Posted on January 31st, 2010
To allow our farmers more access to bank credit, to further address their financing needs, the Bangko Sentral ng Pilipinas (BSP) has further eased its documentary requirements and its application procedures. This would allow banks to provide micro-agri loans to farmers.
The micro-agri loans which amount to less P150,000 would be exempted from the requirement of traditional collateral, complex documentary requirements and other application procedures. It would have a short term with frequent amortizations, which is based on the borrowers’ capacity to pay. And since they are typically unsecured, they would have non-collateral substitutes like group guarantee or household and personal assets as security.
The facility is available to farmers who have engaged in the trade for at least two years and have no other sources of income outside farming.
Because of the seasonality and cycles of agricultural production, the micro-agri loans provide flexibility in terms of payment. It allows the lump sum payment of micro-loans up to 40% of the total loan amount.
Before the new ruling, even small loans to farmers were treated by BSP are regular agricultural loans which require collaterals, documentary requirements and a complex application procedures. “These conditions have become a major barrier for small farmers to access much needed financial services to grow their production and increase their economic activity,” the BSP said.
BSP however, advised that banks should have the capacity, appropriate risk management mechanism and technical capability in order to ensure that the loans are delivered to clients and in a prudent and sustainable manner.
Banks who would be offering micro-agri loans must have a good track record in microfinance, appropriate micro-agri loan product manual, knowledgeable and trained loan or account officers, and a systematic and adequate loan monitoring, collection, control and provisioning consistent with existing BSP regulations for microfinance.