.283.4
83.683.8
84
1995 1996
g
Reporting Period
Rep
aym
ent
Rat
es
46
* Number of reporting programs for 1995 and 1996 does not tally since some programsstarted only in 1996.
Table 4.8Distribution of Average Repayment Rates For 42 Reporting ProgramsBy Agency Type, 1995-1996
1995 1996
Line NBFI GFI GOCC Line NBFI GFI GOCCAgency Agency
Minimum (%) 20.0 88.4 36.2 58.17 34.5 74.0 21.7 56.1
Maximum (%) 100.0 100.0 100.0 100.0 100.0 100.0 100.0 93.0
Average (%) 73.59 92.22 92.24 75.76 76.0 91.74 89.80 67.22
below 50% 2 1 2 1
51-60% 1 1 2
61-70% 2 1 1 1 1
71-80% 3 2 3 1 2
81-90% 4 2 7 1
91-100% 2 2 12 1 2 4 12 1
Programs Reporting* 13 4 15 3 16 5 17 4
The distribution of average repayment rates by variousdimensions (agency type, implementation mode, target sector)provides better information on program performance. Forinstance, in 1996 NBFI and GFI programs registered the highestaverage repayment rates of 91.7% (5 reporting programs) and89.8% (17 reporting programs), respectively (Table 4.8). In1995, these two agencies performed even better with bothposting a 92.2% repayment rate. In terms of the number ofprograms, 4 out of 5 for NBFIs and 12 out of 17 for GFIsperformed remarkably well with repayment rates ranging from91-100%. Poor repayment performance on the other hand,were registered by programs under GOCC with an average of67.2% (4 programs) and line agency with 76% (16 programs).Three programs of these agencies had repayment rates rangingfrom lower than 50%-60%.
S u r v e y R e s u l t s
47
Table 4.9Distribution of Average Repayment Rates For 42 Reporting ProgramsBy Mode of Implementation, 1995-1996
1995 1996
Directly Thru Thru Thru Thru Mixed Directly Thru Thru Thru Thru MixedImpl. FI NBFI Coop NGO Impl. FI NBFI Coop NGO
Minimum (%) 58.2 20.0 80.0 36.1 63.7 83.0 27.3 34.5 72.0 21.7 61.5 60.0
Maximum (%) 100.0 100.0 100.0 77.0 100.0 90.2 100.0 100.0 93.0 100.0 90.0 100.0
Average (%) 85.1 88.3 90.0 68.7 85.2 76.7 70.1 93.2 82.5 71.8 79.8 79.4
Below 50% 1 2 1 1 1 1
51-60% 1 2 1 1
61-70% 1 1 1 1 1
71-80% 1 2 2 1 1 1 1 1
81-90% 1 2 1 1 1 2 1 2 2 2
91-100% 3 12 1 2 1 15 1 1 1
Prog. Rep. 5 17 2 5 3 3 7 18 2 7 3 5
In terms of implementation mode, data show that 15 ofthe 18 or 83.3% of the reporting programs which registeredrepayment rates above 90% coursed their funds throughfinancial institutions (Table 4.9). Of these, only one programwhich utilized financial institutions as conduits showed poorrepayment rate ranging from 50% to 60%. The averagerepayment performance of directly implemented programs,while fairly good in 1995 (85%) for 5 programs, weakenedconsiderably in 1996 (70%) for 7 programs. Programs coursedthrough the NGOs also posted similar experience - 85%repayment rate in 1995 and down to 79.8% in 1996. Theseven programs using cooperatives as conduits performed badlywith 70% average repayment rates for 1995-96.
S u r v e y R e s u l t s
48
Table 4.10Distribution of Average Repayment Rates For 42 Reporting ProgramsBy Target Sector, 1995-1996
1995 1996
Agri- Agri & Liveli- Lvlhd & SM&L Agri- Agri & Liveli- Lvlhd & SM&Lculture Rel Act. hood SMEs Ent. Culture Rel Act. hood SMEs Ent.
Minimum (%) 20.0 67.1 58.2 91.8 99.5 21.7 27.3 56.1 82.7 80.1
Maximum (%) 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Average (%) 75.5 79.4 74.8 97.3 99.9 79.6 63.3 75.4 90.2 97.7
Below 50% 3 2 1
51-60% 1 2 2
61-70% 1 2 1 1
71-80% 4 1 4 1 1
81-90% 4 1 4 2 2
91-100% 4 1 1 3 9 6 1 2 1 9
Prog. Rep. 15 3 5 3 9 17 5 7 3 10
Data on average repayment rates by sector show very goodrepayment performance of programs for SM&L enterpriseswith 97.7% in 1995 and 99.9% in 1996 (Table 4.10). Exceptfor one, all programs for SM&L have repayment rates under91-100% ranges. Programs catering to both livelihood & SMEsranked second with 90.2% in 1996 and 97.3% in 1995 (3programs). The lowest average repayment rates during thetwo year period was registered by programs for agri & relatedactivities (71.3%) followed by program for livelihood projects(75%) and agriculture (77.6%).
S u r v e y R e s u l t s
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This section looks at institutional factors, systems andpractices of agencies implementing DCPs. Interviews with keyagency officials were conducted for this purpose.
On Institutional Capability
Most DCPs were created and lodged in agencies thatconduct activities other than lending. To implement theprograms, the agencies either assign an existing department inthe organization to manage the programs or, more commonly,create a unit dedicated solely to administering the programs.Employees working on the program may be regular orcontractual employees hired on a full-time or part-time basis.In some cases, one staff member handles a specific programfrom start to end. In other cases, several groups of peopletogether handle a program, with each group focusing on oneparticular aspect of loan processing (e.g., one takes charge ofevaluation, another monitoring, another collection).
It would seem that many of the agencies tasked toimplement DCPs, especially line agencies and GOCCs, do nothave the capability to effectively deliver credit. To start with,they have totally different mandates and, thus, do not have thenecessary staff support to carry out the requirements of a credit
Management andImplementation
Issues
50
program. Without the necessary skills, these agencies faceproblems at every stage of the credit delivery process —evaluating proposals, screening loan applicants, monitoring andrecord keeping, loan collecting — rendering the programsineffective and unsustainable.
To cite an example, CDA’s primary mandate is to regulateand supervise credit unions. However, it operates five lendingprograms inherited from previous implementors (i.e., CentralBank, ACPC). The lack of credit delivery skills on the part ofCDA’s personnel resulted in such problems as low repaymentrates, cases of fraud involving “fly-by-night” cooperatives, andinability of field personnel to collect payment.
On Management ControlDepending on program design, management control over
a program may be exercised solely within the implementinginstitution, or there may be committees that manage theprogram. In certain cases, the implementing institution merelydisburses the loan on behalf of the owner of the fund whodecides who will receive the loan.21 Inter-agency ProgramManagement Committees are more common for programsinvolving Special Funds, or where the fund owner is not theprogram implementor. These committees’ roles vary frompolicy making for some programs to actual interest rate settingand loan approval for others. In the latter case, theimplementing agency does not shoulder the credit risk, anddefault losses are charged to program funds.22
Nonetheless, the executing agencies claim to have somecontrol over their own programs and shoulder the credit risk(true for 75% of the surveyed DCPs) (Figure 5.1). Decisionson project financing (from project evaluation to loan approval)
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51
may then be centralized at the head office of the implementingagency, or they may be decentralized to the regional levels.23
Centralization of loan processing may become tedious (in termsof processing and management time), especially if the programinvolves numerous small loans given at the provincial ormunicipal level.24 Hence, many agencies have decentralizeddecision-making to the regional level, retaining central controlonly over large loans. Such operational matters as loan releases,project monitoring and loan collection are likewise assignedto the regional offices, or if there are no regional offices, to aunit within the head office.
21 E.g., LBP’s Special Livelihood Financing Assistance Program (Type B)
22 Most of the agencies implementing CIA/CDF-funded programs do not shoulder credit risks sincethey have minimal control over where and to whom the funds will be directed. Due to politicalpressure, some of the agencies release loans (without screening the borrowers) as long as the borrowersare able to satisfy the documentary requirements.
23 This may involve internal committees (or the Board of Directors) for loan approval or levels ofapproving authority within the organization depending on loan amount.
24 E.g., DSWD’s SEA-K which is moving toward decentralized decision-making.
M a n a g e m e n t a n d I m p l e m e n t a t i o n I s s u e s
Figure 5.1Exposure to Credit Risk of Agencies Implementing DCPs
0
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A A R T D E TI P A P P
No credit risk -
EARisk shared -
FS100% FA
100% Own
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Executing Agency
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f P
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ram
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52
On Financial Practices
An agency’s financial practices impact on how wellmanagement is kept abreast of program status. The surveyreveals that there is no standard treatment of financial dataamong the agencies. Thus, a loan considered past due by oneagency may still be on current status with another agency. Agingof accounts per program is seldom done. Restructuring ofloans may or may not be allowed, and once restructured, theymay be classified separately or lumped together with the current
Once underway, programs are usually evaluated based on anumber of indicators: outreach, fund utilization, loan releases,repayment, program impact, etc. The relative importance ofeach indicator varies from one agency to the next. In manycases, outreach reigns supreme so that poor loan repaymentrates do not matter as much. In other cases, program successis based on the rate of fund utilization so that as long as thefund releases meet targets, the program is deemed successful.Data are then generated depending on which indicators matterto the agency.
In terms of cost coverage, many agencies cannot say to whatextent interest income from individual programs cover the costsinvolved in running the programs (such as administration andoperating costs, as well as training costs for programs withinstitution building). This may be traced to poor datageneration and monitoring of the agency, where individualprogram accounts are, at times, non-existent. Some agenciesargue that they cannot keep track of loan repayments from theprograms because collections from borrowers are remitteddirectly to the Bureau of Treasury by their regional offices, whichdo not have enough personnel to do financial reports. Hence,the flow of program funds is left largely unmonitored.
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accounts. Provisioning for doubtful accounts may or may notbe done and may follow different methodologies. Policies onwriting-off bad debts or foreclosures of collateral generally donot exist.
The varied ways in which the agencies treat financial datamake comparison across programs difficult, if not downrightimpossible. This suggests that there is some merit in coming upwith standard financial practices that will be applied on all DCPs.
On Problems of Implementing DCPs
Considering the amount of funds infused into theprograms, many agencies (especially line agencies and NBFI)still cite the lack of funds as their main problem. This reflectsboth their dependence on continuous capital infusion fromoutside sources to run their programs as well as their inabilityto recycle funds given to them. A second problem relates topersonnel suitability. Many agencies reported that given theirstaff complement, they simply do not have the capability toimplement DCPs. Not only are the personnel not trained tohandle financial matters, their workload also does not allowthem to attend full-time to monitoring and collection.
A third problem has to do with political pressure, especiallyfor programs funded out of CIA/CDF. Some agencies arepressured to grant loans even to non-qualified borrowersbecause the latter are endorsed by congressmen and senators.Some borrowers, viewing the loans as dole outs, do not botherto repay the loans, resulting in poor loan recovery by theconcerned agency.
25 In fact, starting 1997, the CDA is no longer granting new loans but is in the process of transferring theirprograms to cooperative banks for implementation. Likewise, DTI is in the process of transferring theTST-Micro Credit Project to SBGFC and the TST Program for the Poorest of the Poor to the PCFC.
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On Transferring Credit Programs to Financial Institutionsfor Implementation
Based on interview results, government line agenciesgenerally recognize the advantages of using financial institutionsfor credit delivery.25 However, most of them express somereservations on transferring the programs outright to financialinstitutions, citing the financial institutions’ strict collateralrequirements as deterrent to loan accessing by the basic sectors.Others argue that the technicalities of the documents requiredin applying for a loan from financial institutions woulddiscourage their clients from borrowing. Because of these, someagencies proposed a middle ground, wherein non-financialinstitutions would steer clear of sectors reached by formalfinancial institutions. The former should intervene only forthe non-bankable sectors, and only until such time that theformal system is able to service these sectors’ needs.
25 In fact, starting 1997, the CDA is no longer granting new loans but is in the process of transferringtheir programs to cooperative banks for implementation. Likewise, DTI is in the process oftransferring the TST-Micro Credit Project to SBGFC and the TST Program for the Poorest of thePoor to the PCFC.
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Summary ofFindings and
Emerging Issues
26 These programs fall within the definition of directed credit programs adopted here.
Despite the promulgation of a Cabinet resolution in 1989calling for the termination of direct lending by governmentnon-financial institutions, the number of DCPs has increasedto 177. This is a marked increase over Lamberte’s count ofonly 111 in 1994. If the terminated DCPs and the member-loan programs of government pension funds (SSS, GSIS,HDMF) are excluded, the total number of on-going DCPs isreduced to only 86.26 The comparative number with theLamberte (1994) study is 68, hence, an increase of 18 programsover a period of three years.
Survey results show that almost half of these DCPs areimplemented by government non-financial institutions. Non-bank financial institutions implement almost 13% of the DCPs,while GOCCs and banking institutions implement 8% and36% of the total DCPs, respectively. There are three primarymodes by which DCPs are implemented: Mode 1 – directlending by executing agency (20 programs); Mode 2 – indirectlending wherein funds are channeled through lending conduits(48 programs); and Mode 3 – indirect lending wherein fundsare coursed through a fund administrator, which in turn useslending conduits to reach target beneficiaries (10 programs).About eight programs use a combination of these modes.
56
The majority of DCPs source their funds from budgetaryallocation and foreign assistance from donors (either as loansor grants). In a number of cases, DCPs are sourced from acombination of budgetary allocation, donor funds, and internalagency funds (in the case of GFIs and GOCCs). Limited datafrom the survey show that initial fund allocation for 63 DCPsamounts to more than P40 billion, which shows that thegovernment still directly intervenes in the credit market despiteits avowed adoption of market-based financial policies. Thisintervention is largely prevalent in the agriculture sector. Fortypercent of the DCPs cater to agriculture and activities relatedto the sector. Financing of livelihood activities is also anotherarea where direct credit provision by government isimplemented. The government continues to direct resourcesto specific sectors in the hope that this would increase economicactivity and, thus, eventually increase incomes, which is theend goal.
Limited data from the survey show that DCPs have minimalreach. Using data from 24 reporting DCPs, the total numberof beneficiaries reported under the programs for the period1995 and 1996 was only 685,794, or an average of 29,000beneficiaries per program. The limited reach may be explainedby the low turn around of loanable funds considering thataverage repayment rates for DCPs are dismally low. Data on42 programs representing almost half of the total reportedDCPs show an average repayment rate of only 82%. Thisimplies that the costs associated with the implementation ofDCPs are enormous.
For efficient financial management, interest charges onloans should be able to cover, among other things, the cost ofadministering the credit program. Survey results, however, show
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that DCPs use varied interest rate structure. The cost of theloan to the end-beneficiary is often a “market rate,” but passon cost of the DCPs to intermediaries and lending conduitsoften are at subsidized rates. This is because cost of funds arenormally not imputed in the pass on rate.
Viability and sustainability indicators provide a moreaccurate picture of how efficiently government resources havebeen used. These indicators, however, cannot be accuratelycomputed due to the inadequacy of data for most of theprograms. Only 32 programs provided complete informationon their performance and operations. The lack of informationon program performance and operations for most of the DCPsis indicative of how the DCPs are being monitored bygovernment. The lack of reports shows that there is nosystematic monitoring of DCPs, resulting in a number ofoverlaps and repeat of past program bottlenecks. In most cases,terminated DCPs are not reviewed and evaluated. The lack ofa monitoring system encourages further inefficiencies and anneglect of reporting responsibilities. Interview results fromprogram implementors reveal the inadequacy of staff personnelto accurately report data related to viability and sustainabilityof DCPs. In some cases, the lack of staff capability was alsoreported as one reason behind the lack of information.
The foregoing shows the enormous complexity and wasteof public resources involved in DCP implementation (Figure4.3). For instance, one would be lost in tracing through thevaried implementation structure and administrativearrangements by which DCPs operate. There is likewise nostandard mechanism for determining loan pricing from onechannel to another. Since DCPs are mostly implemented bygovernment non-financial institutions, whose mandates are
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broader than mere credit provision, there is difficulty inallocating the costs associated with the implementation ofDCPs. In most cases, project personnel still perform functionsnot related to the implementation of DCPs. This, therefore,results in a situation where cost recovery is not accuratelyinputed in determining the price of the loan.
The lack of sufficient and accurate information and thecomplexity involved in implementing DCPs provide room forgross inefficiency and waste of resources. Information resultingfrom this survey are indicative of this, but inadequate data,despite efforts to gather them, prevented a more conclusivestatement of this point. Hence, a number of issues must befurther investigated. These are:
• Assessment of the role and performance of government non-financial agencies in implementing credit programs. Sincethese institutions comprise the majority of DCPimplementors, there is a need to assess their relativeefficiency in carrying out DCPs. Current survey resultsprovided only limited information related to programperformance and efficiency. Further investigation of theissue would provide the National Credit Council ampleinformation regarding actions that they need to undertakein relation to the implementation of DCPs by governmentnon-financial institutions.
• Impact of DCPs on savings mobilization. Provision ofgovernment funds for the implementation of DCPs posesan alternative to savings mobilization among financialinstitutions. This may have some disincentive effects onsavings mobilization. Survey results show that themechanisms used in DCP implementation allow the use
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of private financial institutions as channels or conduits ofDCP funds. Availability of these funds does not encouragefinancial institutions to implement their own savingsmobilization program. Compared to the cost associatedwith DCP funds, savings mobilization becomes anexpensive alternative as source of funds among privatefinancial institutions. An investigation of this issue isnecessary since savings mobilization is a critical componentin ensuring the sustainability of financial institutions.Savings are necessary for institutional funding, fordeveloping client relationship, and for promoting greaterdiscipline among financial institutions. An investigationof the issue would provide additional information for theNCC to effectively rationalize DCPs.
• Appropriate interest rate structure on loans. This surveyon DCPs finds that various programs and institutionscharge different interest rates. In most cases, so-called“market rates” are charged on end-users while executingagencies pass on the loanable funds at “subsidized rates” tothe financial conduits. A study is proposed to look intothese rates at various stages of financial intermediation andto determine the effective subsidy to specific institutionsinvolved. The objective is to introduce and recommendappropriate market-based pricing for loans.
• Assessment of GFIs implementing DCPs. Next togovernment line agencies, government financial institutionsimplement the most number of DCPs. While GFIs mayhave the comparative advantage in credit operations, it isstill important to assess their performance in administeringthe more specialized DCPs. This entails not only lookinginto their efficiency and effectiveness in implementing
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DCPs, but also assessing the impact of these programs onthe financial viability and operations of these institutions.The results of such a study will help the NCC carve outthe role of GFIs in the microfinance market.
• Framework for rationalizing DCPs. The survey revealsthat the government’s numerous DCPs failed to providethe poor access to formal credit despite the substantialresources deployed for the purpose. As a result, publicresources are wasted on DCPs that have very minimalimpact on poverty alleviation. How should this problembe addressed? Should the government stop funding DCPs?What can be done to the current crop of DCPs? What arethe respective roles of the government, the variousmicrofinance institutions, and the donors? To tackle theseissues, it is important to come up with a framework forrationalizing DCPs. An analytical framework will motivatea policy reform agenda for the rationalization of DCPs.
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62
Annex 1Summary of Literature on Philippine Credit Programs
Subbarao,Kalanidhi, et.al.Selected SocialSafety NetPrograms in thePhilippines:Targeting, Cost-Effectiveness, andOptions forReform
RIDA, OECF.Policy-BasedDirected CreditPrograms in thePhilippines.
The studyexamines theeffectiveness ofsafety netprograms,including credit-based livelihoodprograms, fromthe perspectives oftargeting, cost-effectiveness andsustainability
General: Theresearch involvesfour studies whichreview variousaspects of thepresent govern-ment-sponsored
1996
1995
• uses secondarydata from theCentre forAdvanced Philip-pine Studies, Bot,Bureau of RuralWorks, ACPC
• targeting indica-tors include:regional distribu-tion of funds,income of benefi-ciaries, schoolingof beneficiaries,and asset owner-ship
• costs of programsinclude projectcost for personnel,supplies andfacilities, loancosts, and theopportunity costof funds; programbenefits consistsof beneficiaryincome receivedover the life of theproject; costs andbenefits areconverted into1990 prices
Study 1:• Gathered and
reviewed litera-ture, documentson the DCPs, andsecondary data
• Interview with
54 livelihoodprograms(def. as thoseschemes thataim topromote thecreation ofincome-generatingactivities forthe poor andmarginalgroups,including theGrameenBank Replica-tion Program(GBRP) andthe SmallEnterpriseAssistanceProgram(SMAP)
Study 1: 111DCPs under44 imple-mentingagencies
Title/Author Year Objectives Methodology ProgramsCovered
63
• Philippine livelihood programs differ inthree respects: (i) government lineagencies implement the programs inaddition to their usual functions; (ii)reliance on NGOs to perform bankingfunctions; and (iii) NGOs aresubsidized by the government;
• the programs served the nearpoor andnonpoor households more thanultrapoor households
• programs were implemented in regionsthat were better endowed withinfrastructure and whose residents hadhigher average incomes
• the benefit-cost ratios of majorlivelihood programs were unfavorableand the incremental employment andincome effects were negligible
• repayment rates were unsatisfactory,due to an unwillingness, not anincapacity to repay (since those whomade substantial income gains did notrepay their loans)
• except for the SMAP and the GBRP,programs helped to expand familylabor only temporarily
• operational costs of the GBRP (fromP0.41 to P0.83 per peso loan) in thePhilippines were four to five times thecosts of Grameen Bank in Bangladesh
Study 1:• The administrative arrangements for
DCPs are complex, some followingseveral administrative layers whileothers are directly implemented by thefund originators.
• Many of the DCPs have similar
General:
• livelihood programs should not besubsidized and the involvement of linedepartments needs to be reviewed
• the SMAP and the GBRP need to bemodified so that they enable benefi-ciaries to create sustainable livelihoods
Specific:
• the SMAP needs to increase the loanamount given, serve more families,and regularly supervise and monitortheir activities the GBRP needs toreduce its operational costs, andconsequently the subsidy cost
Study 1:• There is a need to have a credit
coordinating body that should putorder into these various programs,determine the mobilization ofresources for DCPs and ensure theirefficient utilization. The credit
Findings Recommendations
64
Annex 1 cont.
directed creditprograms (DCPs)in the Philippinesand recommendpolicies andmeasures for theirimprovement.
Study 1: To delveinto the institu-tional and admin-istrative issuesconcerning DCPsand suggestadministrativereforms toenhance theireffectiveness.
Study 3: To assessthe importance ofrural credit withinthe broad contextof rural develop-ment; to identifythe criticalelements associ-ated with theimplementation ofa successful ruraldirected creditprogram; and toprepare a set ofrecommendationswith reference tothe establishmentof an effective andefficient ruralfinancial system.
key informants• Workshop
Study 3:• Administered two
sets of question-naires to end-usersand suppliers ofcredit
• End-users con-sisted of 80respondents fromeach of the fourprovinces covered– Ifugao, Leytedel Sur, Agusandel Sur, Antique.Most of therespondents(80%) are agrar-ian reformbeneficiaries whilethe rest consist offormer landown-ers in the agrarianreform communi-ties , influentialleaders of coop-eratives andcommunities andSMEs.
• Suppliers of creditwere composed of20 respondentsper province,including the fieldoffices ofLandBank, ruralbanks, cooperativerural banks,
Title/Author Year Objectives Methodology ProgramsCovered
Study 4:DCPsunder DBPand LBP
65
functions and clientele leading toduplication and a waste of governmentresources. Moreover, the linkage ofmany of these DCPs to thedevelopment plans of the government isunclear.
• Externally-funded projects usually havea time frame and a review mechanism,whereas most internally funded projectsdo not have such features making itdifficult to evaluate the latter’speformance.
• ODAs have become an importantsource of funds for DCPs. However,there is an absence of a systematicapproach to tapping ODAs for DCPs.
• Unlike other countries where DCPShave been successfully implemented, inthe Philippines, government lineagencies have also been involved inadministering DCPs. These agenciesnot only suffer from the lack of staffcapable of handling credit evaluation,monitoring and collection, they alsohave difficulty resisting interferencefrom politicians in their creditjudgements.
• The Philippine experience with creditguarantee programs is very poor - highleverage ratios, high administrativecosts, no credit additionality and failureof the guarantee to act as collateralsubstitute.
Study 3:• The lack of access to formal credit for
end-users is traced to the unevendistribution of banks in the rural areas.Thus, the cooperatives and NGOs havebecome the major important source of
coordinating body must be distinctfrom implementing agencies to ensurea healthy check and balance.
• All DCPs must be time-bound andmust be subjected to a periodic andterminal review.
• BSP should gradually wind up itsrediscounting window as this fundsource is inflationary. On the otherhand, given the huge savings gap ofthe country, the effort to tap ODAs(which are subject to DBM’s funddisbursement ceiling) to finance DCPsis supported. However, tappingODAs should be well-coordinated andrationalized under a coherent policyframework.
• Non-financial and financialinstitutions should focus on theiroriginal mandates and exploit theircomparative advantage; the GFIs indelivery financial services, the non-financial government agencies inproviding non-financial services totarget groups. This suggests thatcredit programs currently managed bynon-financial government agenciesshould be transferred to existing GFIs.Also, it may well be for the Office ofthe President to shed those agencies orprojects under it that are found to beduplicating other governmentagencies’ functions (e.g., TLRC vs.DTI-BSMBD)
• Government should de-emphasize itscredit guarantee programs and focusmore on lending programs.
• GFI’s practice of engaging in bothwholesale and retail lending must bemaintained. It is better for the GFIs
Findings Recommendations
66
Title/Author Year Objectives Methodology ProgramsCovered
Annex 1 cont.
Study 4: Toreview andrecommendmanagerial andoperationalimprovements ongovernmentfinancial institu-tions, specifically,DBP and LBP.
commercialbanks, coopera-tives, NGOs,lending investors,informal lenders,and pawnshops.
Study 4:Analysis of DBP’sand LBP’s man-agement andoperation in termsof DBP’s whole-sale and retailbanking activitiesand LBP’s agariansector andbanking sectoractivities
67
formal credit. However, the mostaccessible sources of credit of the end-users in the survey areas are still theinformal lenders who normally chargehigh interest rates on loans
• Loan transactions with the banksrequire more time (average of 45 days)which hinder the timely delivery ofcredit to end-users. The formaldocumentation and procedures ofbanks deter the rural end-users fromapplying for a bank loan.
• Generally, private banks strictly requirecollateral for loans.
• There is low absorptive capacity of end-users for formal credit use due to: (a)absence of adequate infrastructurefacilities leading to unstable and lowlevel of agricultural yields; (b) theperceived low viability of some coop-eratives, especially the “infant” coop-eratives; and (c ) the perceived low sillsin entrepreneurship of cooperatives,SMEs and former landowners due toinadequate information disseminationon markets and potential investment,and technical assistance.
• The rural directed credit programswhich are implemented by differentgovernment agencies and governmentbanks duplicate each other. The lack ofcoordinated and rationalized approachto directed credit programs for ruraldevelopment leads to waste of preciousfinancial resources.
Study 4:For DBP:• On wholesale banking, DBP’s net
spread was negative until 1992 becom-
to course credit for the agriculturesector and SMEs through localfinancial institutions (including creditcooperatives and associations) andconcentrate its retail activities onlending to large industries aimed atovercoming capital market constraints.
• The ICC has greater potential thanother councils/ committees to becomean official credit coordinating body.
Study 3:• The LBP should continue to use the
community-based cooperatives asprimary channels to deliver credit tothe rural areas. Mature cooperativesshould be given priority and beprovided with more credit funds forre-lending to end-users.
• LBP, in coordination with the CDA,DAR and community-based NGOs,should continue its current technicalassistance to “infant” cooperativesusing its own resources but only for adefinite period until such time that anappropriate government agency isready to absorb such functions.
• The LBP, in cooperation with DA,DAR, DTI, CDA, LGUs and privatebanks, should provide market infor-mation and investment alternatives tomature cooperatives, SMEs andformer landowners. More thanproviding information per se, themature cooperatives, SMEs andformer landowners, should be assistedand linked up with buyers/exportersand processors to have a ready marketfor their outputs.
• Acceleration of agrarian reform
Findings Recommendations
68
Title/Author Year Objectives Methodology ProgramsCovered
• effectiveness ofprograms assessedin terms of: (i)borrower accessand loan pricingissues; (ii) incen-tive issues in thedesign of creditprograms; and(iii) sustainabilityissues for creditprograms andcredit-grantinginstitutions
The study reviewsthe Philippineexperience withgovernment-sponsored creditprograms for therural sector,highlightinglessons learned inthe process ofimplementing theprograms andidentifyingemerging issuesthat governmentpolicy mustaddress
Annex 1 cont.
Esguerra,Emmanuel P.Rural CreditPrograms in thePhilippines:Lessons and PolicyIssues
1995 supervisedcreditprogramssince1973; 42existingrural creditprogramsas of 1994
69
Government should create anenvironment that is conducive tofinancial intermediation through:
• investments in productivity-increasingand cost-reducing social overheadcapital
• provision of large-scale irrigationsystems, major road networks, farm-to-market roads, ports, bridges,storage facilities and energy and powersystems
• policies that reduce the informationasymmetries inhibiting the privateprovision of insurance for agriculturalcrops
• removing ambiguities in the existingsystem of property rights, institutingbetter systems of implementingcadastral surveys, land registration andvaluation, and improving theefficiency of the courts in adjudicatingdisputes arising from collateralforeclosures
• redistribution policies such as landreform to increase the borrowingcapacities of beneficiary householdsand improve the loan contractsavailable to them
On alternative credit deliverymechanisms: group lending and creditcooperatives:
• group size (beyond a certain size,familiarity may be compromised) andcomposition (to reinforcecommonality) are crucial
• the process of group formation shouldgive due importance to thedevelopment of “positive expectations”about the group among its members;
Features distinguishing credit programstoday:
• instead of being commodity-specific andactivity-specific, today’s credit programsprovide financing for a comprehensiverange of activities
• emphasis on group, rather thanindividual lending
• inclusion of a savings mobilizationcomponent
Other findings:• programs administered by the DA and
its attached agencies have lowerrepayment rates than non-DA programssince the latter are predominantlyprograms of GFIs which are presumedto have a comparative advantage in creditoperations
• DA programs cater largely to small ruralborrowers; the performance of DA creditprograms reflects the problems attendantto small farmer lending
• the strong tendency to use credit as aredistributive mechanism (e.g., interestceiling set in the Magna Carta forSmall Farmers) still remains
Findings Recommendations
70
Title/Author Year Objectives Methodology ProgramsCovered
• survey was con-ducted in areaswhere program hasbeen replicated
• program impactassessed by com-paring the standardof living of benefi-ciaries before andafter the programas well as withnon-beneficiaries1
• cost measured byoperational andadministrative
Annex 1 cont.
1995ACPC.An Evaluation ofthe GrameenBank ReplicationProject in thePhilippines
The studyevaluates theefficiency andeffectiveness ofthe GrameenBank Replicationin the Philippinesafter three years ofimplementation
GrameenBankReplicationProject(GBRP)
1 Impact assessment focused on the following variables: income, wealth, employment generation, savingsand borrowing behavior.
71
On lending activities:• loan ceilings must be reviewed
periodically to account for changes inthe general price level
• replicators must be allowed to chargemarket-oriented interest rates
• adoption of market rates must beaccompanied by increased loanvolumes to improve the incomes ofGB replicators
On savings mobilization:• continued promotion of savings
mobilization scheme• an innovation to the program is to
• GBRP has made a significant impacton the standard of living of its benefi-ciaries
• high repayment rates were recordedranging from 94% to 98%
• reduced level of dependence of benefi-ciaries on informal credit
• GBRP has demonstrated that the poorare capable of saving on a regular basis
• implementation of GBRP characterizedby high cost of administration andassistance from the government(average of P0.29 per peso loan for alltypes of replicators - banks, POs/NGOs and cooperatives - distributed as
Findings Recommendations
this is hardly achieved when groups areartificially formed merely to takeadvantage of the reduced borrowingcosts
• interest in sustaining a group lendingscheme can be developed if individualsare made to bear some costs for groupmembership (e.g., group fund)
• inter-cooperative lending to meettemporary shortfalls experienced bycoops can be practiced
• the costs of organizing and operating agroup lending scheme (e.g.,membership education, personneltraining, controls to ensure operationsare legal) are important
• there is no substitute for painstakingcollection of information aboutpotential borrowers and the institutionof effective controls within theorganizations (e.g., record-keeping,accounting and auditing system) toprevent abuse
72
Title/Author Year Objectives Methodology ProgramsCovered
Annex 1 cont.
Lamberte, MarioB. Credit Unionsas Channels ofMicro-CreditLines: ThePhilippine Case
The paper analyzesthe differentialimpact of access toexternal sources offunds, such as thespecial creditprograms, on theperformance ofcredit unions
•uses data from the1993 survey byPragma Corp. of100 credit unionsin Regions 2-5, 7,10-12, NCR
•conducts tests ofdifferences ofmeans of particularvariables3 among
TST-SELA,DAPCOPO
1995
expenses of thegoverment, thereplicator, and thebeneficiary
• cost effectivenessmeasured by : costof administeringloan operations,profitabilitymeasures, rate ofgovermentsubsidy2
2 Cost of administering loan operations = (total operating costs/total loans granted); unit cost of operation = (totalexpenses/total loans outstanding); net revenue ratio = (net revenue/gross revenue); income/loss = (total income fromGB/total loans granted); rate of gov’t subsidy = (financial assistance from gov’t/total loans) and (financial assistancefrom gov’t/total income from loans)
73
Findings Recommendations
• access to external sources of funds doesnot have significant differential impacton the performance of credit unions interms of savings mobilization, overallprofitability and loan delinquency
• the credit programs have not causedany qualitative changes in the opera-tions of credit unions since loancovenants of the credit programs do
• Since access to external funds by creditunions to deal with resourceconstraint remains limited, the resultsof the study seem to suggest that thereis merit in providing credit unionswith access to external funds toovercome resource constraints.
• Coursing loans through credit unionscould widen further the range of
follows: P0.20 by the replicator andP0.092 by the government; the profitsearned by the replicator amounted toonly P0.15 per peso loan granted whichis not enough to cover their costs)
• from among the types of replicator, thebanks and POs/NGOs performedbetter financially with lower per unitcost of operation (P0.284 and P0.255per peso loan, respectively) and lowergovernment assistance (P0.51 andP0.53 per peso loan, respectively)
treat the contributions to the groupfund or to the voluntary savings fundas a source from which memebers mayborrow
• replicators should offer a market-basedsavings generation program toencourage members to save
• intensified efforts must be directedtowards the development ofentrepreneurship
On government intervention - shouldbe limited to the following:
• institution-building and training ofproject staff
• brokering of funds for lending byreplicators to beneficiaries; sourcedfunds should be low-cost, preferablyfrom grants
• assistance only in temporarily closingthe gap between the replicator’sbankable loan portfolio and mobilizedresources
On the guarantee• should be removed
3 The chosen variables are: size of credit unions (number of members, asset size), sources of funds (borrowings, savings/timedeposits, share capital, reserve funds), uses of funds (loan portfolio), profitability (ratios of (i) total expenses to total income,(ii) interest income to total assets, (iii) interest expense to total resources, (iv) interest income to total income, (v) rate ofreturn on assets or net income divided by total assets, and (vi) rate of return on capital or net income divided by sharecapital plus reserves), loan delinquency (number and amount of past due loans), qualitative indicators (improvement inorganizational structure, accounting system, reporting system, lending policies, management of loan portfolio, etc.)
74
Title/Author Year Objectives Methodology ProgramsCovered
Annex 1 cont.
the followinggroups: Group 1 –those with borrow-ings from the TST-SELA program;Group 2 – thosewith borrowingsfrom other sources;and Group 3 –those without anyborrowings
•interviews withcredit unions
Llanto, GilbertoM. AgriculturalCredit andBanking in thePhilippines:Efficiency andAccess Issues
This paper reviewsthe past andpresent policies onagricultural creditand bankingpolicy in thePhilippines. Itidentifies theprincipal issues inrural creditmarkets anddiscusses thepresent status ofagriculture financeand thegovernment’scurrent role inrural creditmarkets.
•uses secondary data•indicators usedinclude: loansgranted, number ofbeneficiaries,repayment rate,projects generated,increase in farmincomes due toprograms, costs perpeso loan granted
CALF;IRF; ALF/CLF;LEAD;DAPCOPO;GrameenBankReplication
1993
75
Findings Recommendations
• while existing programs were able toincrease access to credit by theagricultural and rural sector, such accessremains small compared to the loansextended to big borrowers by thebanking system;
• credit guarantees have yet to make adent on banks’ lending decisions; creditguarantees are not a major factor in thebank’s decision to lend and do notminimize the collateral needs asked bybanks;
• the experimental projects (DAPCOPOand Grameen), while offering a freshtack to rural lending, are hampered bysuch problems as: high transaction andadministrative, painstaking monitoringand evaluation of impact;
• the IRF has lower administration costdue to the credit line financingapproach which systematized thelending process, reduced paperwork,lessened processing time and cut downtransaction costs
Need for policy reforms in thefollowing:
• create an environment of greatercompetition in rural financial marketsthrough liberalizing bank branchingand services;
• promote vigorous resourcemobilization by allowing privatebanks to expand banking servicesoffered in rural areas;
• terminate direct lending by non-financial government institutionssince their participation in creditmarkets is distortionary anddiscourages bank expansion in ruralareas
• move away from loan quotas as astrategy to ensure loans to targetgroups
• strengthen the CALF guaranteeinstitutions
income classes that can benefit fromthe programs. Even if members ofcredit unions are on the averagerelatively well off, a great majority ofthem do not yet have access to creditfrom the formal banking system andyet, have greater probability of successin their business.
not include conditionalities that wouldencourage qualitative changes in thecredit unions
76
Title/Author Year Objectives Methodology ProgramsCovered
Annex 1 cont.
Lamberte, MarioB. Impact ofSpecial Credit andGuaranteeProgrammes forSMEs on Employ-ment and Produc-tivity. ILO-DOLE.
1990 To determine theextent of SMEs’access to bankcredit; to describethe features,policies, rules andregulations ofSME lending andguarantee pro-grams and assesstheir performance;to recommendpolicies and creditprograms needed
• Primary data:conducted a surveyof 42 firms locatedin the NCR andRegion IV thatenjoyed the creditguarantee facilityof thePhilguarantee andthe GFSME
• Interviewed 28firms
• Secondary data:NEDA-UPISSI
Lendingprogram:TSTFinancing,EIMP,EDAP,PITCFinancing,TransactionFinancing
GuaranteePrograms:GFSME,
Lamberte, MarioB. Policy-basedLending Programsin thePhilipppines
1992 The paper reviewsand examines thespecial features ofpolicy-basedlending programsand policy condi-tionalities, as wellas their impacts onthe various playersin the creditmarkets
ALF/CLF,IGLF, IICP/IRP, TST-SELA, FSP
77
FindingRecommenda
• Government special credit and guaran-tee programs for SMEs do not reachthe smallest clientele (the smallest firmin the sample that was able to accessone of the guarantee facilities hadstarting assets of P50,000);
• While access to credit in general doesnot seem to be a problem among firmsdue to the informal sources of credit,access to bank credit was fairly limited;
• 43% of the sample firms could notborrow from banks before the creditguarantee facilities became available tothem;
• Since SMEs are still left out by thebanking system, there are still meritsto having a special credit program forSMEs;
• The stress should be on guaranteeprograms than on direct lendingprograms since: (a) the governmenthas very limited resources; (b) it doesnot discourage savings mobilization;and (c ) it encourages banks to see forthemselves the profitability of lendingto SMEs;
• The credit guarantee facility should befor all types of SMEs rather than the
Remaining issues to be addressed bypolicy:
• probability that funds drawn fromspecial credit programs substituted forthe banks’ own funds that should havebeen used to service the credit needsof their clients;
• lending conduits have extracted somerents from the credit programs asbanking concentration has widenedbanks’ spread;
• while there is a need to continuouslylook for alternative, non- conventionalmechanisms for delivering credit tothe “nonbankable” sectors, thepromotion and nourishing of ineffi-cient credit delivery systems (e.g.,NGOs realizing very high spreadsfrom the programs) must be avoided
• there is a need to discern the contribu-tion to growth made by the theseprograms as against other factors thatdetermine growth in the targetedsectors
• policy-based lending programs target amuch broader set of beneficiariescompared to traditional DCPs
• the programs are benefiting from GFImanagement in terms of: (i) scale andscope economies; (ii) credit marketsexpertise of bankers; (iii) minimizedpolitical interference; (iv) more flexibil-ity in responding to a changing envi-ronment
• use of lending conduits by GFIs hasincreased access and reduced transac-tion cost of borrowers
• lending conduits bear the credit risk ofany loan given to end-users; since theyare given the freedom to apply theirown criteria in approving loan applica-tions over and above the criteria set bythe individual programs, they havebeen able to reduce their risk exposure
• fairly developed monitoring systems areincluded in the design of policy-basedlending programs
• market rate of interest does not seem tobe a hindrance to end-users
78
Title/Author Year Objectives Methodology ProgramsCovered
to enhance theemployment-generation poten-tial of SMEs
survey of “Small-Scale Operationsin the Rural Areasof the Philippinesand their Poten-tials for Non-FarmEmploymentGeneration”(covering 600small firms ineight regions) andpublished andunpublishedreports of SMEspecial creditprograms
Philguarantee,ECGP-SMI,IGLF
Lamberte, MarioB. and JosephLim.Rural FinancialMarkets: A Reviewof Literature.TBAC WorkingPaper No. 87-01.
1987 To provide acomprehensivereview of existingliterature on ruralfinance with theend in view ofintegratingfindings andpolicyimplications ofexisting studies onrural finance andidentifying futuredirections forpolicy-oriented
• Reviewed keyfindings of existingstudies on ruralfinance, coveringstudies on formaland informallenders in the ruralsector, savings inthe Philippines andin the rural sector,behavior ofborrowers in therural sector, andimpact of mon-etary and credit
Annex 1 cont.
79
Findings Recommendations
• 57% of the sample firms that availedthemselves of the credit guarantee couldhave access anyway to bank credit evenwithout such guarantee;
• the availability of bank credit enhancedthe labor absorptive capacity of smallfirms but access to bank credit seemedto have no effect on labor productivity;
• access to bank credit was associated withhigher capital intensity; however, thecapital intensity of those that availedthemselves of the credit guaranteefacilities of the government was foundto be much lower than the nationalaverage
• the share of interest payments to totalcost of production of SMEs that availedthemselves of the credit guaranteefacilities was very low compared to rawmaterials and labor, suggesting that anincrease in the interest rate has lessimpact on the total cost of productionthan an increase in the prices of rawmaterials and labor.
existing system of targeting specificcommodities produced or marketproducts;
• Guarantee programs should notinclude an interest subsidy compo-nent;
• There should be less restriction on theuse of the loans covered by theguarantee; what is important is thatthe guaranteed loans should coveronly a modest proportion of therequired start-up or increase in capital;
• Selective granting of guaranteeaccommodation: only to those that donot have access to bank credit;
• Massive credit subsidy to the rural areaswill not work and cannot compensatefor a depressed rural economy.
• Direct subsidies to agriculture, thepromotion of rural employment, thetermination of anti-agriculturalpolicies, land reform, and liberalizationof industrial inputs to agriculturewould create the environment for therural economy to develop and grow,and subsequently, for the rural financesector to expand and thrive.
• Credit subsidies cannot substitute forthe failures in agricultural development
• Rural savings are far from minimal and
• Liberalize interest rates• Move away from specialized,
supervised and subsidized credit• Scrap unnecessary and often harmful
state intervention in the rural bankingsector (such as the agri-agrarequirements and the depositretention scheme)
• Free entry and exit in the ruralbanking sector
• Selective rehabilitation of rural bankslimiting them to honest, viable andefficient banks.
• Make macroeconomic policies neutralto all sectors of the economy (avoid
80
Title/Author Year Objectives Methodology ProgramsCovered
researches on ruralfinance in thePhilippines
policies on ruralfinancial markets
• Re-analyzed datapresented inexisting studiesand included newdata and informa-tion
Annex 1 cont.
81
Findings Recommendations
financial liberalization as well as thecorrect institutional support wouldcreate a good atmosphere for ruralsavings mobilization and allocation ofcredit to the most productive projects.
• Rural borrowers borrow more frominformal lenders.
• Informal lenders are more efficient andmore flexible than formal lenders sincethey can reduce administrative and riskcosts, and provide smaller loan sizes atthe time they are needed. Also, moreflexible repayment schemes and“rollovers” are allowed.
• Need for more research work oninterlinked markets since informalcredit are usually linked with factor andoutput markets and this interlinkagemay cause imbalances in the economicpower between lenders and borrowers
overvaluation of peso, re-examinetrade policy w.r.t. quantitativerestrictions and importation of farminputs, refocus governmentinfrastructure program on farm-to-market roads, implement acomprehensive land reform program,encourage multicroppingarrangement, set up institutional andphysical infrastructure that willincrease agricultural productivity, setup a sensible price stabilization policy)
• Strengthen government planning andadministrative machineries at theregional and provincial level
82
Annex 2Directed Credit Programs as of June 20, 1997
5:25:70 DAR-LBP CountrysidePartnership Financing Scheme
DBP-DAR Financing Programfor ARBs
CARP-Barangay Marketing Center(CARP-BMC)
DAR-KMI PeasantDevelopment Fund
Farm Level Grains Center(FLGC I)
Self-Employment Assistance-Kaunlaran Integrated Program(SEA-K)
PITC Financial Assistance/ Loan
Food and Agricultural RetailEnterprise (FARE)
Coordinated AgriculturalMarketingand Production (CAMP)
Farm Level Agricultural Machineryand Equipment (FLAME)
PCA-LBP Financial Incentives forEconomic Livelihood DevelopmentScheme for the Small CoconutFarmers Organization(FIELDS-SCFO)
Agricultural Loan Fund
Rural Finance Project I(Countryside Loan Fund I orCLFI)
Second Rural Finance Project(CLF II)
Department ofAgrarian Reform
Department ofAgrarian Reform
Department ofAgrarian Reform
Department ofAgrarian Reform
National Food Authority
Department of SocialWelfareand Development
DTI- PhilippineInternationalTrading Corporation
DA- Quedan andRural Credit Corporation
DA- Quedan and RuralCreditCorporation
DA- Quedan and RuralCredit Corporation
DA- Philippine CoconutAuthority
LandBank of thePhilippines
LandBank of thePhilippines
LandBank of thePhilippines
MOA
MOA
MOA Quedancorand DAR/RA 7393
MOA
RA 7393/MOA bet.NFA and Quedancor
RA 5416/ AO
Board Resolution
LOI 1392/GRCGCBoard Res. #60
RA 7393/BoardResolution 25-93
Circular No. 032series of 1993
MOA w/ PCAand LBP
MOA
Loan Agreementw/ WB
Loan Agreementw/ WB
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Program Name Executing Agency Legal Basis
83
Program Name Executing Agency Legal Basis
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Retail Co-financing Fund (RCF)
KFW-LBP-PBSP Small, Microand Cottage EnterpriseCredit Project
ADB Small Farmers Credit Project
ADB Mt. Pinatubo DamageRehabilitation Project
ADB Industrial ForestPlantation Project
OECF -AJDF Small FarmersCredit Project
OECF Rural Farmers andAgrarian Reform SupportCredit Program (RASCP)
OECF Metro Cebu DevelopmentProject Phase III
Credit Assistance Program forProgram BeneficiariesDevelopment (CAP-PBD)
Special Livelihood FinancingAssistance Program (Type B)
5-25-70 CountrysidePartnership Scheme
Kawal Pilipino KabuhayanProgram
LBP-NPUDC AgriculturalLivelihoodDevelopment Program forRebel Returnees
LBP-DTI Small and MediumIndustrial Technology TransferDevelopment Program(SMITTDP)
LandBank of thePhilippines
LandBank of thePhilippines
LandBank of thePhilippines
LandBank of thePhilippines
LandBank of thePhilippines
LandBank of thePhilippines
LandBank of thePhilippines
LandBank of thePhilippines
LandBank of thePhilippines
LandBank of thePhilippines
LandBank of thePhilippines
LandBank of thePhilippines
LandBank of thePhilippines
LandBank of thePhilippines
Loan Agreement betLBP and WB-IBRD
MOA
Loan Agreementw/ ADB
Loan Agreement
Loan Agreement
Loan Agreementw/ OECF
Loan Agreementw/ OECF
Loan Agreementw/ OECF
MOA
MOA
MOA w/ Sponsors(senators andcongressmen)
MOA among LBP,AFP, CDA, TESDA,DA, AFPRSBS
MOA
MOA
Annex 2 cont.
84
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
NFA-LBP-QGFB Post HarvestFinancing Program
LBP-DENR Integrated SocialForestry Program
PDAF-LBP Feed TechnologyPromotion and CommercializationProgram
Veterans Livelihood Assistance andDevelopment Program
Countrywide Development Funds(CDF)/Countryside InitiativeAllocation (CIA) for CooperativeDevelopment
Cooperative DevelopmentLoan Fund
Cooperative Marketing Project
Cooperative Rehabilitation andDevelopment Loan Fund
Cooperative Support Fund
Multi-Livestock DevelopmentLoan Program
Tulay 2000
Workers Entrepreneurship Program
Women Workers EntrepreneurshipDevelopment Program
Promotion of Rural EmploymentThrough Self-Employment andEntrepreneurship development
Special Technology FinancingProgram- CommercializationComponent
LandBank of thePhilippines
LandBank of thePhilippines
LandBank of thePhilippines
LandBank of thePhilippines
Cooperative DevelopmentAuthority
Cooperative DevelopmentAuthority
Cooperative DevelopmentAuthority
Cooperative DevelopmentAuthority
Cooperative DevelopmentAuthority
DA- Bureau of AnimalIndustry
DOLE- Bureau of LocalEmployment
DOLE- Bureau of LaborRelations
DOLE- Bureau of Womenand Young Workers
DOLE- Bureau ofRural Workers
Department of Scienceand Technology
MOA
MOA
MOA
MOA
RA 8174
RA 6939
RA 6939
RA 6939
RA 6939
DO
RA 7277
DO 26
DO 26
DO 28
EO 128/ MOA
Annex 2 cont.
Program Name Executing Agency Legal Basis
85
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
Special Technology FinancingProgram - Venture FinancingComponent
Invention DevelopmentAssistance Fund
New Invention Guarantee Fund
Transactional Lending Project
Equipment Acquisition forSmall Enterprises
Financial Assistance forMicroentrepreneurs
Banca Dispersal Project
Franchise and EntrepreneurDevelopment Program
Tulong Pangnegosyo Program
Bagong Pagkain ng BayanProgram
Information Technology Ventures
Community EmpowermentProgram
Livelihood Enhancement forAgricultural Development(LEAD) Program 2000
Southern Mindanao AgriculturalProgram (SMAP)
DA-DOH-NEDA-DPWH -Earthquake RehabilitationProgram (ERP)
Department of Scienceand Technology
Department of Scienceand Technology
Department of Scienceand Technology
Livelihood Corporation
Livelihood Corporation
Livelihood Corporation
Livelihood Corporation
Livelihood Corporation
Technology andLivelihoodResource Center
Technology andLivelihoodResource Center
Technology andLivelihoodResource Center
Technology andLivelihoodResource Center
National Agriculture andFishery Council (NAFC)
DA - Project ManagementOffice/Special ConcernOffice
DA - Project ManagementOffice/Special ConcernOffice
EO 128
RA 7459
RA 7459
EO
EO
EO
EO
EO 650/ MOA
EO
EO 548
EO
EO
MOA bet. Phil.Govt. thru DAand EEC
Financing Agreement
Annex 2 cont.
Program Name Executing Agency Legal Basis
86
59
60
61
62
63
64
65
66
67
68
69
70
71
72
Central Cordillera AgriculturalProgram (CECAP)
DA-ACPC-LBP Integrated RuralFinancing (IRF) Program
Fisheries Sector Program (FSP)
Expanded Cooperative Bank(CoopBank) Assistance Program
Gintong Ani Program (GPEP IV) –formerly, GPEP
LBP/ACPC-5-25-70 CountryPartnership Scheme
Development Assistance Programfor Cooperatives and People’sOrganization (DAPCOPO)
Micro Credit Program for theBottom Poor
Tulong sa Tao Program -NGO-Microcredit Project II
Tulong sa Tao Program -Subcontracting Financing Project
Tulong sa Tao Program –Credit Program for Poorest ofthe Poor
Countrywide Industrialization Fund– RA 7368
Sectoral Livelihood Program (SLP)
Assistance to Micro EnterpriseDevelopment Program
DA - Project ManagementOffice/Special ConcernOffice
Agricultural Credit PolicyCouncil (ACPC)
Agricultural Credit PolicyCouncil (ACPC)
Agricultural Credit PolicyCouncil (ACPC)
Agricultural Credit PolicyCouncil (ACPC)
Agricultural Credit PolicyCouncil (ACPC)
Agricultural Credit PolicyCouncil (ACPC)
Agricultural Credit PolicyCouncil (ACPC)
DTI- Bureau of Small andMedium BusinessDevelopment (BSMBD)
DTI- Bureau of Small andMedium BusinessDevelopment (BSMBD)
DTI- Bureau of Small andMedium BusinessDevelopment (BSMBD)
DTI- Bureau of Small andMedium BusinessDevelopment (BSMBD)
DTI- Bureau of Small andMedium BusinessDevelopment (BSMBD)
DTI- Bureau of Small andMedium BusinessDevelopment (BSMBD)
Financing Agreementw/ EEC
EO 116/RA
EO 116/RA/DO
EO 116/RA
EO/RA
MOA
MOA w/ ACPC
EO/RA
EO/ MOA
EO/ MOA
EO/ MOA
RA 7368
EO/ MOA
EO/ MOA
Annex 2 cont.
Program Name Executing Agency Legal Basis
87
Program Name Executing Agency Legal Basis
73
74
75
76
77
78
79
80
81
82
83
84
85
86
Micro Enterprise DevelopmentProgram – a component of theCountrywide Development Fund
NLSF Lending Program
Small Enterprise Financing Facility(SEFF)
Helping Individuals Reach TheirAspirations Through Microcredit(HIRAM) Lending Program
Damayan sa PamumuhunanProgram
Industrial Restructuring Program
Industrial Guarantee andLoan Fund
Overseas EconomicCooperative Fund
Industrial InvestmentCredit Project
EXIM Japan Untied Loan to DBP
Cottage Enterprise Finance Project
Domestic Shipping/ ModernizationProgram
Industrial and Support ServicesExpansion Program
Kreditanstalt Fur Wiederaufbav -Sector Programme I (KFW-SPI )
DTI- Bureau of Small andMedium BusinessDevelopment (BSMBD)
National LivelihoodSupport Fund
Small Business Guaranteeand Finance Corporation
People’s Credit andFinance Corporation
Development Bankof the Philippines
Development Bankof the Philippines
Development Bankof the Philippines
Development Bankof the Philippines
Development Bankof the Philippines
Development Bankof the Philippines
Development Bankof the Philippines
Development Bankof the Philippines
Development Bankof the Philippines
Development Bankof the Philippines
MOA
EO 261
RA 6977
EO
Loan Agreement
MOA
MOA
MOA
Loan Agreement/MOA
Loan Agreement/MOA
MOA
Loan Agreement
Loan Agreement
88
Government Line Agencies
Department of Agrarian Reform
5:25:70 DAR-LBPCountrysidePartnershipFinancing Scheme
CARP-BarangayMarketing Center(CARP-BMC)
DAR-KMI PeasantDevelopment Fund
DBP-DARFinancing Programfor ARBs
DA-Agricultural Credit Policy Council (ACPC)
Farm Level GrainsCenter (FLGC I)
Self-EmploymentAssistance-KaunlaranIntegrated Program(SEA-K)
Annex 3Matrix of 86 Directed Credit Programs
MOA
MOA
MOA
MOA
EO/RA
MOA
Agriculture
Agriculture
Agriculture
Agriculture
Agriculture
Livelihood
Basic
Basic
Basic
Basic
Basic
Basic
FA: LBP;LC: coops
FA/LC:Quedancor
FA: KMI;LC: FI
LC: DBP
FA: LBP;LC: FIs coops
FA:QuedancorLC:federations/primary coops
25%DAR;70% LBP
100%Quedan-cor
20%KMI;75%DBP
100%DAR
100%LBP
100%ACPC
Executing Agency/ Legal Basis Fund Source Program Target Mode of Credit RiskProgram Name Objectives Sector Implementation
BudgetaryAllocation+ InternalLBP Fund
BudgetaryAllocation
BudgetaryAllocation+ InternalDBPfunds
BudgetaryAllocation
SpecialFund
SpecialFund
89
1993-2003
1994-2009
1993- n.d.
1990-1992
1989-2000
1990-1996
WC/FAL
WC/FAL
ML/FAL
WC/FAL
WC
WC
SelectedAreas
Nationwide
Selectedareas
Nationwide
SelectedProvinces
Nationwide
Required
Without
Without
Without
Required
Required
DAR funds are kept intrust at LBP; interestearnings on trust fund tobe used for trainings; LBPprovides 70% of the loanamount per loan grantedto ARBs, DAR provides25% while borrower putsin 5% as equity
Investment earnings offund is used for training/seminars of farmer-beneficiaries
75% of loan financed byDBP; 20% from DAR-KMI funds; 5% borrowerequity
DAR funds are kept intrust at DBP; Funds forloan components arereleased thru DBPbranches uponinstructions of DAR;funds for non-loancomponents are directlyreleased by DAR
Proponent to put up 15%of the loan fund as hold-out deposit to theprogram, includesInstitutional Support Fundof P640K; Quedancorcharges management fee of
Program Loan Target Eligible Geographic Savings Other FeaturesDuration Purpose Beneficiary Borrowers Coverage Mobilization
Farmers
Farmers
Farmers
Farmers
Farmers/Fisherfolks
Farmers
Cooperatives
Individuals/Associations
NGOs/Coops/Association/Federations
NGOs/Coops/Ass’n/PVOs
Individuals/Cooperatives
Cooperatives/POs
90
PITC FinancialAssistance/ Loan
Food andAgriculturalRetail Enterprise(FARE)
CoordinatedAgriculturalMarketing andProduction (CAMP)
LBP/ACPC-5-25-70Country PartnershipScheme
Micro CreditProgram for theBottom Poor
DA – Bureau of Animal Industry
Multi-LivestockDevelopmentLoan Program
Annex 3 cont.
EO/RA
EO/RA/DO
EO/RA
MOA
EO/RA
DO
SpecialFund
ForeignLoan
BudgetaryAllocation/SpecialFund
BudgetaryAllocation+ InternalLBP Fund
SpecialFund
BudgetaryAllocation/ForeignLoan
SMEs
Agriculture
Agriculture
Agriculture
Livelihood
Agriculture
Notbasic
Basic
Basic
Basic
Basic
Basic
LC: FIs
FA: DBP, LBPQuedancor;LCdirect DBP,coops for LBP,FIs forQuedancor
FA: LBP,Quedancor;LC;coops
FA; LBP; LC;coops
FA; LBP; LC;NGOs, coops,coop banks
LC: FIs
100% FA
100%DBP,LBP,Quedan-cor
For LBP/SHFG-100%DA; ForQuedan-cor –100%Quedan-cor
25%ACPC;70% LBP
100%ACPC
100%BAI
Executing Agency/ Legal Basis Fund Source Program Target Mode of Credit RiskProgram Name Objectives Sector Implementation
91
1991- n.d.
1990-1994
1996- n.d.
1994- n.d.
1995-1999
1988- n.d.
Others
WC/FAL
WC/ML/FAL
FAL
WC
WC
Nationwide
SelectedAreas
SelectedProvinces
Nationwide
SelectedAreas
Nationwide
Required
Without
Required
Without
Required
Without
4% on disbursed portionand 1% on undisbursedportion
IB component
Quedancor partner-FIprovides 50% of the loanamount per loan granted;50% share of partneerinstitution is 100%guaranteed by Quedancor
Under Quedancor,includes P1.3 milliontraining fund
ACPC funds are kept intrust at LBP;LBP provides 70% of theloan amount per loangranted to ARBs, ACPCprovides 25% whileborrower puts in5% as equity
ACPC also provides agrant fund ofP4 million for institutionbuilding
Program Loan Target Eligible Geographic Savings Other FeaturesDuration Purpose Beneficiary Borrowers Coverage Mobilization
Farmers/Fisherfolks
Fishermen
Farmers
Farmers
Disadvan-tagedgroups
Farmers/Fisherfolks
Individuals/Coops
Individual/Coops
Coops/Self-HelpGroup/Federations
Cooperatives
NGOs/Coops
Coops/PPC/Associations
92
Annex 3 cont.
DA – Project Management Office/Special Concern Office
Central CordilleraAgriculturalProgram (CECAP)
DA-DOH-NEDA-DPWH –EarthquakeRehabilitationProgram (ERP)
Southern MindanaoAgriculturalProgram (SMAP)
DA – National Agriculture and Fishery Council (NAFC)
LivelihoodEnhancementfor AgriculturalDev’t. (LEAD)Program 2000
Cooperative Development Authority
CooperativeDevelopmentLoan Fund
CooperativeMarketing Project
CooperativeRehabilitation andDevelopment Fund
CooperativeSupport Fund
FinancingAgreement
FinancingAgreement
FinancingAgreement
EO
RA
RA
RA
RA
ForeignGrants
ForeignGrants
ForeignGrants
ForeignGrants
BudgetaryAllocation/ForeignLoan/Grant
BudgetaryAllocation/ForeignGrant
BudgetaryAllocation/
BudgetaryAllocation/ForeignGrant
Agriculture
Agriculture
Agriculture
Agriculture
Agro-Industrial
Agriculture
Agro-Industrial
AgricultureLivelihood
Basic
Basic
Basic
Basic
Basic
Basic
Basic
Basic
Directlyimplemented
LC: FIs
LC: FIs/NGOs
Directlyimplemented
Directlyimplemented
LC: FIs
Directlyimplemented
LC: FIs
100%DA
100%DA
100%DA
100%DA
100%CDA
100%CDA
100%CDA
100%CDA
Executing Agency/ Legal Basis Fund Source Program Target Mode of Credit RiskProgram Name Objectives Sector Implementation
93
1988-1996
1992-1997
1994-1997
1995-1998
1993- n.d.
1993- n.d.
1993- n.d.
1993- n.d.
WC/FAL
WC/FAL
WC/FA
WC
WC/ML/FAL
WC/FAL
WC/ML/FAL
WC/ML/FAL
SelectedProvinces
SelectedProvinces
SelectedProvinces
Nationwide
Nationwide
Nationwide
Nationwide
SelectedAreas
Required
Required
Required
Required
Required
Required
Required
Required
Financial support for theconduct of trainings, agri-fairs/exhibits,researches/studies
Has a guarantee scheme
3.75% approved seasonalloan and 5% for approvedterm loan shall bededucted from loanproceeds as borrower’scontribution toGuarantee Fund.
Has a guarantee scheme
Program Loan Target Eligible Geographic Savings Other FeaturesDuration Purpose Beneficiary Borrowers Coverage Mobilization
Disadvan-tagedgroups
Farmers
Farmers
Farmers/Fisherfolks
General
Farmers/Fisherfolks
General
Farmers/Fisherfolks
Coops/Self-Help Group
NGOs/Coops/Federations
Coops/Self-Help Group
NGOs/POs/LGUs/Other GA
Federations/Coops/CRBs/Coop Banks
Cooperatives
Feds/Coops/CRBs/Coop Banks
CoopBanks/KBs/RBs
94
Annex 3 cont.
Countrywide Dev’t.Fund (CDF)/CountrysideInitiative Allocation(CIA) forCooperative Dev’t.
DOLE – Bureau of Labor Relations
WorkersEntrepreneurshipProgram
DOLE – Bureau of Local Employment
Tulay 2000
DOLE – Bureau of Rural Workers
Promotion ofRural EpmploymentThrough Self-employment andEntrepreneurshipDevelopment
DOLE – Bureau of Women and Young Workers
Women WorkersEntrepreneurshipDev’t. Program
Department of Science and Technology
Invention Dev’t.Assistance Fund
New InventionGuarantee Fund
Special TechnologyFinancing Program –CommercializationComponent
RA
DO
RA
DO
DO
RA
RA EO/MOA
EO
BudgetaryAllocation/
BudgetaryAllocation
BudgetaryAllocation
BudgetaryAllocation
BudgetaryAllocation
BudgetaryAllocation
DBP
DBP
Small,Mediumand LargeEnterprises
Livelihood
Livelihood
Livelihood
Livelihood
SMEs
SMEs
SMEs
Basic
Basic
Basic
Basic
Basic
Notbasic
Notbasic
Notbasic
Directlyimplemented
LC:federations/labor unions
LC: coops/associations
LC: NGOs
LC: NGOs/associations
Directlyimplemented
LC: FI
LC: FI
NoCreditrisk toCDA
100%BLR
100%BLE
100%BRW
100%BMYW
100%DOST
100%DBP
100%DBP
Executing Agency/ Legal Basis Fund Source Program Target Mode of Credit RiskProgram Name Objectives Sector Implementation
95
1993- n.d.
1994- n.d
1994- n.d.
1989- n.d.
1989- n.d.
1992- n.d.
1997- n.d.
1987- n.d.
WC/FAL
WC/FAL
WC
WC
WC
FAL
FAL
FAL
SelectedAreas
Nationwide
Nationwide
Nationwide
Nationwide
Nationwide
Nationwide
Nationwide
Required
Required
Without
Without
Without
Without
Without
Without
NUPCD providesfinancing of 8,000 per RRduring the institutionbuilding phase
With guarantee coverage;P10 M is allocated bygovernment annually
TAPI/POST providestechnical assistance whileDBP gives loan using itsown funds
Program Loan Target Eligible Geographic Savings Other FeaturesDuration Purpose Beneficiary Borrowers Coverage Mobilization
General
General
General
Entre-preneurs
General
General
General
General
NGOs/Coops/POs/OtherGroups
Federations/LaborUnions
NGOs/Coops/POs/Other
NGOs/Associations
NGOs/Associations
Individuals
Individuals
Individuals
96
Annex 3 cont.
Special TechnologyFinancing Prog.–Venture FinancingComponent
Department of Social Welfare and Development
Self-EmploymentAssistance –KaunlaranIntegrated Prog.(SEA-K)
DTI – Bureau of Small and Medium Business Development (BSMD)
Assistance to MicroEnterpriseDevelopmentProgram
CountrywideIndustrializationFund – RA 7368
Micro EnterpriseDev’t. Program –a componentof the CountrywideDev’t. Fund
Sectoral LivelihoodProgram (SLP)
Tulong sa TaoProgram –Credit Program forPoorest of the Poor
Tulong sa TaoProgram –NGO – MicrocreditProject II
RA/AO
EO/MOA
RAMOA
EO/MOA
EO/MOA
EO/MOA
EO/MOA
BudgetaryAllocation
SpecialFund
BudgetaryAllocation
BudgetaryAllocation
BudgetaryAllocation
BudgetaryAllocation
ForeignGrants
BudgetaryAllocation/ForeignLoan/Grant
SMEs
Livelihood
SMEs/Livelihood
SMLEs
SMEs/Livelihood
SMEs/Livelihood
Livelihood
Livelihood
Notbasic
Basic
Notbasic
Notbasic
Basic
Basic
Basic
Basic
Directlyimplemented
LC:associations/POs
LC: NGOs
LC: FIs
LC: NGOs
LC: NGOs
LC: NGOs
LC: NGOsandcoops
100%DOST
100%DSWD
No creditrisk toDTI
No creditrisk toDTI
No creditrisk toDTI
No creditrisk toDTI
100%DTI
100%DTI
Executing Agency/ Legal Basis Fund Source Program Target Mode of Credit RiskProgram Name Objectives Sector Implementation
97
1995- n.d.
1992- n.d.
1995- n.d.
1994- n.d.
1990- n.d.
1995- n.d.
1994- n.d.
1992-1997
FAL
WC
WC/FAL
WC/FAL
WC
WC
WC/ML
WC/ML
Nationwide
Nationwide
Senator –Nationwide;Congressman– DistrictNationwide
Nationwide
Nationwide
Nationwide
SelectedProvinces
Nationwide
Without
Required
Without
Without
Without
Required
Required
Required
Technical assistance grant
Technical assistance grant
Technical assistance grant
Technical assistance grant
Technical assistance
Program Loan Target Eligible Geographic Savings Other FeaturesDuration Purpose Beneficiary Borrowers Coverage Mobilization
General
Entre-preneurs
Entre-preneurs
Entre-preneurs
Disadvan-tagedgroups
General
Entre-preneurs
Individuals
Associations
NGOs
PPC
NGOs
NGOs
NGOs/Coops/CBs
NGOs/Coops/CBs
98
Tulong sa TaoProgram –SubcontractingFinancing Project
Non-Bank Financial Institutions
DA – Quedan and Rural Credit Corporation
CoordinatedAgriculturalMarketing andProduction (CAMP)
Farm LevelAgriculturalMachineryEnterprise (FLAME)
Food andAgriculturalRetail Enterprise(FARE)
Livelihood Corporation
Banca DispersalProject
EquipmentAcquisition forSmall Enterprises
FinancialAssistance forMicroentrepreneurs
EO/MOA
BoardResolu-tion
BoardResolu-tion
BoardResolu-tion
EO
DO
EO
BudgetaryAllocation
Internal +one-timeDACapitalinfusion
InternalFunds
Internal +one-timeDACapitalinfusion
InternalFunds
InternalFunds
InternalFunds
SMEs/Livelihood
Agriculture
Agriculture
Agriculture
Agriculture
SMEs
SMEs
Basic
Basic
Basic
Basic
Notbasic
Notbasic
Notbasic
Directlyimplemented
LC: FIs
LC: FIs
LC: FIs
Directlyimplemented
Directlyimplemented
Direct toindividualborrowers;LC;coops/associations
100%DTI
100%Quedan-cor
100%Quedan-cor
100%Quedan-cor
100%Livecor
100%Livecor
100%Livecor
Annex 3 cont.
Executing Agency/ Legal Basis Fund Source Program Target Mode of Credit RiskProgram Name Objectives Sector Implementation
99
1987- n.d.
1993- n.d.
1984- n.d.
1993- n.d.
1990- n.d.
1995- n.d.
1990- n.d.
WC/ML/FAL
WC
FAL
WC
FAL
FAL
WC/FAL
Nationwide
Nationwide
Nationwide
Nationwide
Selectedareas
Selectedareas
Selectedareas
Without
Without
Without
Without
Without
Without
Without
partner-FI provides 50%of the loan amount perloan granted; 50% shareof partner institution is100% guaranteed byQuedancor
partner-FI provides 50%of the loan amount perloan granted; 50% shareof partner institution is100% guaranteed byQuedancor
partner-FI provides 50%of the loan amount perloan granted; 50% shareof partner institution is100% guaranteed byQuedancor
Program Loan Target Eligible Geographic Savings Other FeaturesDuration Purpose Beneficiary Borrowers Coverage Mobilization
Farmers
Farmers
Entre-preneurs
Farmers/Fisherfolks
Entre-preneurs
Entre-preneurs
Entre-preneurs
PPC
Individuals/Coops/PPC
Individuals/Coops/PPC
Individuals/Groups
Cooperatives
PPC
Individuals/Coops/Associations
100
Franchise andEntrepreneurDev’t. Program
TransactionalLending Project
National Livelihood Support Fund
NLSF LendingProgram
People’s Credit and Finance Corporation
Helping IndividualsReach TheirAspirations ThroughMicrocredit(HIRAM)Lending Program
Small Business Guarantee and Finance Corporation
Small EnterpiseFinancing Facility(SEFF)
Government-Owned and -Controlled Corporations
DA-Philippine Coconut Authority
PCA-LBP FinancialIncentives forEconomicLivelihood Dev’t.Scheme for theSmall CoconutFarmersOrganization(FIELDS-SCO)
EO
EO
EO
RA
MOA
BoardResolu-tion
InternalFunds
InternalFunds
SpecialFund
SpecialFund
InternalFunds
BudgetaryAllocation
SMEs
SMEs
SMEs/Livelihood
Livelihood
SMEs/Livelihood
Livelihood
Notbasic
Basic
Basic
Basic
Basic
Notbasic
Direct toindividualborrowers;LC;coops/associations
Directlyimplemented
LC: FIs/NGOsand POs
LC: FIs/NGOsand POs
LC:FIs
FA; LBP; LC:SCFO
100%Livecor
100%Livecor
100%NLSF
100%PCFC
100%SBGFC
100%LBP
Annex 3 cont.
Executing Agency/ Legal Basis Fund Source Program Target Mode of Credit RiskProgram Name Objectives Sector Implementation
101
1984- n.d.
1996- n.d.
1996- n.d.
1995- n.d.
1989- n.d.
WC
WC
WC
WC
WC/FAL
WC/FAL
Nationwide
Nationwide
Nationwide
Nationwide
Nationwide
Nationwide
Required
Without
Without
Without
Without
Required
Provides soft loan forprogram operations andtraining of end-beneficiaries at 3%interest p.a.
Linkage with otherinstitutions for IB ofconduits/program partners
PCA provides training andtechnical assistance
Program Loan Target Eligible Geographic Savings Other FeaturesDuration Purpose Beneficiary Borrowers Coverage Mobilization
Entre-preneurs
Farmers/Fisherfolks
Farmers/Fisherfolk
Disadvan-tagedgroups
Entre-preneurs
Farmers
Individuals/Coops/OtherGroups
PPC
NGOs/Coops/POs/OtherGroups
Individuals
PPC
Associations/POs
102
DTI-Philippine International Trading Corporation
PITC FinancialAssistance/Loan
National Food Authority
Farm Level GrainsCenter (FLGC 1)
Technology and Livelihood Resource Center
Bagong Pagkain ngBayan Program
CommunityEmpowermentProgram
InformationTechnologyVentures
TulongPangnegosyoProgram
Government Financial Institutions
Development Bank of the Philippines
Cottage EnterpriseFinance Project
Damayan saPamumuhunanProgram
MOA
EO
EO
EO
EO/MOA
MOA
MOA
InternalFunds
InternalFunds
InternalFunds
BudgetaryAllocation
BudgetaryAllocation
BudgetaryAllocation/ForeignLoan
ForeignLoan
BudgetaryAllocation
SMEs
Agriculture
Livelihood
GovernmentProjects
SMEs
SMEs
Small,MediumandLargeEnterprises
SMEs/Livelihood
Basic
Notbasic
Basic
Basic
Notbasic
Notbasic
Notbasic
Notbasic
Directlyimplemented
FA/LC:Quedancor
Directlyimplemented
LC: NGOs/Coops/Ass’n/LGU
Directlyimplemented
Direct toPPC;LC: NGOs/Coops/LGUsAss’ns
LC:FIs
Directlyimplemented
100%PITC
100%Quedan-cor
100%TLRC
100%TLRC
100%TLRC
100%TLRC
100%DBP
100%DBP
Annex 3 cont.
Executing Agency/ Legal Basis Fund Source Program Target Mode of Credit RiskProgram Name Objectives Sector Implementation
103
1991 -n.d.
1995-2000
1973- n.d.
1995- n.d.
1979- n.d.
1980- n.d.
1989-1993
WC
FAL
WC/FAL
WC/ML/FAL
FAL
WC/FAL
WC/FAL
WC/FAL
Nationwide
Nationwide
Nationwide
Nationwide
Nationwide
Nationwide
Nationwide
Nationwide
Without
Without
Required
Required
Without
Required
Without
Without DBP shares in loangranted to borrowers
Program Loan Target Eligible Geographic Savings Other FeaturesDuration Purpose Beneficiary Borrowers Coverage Mobilization
Entre-preneurs
Farmers
General
LGUs
Entre-preneurs
Entre-preneurs
Entre-preneurs
General
PPC
Cooperatives
NGOs/Coops/Ass’ns/POs/LGUs/CreditUnions
LGUs
Coops/PPC
NGOs/CoopsPPC/Assn’s/LGUs
PPC
Cooperatives
104
Annex 3 cont.
Executing Agency/ Legal Basis Fund Source Program Target Mode of Credit RiskProgram Name Objectives Sector Implementation
Domestic Shipping/ModernizationProgram
EXIM Japan UntiedLoan to DBP
Industrial andSupport ServicesExpansion Program
IndustrialGuarantee andLoan Fund
IndustrialInvestmentCredit Project
IndustrialRestructuringProgram
Kreditanstalt FurWiederaufbav –Sector Programme I(KFW-SPI)
Overseas EconomicCooperative Fund
LoanAgree-ment
LoanAgree-ment
MOA
MOA
LoanAgree-ment
LoanAgree-ment
MOA
MOA
ForeignLoan
ForeignLoan
ForeignLoan
ForeignLoan
ForeignLoan
ForeignLoan
ForeignLoan
ForeignLoan
Small,MediumandLargeEnterprises
Small,MediumandLargeEnterprises
Small,MediumandLargeEnterprises
Small,MediumandLargeEnterprises
Small,MediumandLargeEnterprises
Small,MediumandLargeEnterprises
Small,MediumandLargeEnterprises
Small,MediumandLargeEnterprises
Basic
Notbasic
Notbasic
Notbasic
Notbasic
Notbasic
Notbasic
Notbasic
Directlyimplemented
LC:FIs
LC:FIs
LC:FIs
LC:FIs
LC:FIs
LC:FIs
LC:FIs
100%DBP
100%DBP
100%DBP
100%DBP
100%DBP
100%DBP
100%DBP
100%DBP
105
Program Loan Target Eligible Geographic Savings Other FeaturesDuration Purpose Beneficiary Borrowers Coverage Mobilization
1995-1998
1991-2008
1995-1997
1990- n.d.
1991- n.d.
1991-1997
1991-1996
WC
WC
WC/FAL
WC/FAL
WC
WC
WC/FAL
Nationwide
Nationwide
Nationwide
Nationwide
Nationwide
Nationwide
Nationwide
Nationwide
Without
Without
Without
Without
Without
Without
Without
Without
Technical assistance,trainings
Technical assistance,trainings
Entre-preneurs
Entre-preneurs
Entre-preneurs
Entre-preneurs
Entre-preneurs
Entre-preneurs
Entre-preneurs
Entre-preneurs
Coops/PPC
PPC
PPC
PPC
PPC
PPC
PPC
PPC
106
Annex 3 cont.
Executing Agency/ Legal Basis Fund Source Program Target Mode of Credit RiskProgram Name Objectives Sector Implementation
LandBank of the Philippines
5-25-70 CountrysidePartnership Scheme
ADB IndustrialForest PlantationProject
ADB Mt. PinatuboDamage Rehabilit-ation Project
ADB Small FarmersCredit Project
AgriculturalLoan Fund
Credit AssitanceProgram forProgramBeneficiariesDevelopment(CAP-PBD)
Kawal PilipinoKabuhayanProgram
KFW-LBP-PBSPSmall, Micro andCottage EnterpriseCredit Project
MOA
LoanAgree-ment
LoanAgree-ment
LoanAgree-ment
LoanAgree-ment
MOA
MOA
LoanAgree-ment
BudgetaryAllocation+ InternalLBP Fund
ForeignLoan
ForeignLoan
ForeignLoan
ForeignLoan
SpecialFund
Internal +AFPRSBS
ForeignLoan
Agriculture
Forestry
Agriculture
Agriculture
Agriculture
Agriculture
Livelihood
Livelihood/SMEs
Basic
Notbasic
Basic
Basic
Notbasic
Basic
Notbasic
Notbasic
Direct tocoops;LC: coops
Directlyimplemented
Direct tocoops;LC: coops
Direct tocoops;LC: coops
LC: FIs
Direct tocoops;LC: RFIs
LC: coops
FA; PBSP;LC:FIs
25%CIA/CDF;70% LBP
100%LBP
100%LBP
100%LBP
100%LBP
No creditrisk toLBP
30% AFPRSBS;70%LBP
100%LBP
107
Program Loan Target Eligible Geographic Savings Other FeaturesDuration Purpose Beneficiary Borrowers Coverage Mobilization
VariesfromMOAtoMOA
1992 -1998
1992 -2012
1993 -1997
1985 -2005
1996 -2006
1996 -2036
WC/FAL
WC/FAL
WC/FAL
WC/FAL
WC/FAL
WC/FAL
WC/FAL
WC/FAL
Nationwide
SelectedAreas
SelectedAreas
Nationwide
Nationwide
Nationwide
Nationwide
Nationwide
Required
Without
Required
Required
Without
Required
Required
Without
CIA/CDF funds kept intrust at LBP; LBPprovides 70% of the loanamount per loan grantedto ARBs, DAR provides25% while borrower putsin 5% as equity
Loan guaranteed by NG
Cost sharing arrangementbetween ADB and LBP
Cost sharing arrangementwith end-user andparticipating FI
Cost sharing betweenborrower and CAP-PBD;specific fund allocationfor rubber projects, agro-industrial projects,studies/workshops
Interest earnings net ofpayments to financetraining, studies andadvisory services, self-helpinstitutions; loanguaranteed by NG
Farmers/Fisherfolks
Entre-preneurs
Farmers
Farmers
Farmers/Entre-preneurs
Farmers
Militarypersonnel
Entre-preneurs
Cooperatives
PPC
Cooperatives
Cooperatives
Coops/PPC/Associations
Individuals/Coops
Cooperatives
PPC
108
Annex 3 cont.
Executing Agency/ Legal Basis Fund Source Program Target Mode of Credit RiskProgram Name Objectives Sector Implementation
LBP-DENRIntegrated SocialForestry Program
LBP-DTI Small andMedium IndustrialTechnology TransferDevelopmentProgram(SMITTDP)
LBP-NPUDCAgriculturalLivelihoodDev’t. Programfor Rebel Returnees
NFA-LBP-QGFBPost HarvestFinancing Program
OECF-AJDF SmallFarmers CreditProject
OECF Metro CebuDevelopmentProject Phase III
OECF RuralFarmers andAgrarian ReformSupport CreditProgram (RASCP)
PDAF-LBP FeedTechnologyPromotion andCommercializationProgram
MOA
MOA
MOA
MOA
LoanAgree-ment
LoanAgree-ment
LoanAgree-ment
MOA
Internal +ARF
Internal +ARF
Internal +NRDCFund
Internal +ARF
ForeignLoan
ForeignLoan
ForeignLoan
Internal +ARF
Agriculture
SMEs
Livelihood
Agriculture
Agriculture
Govern-mentProjects
Livelihood
Agriculture
Basic
Notbasic
Basic
Basic
Basic
Notbasic
Basic
Basic
Direct tocoops;LC: coops
LC: coops/associations
LC: coops
Directlyimplemented
LC: coops
Directlyimplemented
LC: coops
LC: coops
100%LBP
100%LBP
100%LBP
100%LBP
100%LBP
100%LBP
100%LBP
100%LBP
109
Program Loan Target Eligible Geographic Savings Other FeaturesDuration Purpose Beneficiary Borrowers Coverage Mobilization
1991- n.d.
1993- n.d.
1990 - n.d.
1992 -1997
1996 -2000
1996 -2001
1991- n.d.
WC/FAL
WC/FAL
WC/FAL
FAL
WC/FAL
WC/FAL
WC/FAL
WC
SelectedAreas
Nationwide
SelectedAreas
Nationwide
Nationwide
Province-wide
Nationwide
Required
Required
Required
Required
Required
Without
Required
Required
DTI to train CARPbeneficiaries and providetechnical assistance toSMI projects
NUPCD providesfinancing of 8,000 per RRduring the institutionbuilding phase
LBP not managing theY12.315B. Loanavailments by the Cebugovernment are directlycredited by OECF to theaccounts of the CG’scontractor; Cebu citygovernment shoulders theforeign exchange risk
Consultancy services forLBP projectimplementation; loanguaranteed by NG
General
Entre-preneurs
Rebelreturnees
Farmers
Farmers
LocalGovern-mentUnits
Farmers
Farmers
Cooperatives
Coops/Associations
Cooperatives
Cooperatives
Cooperatives
LGUs
Cooperatives
Cooperatives
110
Annex 3 cont.
Executing Agency/ Legal Basis Fund Source Program Target Mode of Credit RiskProgram Name Objectives Sector Implementation
Small,MediumandLargeEnterprises
Small,MediumandLargeEnterprises
Small,MediumandLargeEnterprises
Livelihood
Livelihood
Notbasic
Notbasic
Notbasic
Basic
Basic
Directlyimplemented
LC: FIs
LC: FIs
LC: coops/associations/POs
LC: coops
100%LBP
100%LBP
100%LBP
No creditrisk toLBP
100%LBP
Retail Co-financingFund (RCF)
Rural FinanceProject I(Countryside LoanFund I or CLF I)
Second RuralFinanceProject (CLF II)
Special LivelihoodFinancing AssistanceProgram (Type B)
Veternas LivelihoodAssistance andDevelopmentProgram
LoanAgree-ment
LoanAgree-ment
LoanAgree-ment
MOA
MOA
ForeignLoan
ForeignLoan
ForeignLoan
BudgetaryAllocation
Internal +ARF
111
Program Loan Target Eligible Geographic Savings Other FeaturesDuration Purpose Beneficiary Borrowers Coverage Mobilization
WC/FAL
WC/FAL
WC/FAL
WC/FAL
WC
Same as CLF II
Cost sharing arrangementwith end-user and PFI;strengthening ofinsurance/guarantee fundsundertaken by Quedancorand PCIC
Minimum loans at P100Kfor peso loans and $25Kfor $ loans; cost sharingarrangement with end-user and PFI; loanguaranteed by NG
CIA/CDF funds; LBPcharges the fund a servicefee of 50% of theprevailing interest rate onloans under the program,or 6%, whichever ishigher
1996 -2016
1992 -2011
1996 -2016
VariesfromMOAtoMOA
1990- n.d.
Farmers/Entre-preneurs
Farmers/Entre-preneurs
Farmers/Entre-preneurs
Disadvan-tagedgroups
Farmers/Fisherfolks
Coops/PPC/Associations
Coops/PPC/Associations
Coops/PPC/Associations
Coops/Assn’/POs
Cooperatives
Nationwide
Nationwide
Nationwide
SelectedAreas
Nationwide
Without
Without
Without
Required
112
113
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Christen, Robert Peck, et. al. “Maximizing the Outreach ofMicroenterprise Finance: An Analysis of SuccessfulMicrofinance Programs”. USAID Program and OperationsAssessment Report No. 10 USAID, July 1995.
Esguerra, Emmanuel F. On the Objectives and Design ofSpecial Credit Programs for the Rural Sector. In FinancialSector Issues in the Philippines, Institute of DevelopingEconomies. Tokyo. 1996.
_____. “Rural Credit Programs in the Philippines: Lessons andPolicy Issues. ACPC. 1996.
_____. “The Redistributive Potential of Masagana-99”.Unpublished. MA Thesis. University of the Philippines.1980.
Joyas, Lalaine M., et al. “The Integrated Rural Financing (IRF)Program: An Evaluation”, ACPC. 1996.
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Llanto, Gilberto M., et al. “Housing Subsidies in thePhilippines”, A report prepared for the World Bank andthe Housing and Urban Development CoordinatingCouncil (HUDCC), February 1997.
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RIDA, OECF. “Policy Based Directed Credit Programs in thePhilippines”, OECF Discussion Paper, January 1995.
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