1. LBP Programs
and Services to
Countryside Financial
Institutions
Presented By:
Ms. LETICIA P. VILLA
First Vice President
Land Bank of the Philippines
2. Outline of Presentation
• LBP Credit Assistance to Countryside Financial
Institutions (CFIs)
• Grassroots Development Program
Credit Component
Technical Assistance Component
CFIEP’s Capability Building Support to the Rural
Bankers Association of the Philippines
Available LBP Programs and Services for CFIs
Credit
Equity Investment
Other Services
8. Program Objectives
To encourage Countryside Financial
Institutions (CFIs) and Microfinance
Institutions (MFIs) to expand
outreach and extend financial
services in areas where there is very
limited banking presence or
unserved areas, and where small
farmers and fisherfolk (SFFs) are not
organized.
9. Program Components
A. Credit
To finance the term-loan working capital
of participating CFIs/MFIs for relending
to SFFs by participating CFIs/MFIs.
B. Technical Assistance
To be given as incentive to the
participating CFIs/MFIs in the form of
trainings, enhancement of MIS
database, among others
13. Eligibility Criteria for CFIs
Accredited in the LANDBANK’s Rediscounting
Program
With CAMELS Rating of 3.0 or better in the
last two recent examinations, with no rating
below 3 in any of the CAMELS block during
the said examination
With Net Past Due Ratio of not more than
25%
14. Eligibility Criteria for CFIs
With Capital adequacy ratio (CAR) of at least 12%;
With Portfolio at Risk (PAR) of not more than 10%
(for those with microfinance portfolio);
In current status with satisfactory repayment in all
facilities with creditor banks;
No major BSP findings during the most recent
examination;
15. Eligible Grassroots Enabling Partners
(GEPs)
Agri-Business Entities (ABEs)
Non-Government Organizations, which
may include church-based organizations
16. Eligibility Criteria for GEPs
For Agri-Business Entities
With license/permit to operate business or a
commercial activity with agri-based component in
the unserved area;
Operating in the underved area in the last two (2)
years;
With permanent office/address and has been
holding office in the said address in the last three
(3) years;
No adverse information on the principals
17. Eligibility Criteria for GEPs
For Non-Government Organizations
With permanent office/address and has been
holding office in the said address in the last three
(3) years;
With dedicated individual/staff to run and manage
the relending program
18. Lending Policies
Credit Facility
Term Loan
Purpose
Working Capital for Relending
Maximum Loan Amount
Up to 10% of CFI’s networth based on its latest
audited FS filed with BIR provided the amount is
within the CFI’s borrowing capacity.
19. Lending Policies
Manner of Loan Release
Lump sum, based on the masterlist of prospective
sub-borrowers submitted by the GEPs to CFIs
Term of the Loan
Maximum of three (3) years reckoned from the
date of release
Interest Rate
Prevailing interest rate at the time of availment, fixed
for the duration of the loan.
20. Lending Policies
Collaterals/Securities
• Assignment of CFI’s promissory notes plus
underlying collaterals
• Assignment of proceeds of AGFP
guarantee for loans extended by GEPs to
small farmers and fisherfolk, if applicable
22. Purpose of the TA Fund
Institutional support for credit conduits
and grassroots enabling partners;
Business development and organizational
strengthening assistance to sub-
borrowers.
23. Operating Policies
1. The grant shall be provided for a maximum of
two (2) years, reckoned from date of loan
release from LANDBANK;
3. The amount of the TA shall not be more than
10% of the total loan release or P2.0 Million
per conduit;
5. The grant shall be on a reimbursement basis
which shall be provided at the end of one year
of engagement;
24. Coverage…cont’d
Technical Assistance
Institutional Support
Salary subsidy of one staff equivalent to 50% of
monthly salary and allowance but not more than P7,000.00
per month;
Acquisition of transport facilities (motorcycles) by the
conduits;
Installation of MIS including credit policies, systems
and procedure for grassroots enabling partners;
Staff development training for eligible conduits and
grassroots enabling partners;
25. Coverage..cont’d
Business and Organizational Development
Training on enterprise/livelihood activities for the
sub-borrowers;
development training for the formation of SFF
cooperatives
27. The CFIEP Technical Committee (TC) has
approved on 09 May 2012 during its
meeting the 70% (CFIEP) – 30% (RB)
sharing on the training cost in the conduct
of Corporate Governmance seminar.
CFIEP alloted a budget of P600,000 for the
conduct of at least eight (8) batches of
trainings with 40-50 participants per batch
until December 2012.
29. Credit Programs
1. Rediscounting Line/Easy Rediscounting
Facility (Short-Term)
2. Term-Loan Rediscounting Facility
3. Microfinance Program for MFI-Retailers
4. Stand-by Clearing Line
5. CFI Home Lending Program
6. CFI Calamity Assistance Program
30. Credit Programs
1. Rediscounting Line/Easy Rediscounting
Facility (Short-Term)
2. Term-Loan Rediscounting Facility
3. Microfinance Program for MFI-Retailers
4. Stand-by Clearing Line
5. CFI Home Lending Program
6. CFI-Calamity Enhancement Program
31. Credit Programs
1. Rediscounting Line/Easy Rediscounting
Facility (Short-Term)
2. Term-Loan Rediscounting Facility
3. Microfinance Program for MFI-Retailers
4. Stand-by Clearing Line
5. CFI Home Lending Program
6. CFI Calamity Assistance Program
32. Capital Enhancement Programs
• Capital Infusion for CFIs (2nd Tranche)
• Developmental Module
• Business Module
• Risk Recovery Program-Types 1 & 2
2. Unsecured Subordinated Debt Facility
33. Capital Enhancement Programs
• Unsecured Subordinated Debt Facility
• Capital Infusion for CFIs (2nd Tranche)
• Developmental Module
• Business Module
• Risk Recovery Program-Types 1 & 2
34. Other Current Programs/Services
1. Clearing Arrangement with CFIs with
Negotiable Order of Withdrawal
Accounts
2. Correspondent Banking Line (under
DSWD’s Conditional Cash Transfer
Program)
3. Agricultural Guarantee Fund Pool
RBAP President Ian Eric Pama, heads and representatives of the rural banks all over the country, other development partners, good afternoon. On behalf of LANDBANK, I would like to thank RBAP for giving us again the opportunity to present the Bank’s various programs for countryside financial institutions. The CFIs have always been one of the Bank’s priority sectors in recognition of your significant contribution in economic development in the countryside. In fact, since 1988, the rural banks have been LANDBANK’s partners in extending credit assistance to the agricultural sector, particularly to the small farmers and fisherfolk.
My presentation will focus on the following: First, on LANDBANK’s extent of credit assistance to CFIs, particularly to the rural banks. Second, LANDBANK’s most current credit program – the Grassroots Development Program. Third, CFIEP’s Capability Building Support to the Rural Bankers Association of the Philippines. Finally, in a nutshell, I will discuss LANDBANK’s various programs and services available to CFIs, which I’m sure most of you, are already familiar with.
As of December 31, 2011, LANDBANK has been able to provide credit assistance to 287 rural banks nationwide which comprised 49.9% of the 575 rural banks registered with BSP.
LANDBANK-assisted CFIs as of December 31, 2011 reached 323 of which 287 or 89% are rural banks.
Our credit assistance to small farmers and fisherfolk as of December 31, 2011 reached P31.4 Billion. Of this amount, about 54.7% or P17.118 B was channeled through CFIs. About 52% of this amount or P8.929 B was lent thru rural banks. LANDBANK would like to seek your assistance further in increasing these figures by availing our other services.
As a measure to introduce financial services in the unserved municipalities in terms of small farmers and fisherfolk financing, LANDBANK has developed the Grassroots Development Program or GDP. In 2011, LANDBANK was able to penetrate 25 out of the 70 identified unserved areas as of end-2011. This year, LANDBANK will endeavor to penetrate the remaining unserved municipalities. The bank also intends to expand its credit outreach in the identified “underserved” municipalities in the country in terms of SFF financing.
The GDP aims to expand banking services in the identified unserved areas of LANDBANK to reach out to more small farmers and fisherfolk (SFF) and micro-entrepreneurs, through grassroots-enabling partners.
GDP has two (2) components, namely: the a ) credit component; and the b) technical assistance component. The credit component of GDP provides for a three (3) year term loan to participating CFIs/MFIs for relending to SFFs by CFIs/MFIs through grassroots enabling partners. As an incentive to the participating CFIs/MFIs, technical assistance in the form of trainings on micro-agri, cashflow lending, delinquency management and MIS data base enhancements, among others, shall be provided on the basis of loan availment under the program. I’ll discuss the details of the credit and technical components in a short while.
An initial amount of P500 million has been allocated by LANDBANK for the credit component of the GDP to be used as credit fund for term-loan working capital.
This slide shows how the credit assistance of LANDBANK will flow – From LANDBANK to CFIs or MFIs, down to the Grassroots Enabling Partners, then to the target beneficiaries of the program, which are the small farmers and fisherfolk in the identified unserved municipalities of LBP.
The following are the features of the credit component of the GDP and the policies governing the said program.
On the Eligibility Criteria, the participating CFIs should meet the following: First, accredited in the LANDBANK’s Rediscounting Program; Second, with CAMELS Rating of 3.0 or better in the last two recent examinations, with no rating below 3 in any of the CAMELS block during the said examination; and Third, with Net Past Due Ratio of not more than 25%;
CFIs should also have… Capital adequacy ratio (CAR) of at least 12%; Portfolio at Risk (PAR) of not more than 10% (for those with microfinance portfolio); With satisfactory repayment in all facilities with creditor banks; Lastly, No major BSP findings during the most recent examination
Qualified participating CFIs shall be the one to identify, accredit and lend to grassroots enabling partners, such as, Agri-Business Entities (ABEs) Non-Government Organizations, which may include church-based organizations which will in turn, relend to SFF borrowers for livelihood activities in the identified unserved areas of LANDBANK.
The identified GEPs of the participating CFIs should meet the following criteria: For Agri-Business Entities-GEPs: (Enumerate criteria)
For NGO-GEPs (Enumerate criteria)
As what I have mentioned earlier, the available credit facility under GDP is term loan to be used as working capital for relending. The participating conduits can be granted a loan equivalent to up to 10% of its networth, provided the amount is within the conduit’s borrowing capacity.
The loan proceeds shall be released in lump sum, based on the masterlist of prospective sub-borrowers submitted by the GEPs to CFIs/MFIs. The term of the loan shall be a maximum of three (3) years reckoned from the date of release The loan interest rate shall be the prevailing interest rate at the time of loan availment, which is currently priced at 5% per annum (CFI loan base of 4% plus 1), fixed for the duration of the loan. Such interest rate is lower by 2 to 8% on the interest rate being given by LANDBANK for its existing term loan facility.
The loan may be secured by any or a combination of the following: Assignment of CFI’s Promissory Notes plus underlying collaterals. Assignment of proceeds of AGFP guarantee for loans extended by Grassroots Enabling Partners to small farmers and fisherfolk, if applicable.
Moving on to the Technical Assistance Component of the GDP…. The imp lementing guidelines of GDP-TA Component was approved by LANDBANK Board early this year, including the setting up P50 M TA fund. The GDP-TA component primarily aims to Improve the capacity of CFIs in extending services to these areas, and Provide incentives to the participating CFIs
The purpose of the TA fund are as follows: To provide institutional support to the CFI-credit conduits and grassroots enabling partners; and To provide business development and organizational strengthening assistance to sub-borrowers.
LBP will provide TA to the CFI/MFI that made use of the grassroots enabling partners in lending to SFFs and availed of the term loan facility (per EO No. 10, series of 2011) shall be entitled to the technical assistance component of the GDP, for a period of two (2) years, reckoned from date of loan release. The amount of the TA grant shall be 10% of the total loan release (i.e. using LBP funds) within the 2-year period, or P2.0 Million whichever is less. 3. The amount can be reimbursed after one (1) year from date of engagement.
Specific coverage of the TA are: 1. Institutional support as follows: Salary subsidy (Usually, Senior Staff’s monthly salary is P10,000.00 per month plus allowance of P3,000.00 per month); if assigned in new area; Motorcycle for mobility; Installation of MIS for the credit conduit and the GEP Skills development training for the conduits and GEPs.
Business and Organizational development which covers: Livelihood training for sub-borrowers, and; organizational development training for the formation of cooperatives
As a backdrop, the Countryside Financial Institution Enhancement Program or CFIEP is a joint program of BSP, PDIC, and LANDBANK which aims to improve the capital base of the CFIs and help them sustain long-term viability. CFIEP is likewise focusing its efforts in providing capacity building activities to CFIs in the form of trainings, particularly, in the field of 1) financial reporting package; 2) remedial management, 3) corporate governance; 4) risk management and credit appraisal and management.
I am pleased to inform you that during the CFIEP’s Technical Committee on May 09, 2012, it has approved the RBAP’s request, through Mrs. Cora Miller, the training cost in the conduct of the Corporate Governance Seminar for RBAP at 70:30 sharing arrangement. CFIEP alloted a budget of P600,000 for the conduct of at least eight (8) batches trainings with 40-50 participants per batch until December 12, 2012.
At this point, please allow me to remind you of the other programs which have been developed by LANDBANK for CFIs to suit your needs.
LANDBANK’s Rediscounting Facility or Easy Rediscounting Facility allows you to rediscount the promissory notes of you borrowers with LANDBANK thereby getting additional capital for your credit operations or finance your other businesses. On the other hand, the bank’s Term-Loan Rediscounting Facility is meant to address your needs for a long-term facility to intensify the flow of credit to the rural sector.
LANDBANK’ Microfinance Program for MFI-Retailers supports the CFIs in meeting the new mandatory allocation of credit resources for micro, small and medium enterprises as provided for under BSP Circular No. 625, series of 2008, and under the Magna Carta for MSMEs. Meanwhile, Stand-by Clearing Line is meant for CFIs with clearing arrangement with LBP. The facility is made available to cover the temporary overdraft or to restore the Clearing Account balance of the CFI to the required minimum deposit balance.
Fifth is the bank’s CFI Home Lending Program which provides the CFIs with a credit fund for the housing loan requirements of their borrowers. The sixth program which is relevant to you in the light of the occurrence of natural calamities is the CFI-Calamity Assistance Program. This is a joint program of BSP, LBP and PDIC.
Moving on to the bank’s Capital Enhancement Program for CFIs… For purposes of increasing and strengthening the capital base of CFIs, LANDBANK offers the second round of capital infusion programs to CFIs whereby LANDBANK puts in investment in preferred shares to qualified CFIs under three (3) modules, namely: the Developmental, Business and Risk Recovery, depending on the needs of the CFIs, subject to BSP approval. Also, as part of its continuing assistance to CFIs, LANDBANK developed a rehabilitation program or the Risk Recovery Program-Type 2. This allows the CFI to extend the redemption of the matured equity investments for a period of ten (10) years from the date of conversion (into current status)
LANDBANK also introduced the Unsecured Subordinated Debt Facility or Tier 2 Capital to help improve the capital base of the participating CFIs, thus, allowing them to expand credit to small farmers and fisherfolk. LANDBANK is currently reviewing the existing program guidelines to align with the BSP Circular No. 709, series of 2011 on the amendment of the risk-based capital adequacy framework for Bank/Quasi-Banks on the Definition of Qualifying Capital Instruments.
On other programs and services, LANDBANK has this Clearing Arrangement Facility, a correspondent banking service by LBP with CFIs which have authority from BSP to accept demand deposit and Negotiable Order of Withdrawal (NOW) Accounts. LANDBANK also offers the Correspondent Banking Line for those CFIs that are interested to become a conduit in the distribution of cash grants under the DSWD’s Conditional Cash Transfer Program. By being a conduit of the CCT Program. the CFI can earn a service fee. We hope that you will take advantage of all these credit facilities and programs to complement your operations.
That ends my presentation. Again, thank you very much and good afternoon.
