Project Design ofCredit Assistance

Program for Program Beneficiaries Development

CAP-PBD Window IIIPresented in the 100th PARC Executive

Committee Meeting

October 25, 2006

I. Rationale: • The DAR’s mandate is to redistribute

lands to qualified ARBs and provide support services to ensure development and productivity of the awarded lands and incomes of ARBs

• As part of the support services component, DAR facilitates the provision of credit and financial services to cooperatives, farmers’ associations and ARBs through the implementation of credit programs in agrarian reform communities (ARCs);

• The CAP-PBD (1996- 2006)- is a transitory program to assist non-bank eligible agrarian cooperatives to become eligible borrowers to the (LBP) regular window and other financing institutions

♦ Window 1 for traditional crops ♦ Window II for rubber replanting

• The CAP-PBD deliverables:

1. 150 coops/FAs managing viable and

sustainable enterprise/ projects; 2. 100 coops/FAs able to access credit

from other lending windows 3. Income of ARBs increased to Php 60,000 4. 2,000 hectares replanted with rubber

trees

ACCOMPLISHMENTS• Window I - ♦ provided credit to 163 cooperatives, ♦ 71 viable and sustainable enterprises ♦ 214 projects funded (production loans

for rice, corn, sugarcane, and banana, trading capital and fixed assets (pre & post harvest facilities)

• Window II

♦ six (6) rubber replanting projects

♦ covering 1,945 hectares funded and replanted

♦ 5 cooperatives in 5 ARCs ♦ benefiting 1,664 ARBs

• March 2004 -the PARC Executive Committee approved the unification and merging of the Countryside Partnership Scheme (5:25;70) and CAP-PBD Window 1

• December 2004, - the 10th CAP-PBD National Project Management Committee (NPMC) Meeting approved the conduct of an external evaluation of the program

• January 12, 2006, the evaluation result was presented to the NPMC and approved the extension of the program for another 10 years due to unmet credit needs of a huge number of ARBs.

• The strategies recommended for the re-designing of CAP-PBD:

1.Shift program framework from ARB as beneficiary to ARB as globally competitive agri-entreprenuer maximizing the rationalization thrust of the DAR;

2. Small loans and small risk products for newly organized cooperatives, to allow the intra-organizational institutions and systems to mature without exposing the officers to moral hazard problems and financial risks that go along with large loans;

3. Create a new window and provide a clean slate for CAP-PBD extension to isolate new accounts of the program extension from the “mix-up” of accounts of Window I, where there are inadequacies that must be addressed;

4. Strengthen the Institutional Development, Enterprise Development and Capacity Development Components hand in hand with provision of credit; and

5. Establish realistic program implementation structure from central office to municipal level and strengthen synergy between DAR and LBP.

• In the extension of CAP-PBD for another ten years, it shall continue to:

a) collect loan payments from 161 cooperatives, especially from the 90 cooperatives with past due accounts covered by Window I;

b) provide technical assistance to Window I cooperatives/FAs to ensure timely payment of loans and eventually be eligible

to access credit from the regular window of LBP and other financial institutions as bank worthy creditors.

• CAP-PBD Window II shall continuously provide technical assistance (institution building and enterprise development) to rubber-based plantation cooperatives and shall pursue its operations using the existing guidelines

• The CAP-PBD Window III shall be an alternative credit window to non-bankable cooperatives and farmers’ associations of ARBs in agrarian reform areas, comprising of ARCs and non-ARCs.

II. General Policies 1. CAP-PBD Window III is a three pronged program covering ARCs and

non-ARC areas

♦ credit provision

♦ institutional development assistance

♦ Enterprise development assistance to cooperatives, farmers’ association and ARBs.

General Policies . . . 2. CAP-PBD Window III is a transitory credit

window and utilizes a graduated scheme in the provision of credit

♦small loans for newly organized and existing ARB Coops/FAs

♦Loan based on the absorptive capacity/ organizational maturity of the ARB coops/FA, in accordance with the type of enterprise

♦ID and ED interventions shall be provided in accordance with the organizational maturity and enterprise operations of the coops/association.

General Policies . . . 3. CAP-PBD Window III shall continue its

assistance to Window I, existing rubber cooperatives and the 5:25:70 cooperatives.

♦ ID and ED technical guidance

♦ The interventions focus on strengthening the organizational, managerial and entrepreneurial capability of the cooperatives to manage viable enterprises, generate better income and be able to pay their loan amortization on time.

II. Program Objectives

The general objective of CAP-PBD Window III is to make available credit assistance to non-bank eligible cooperatives and farmers association and graduate to bank-eligible organizations.

Program Objectives. . .

Specifically, it aims to: 1.Make credit available to support

agriculture-based livelihood/enterprises to ARB coops and FAs in the ARCs and non-ARCs, which are considered as non-bank eligible;

2. Provide ID technical assistance to ARB coops and FAs to capacitate them in the operations and management of their livelihood projects and enterprises;

Program Objectives. . .

3. Provide ED technical guidance to ARB coops and FAs to ensure adoption of appropriate technology, establishment of market linkages, and attain enterprise effectiveness, efficiency, viability and sustainability; and

4. Develop and Implement capacity development/ handholding activities for program implementers and other stakeholders, to facilitate their provision of technical support to ARB cooperatives and farmers’ associations.

III. Expected Output 1. 308 ARB cooperatives/farmers’ associations

provided with credit (146 in ARCs and 162 in non-ARCs), benefiting 40,818 ARBs;

2. 265 ARB cooperatives/farmers’ associations graduate from the program starting year 3 and become bank eligible;

3. 633 ARB Cooperatives/FAs (400 coops/FAs in CAP-PBD WIII, 109 coops under CAP-PBD WI, 5 coops under Window II & 119 organizations in 5:25:70) provided with inst’l Dev’t interventions;

4. 231 enterprises established managed by 10,205 ARBs;

5. 4,617 ARB leaders and 350 field implementers trained to provide technical support to ARB cooperative and farmers’ associations.

IV. Program Components

1. Provision of credit

2. Institutional Development

3. Enterprise Development

4. Capacity Development of Program implementers and partners

V. Implementing Structures Central Office Level1. National Project Management

Committee2. National Technical Review Committee3. Program Secretariat

Field Level1. Regional Project Management

Committee 2. Provincial Project Management

Committee3. Program Secretariat

VI. Monitoring and Evaluation

• Program Monitoring and Reporting

• Program Management Meetings• Program Assessments• Knowledge Management

VII. Fund Source and allocation♦ Total Funds available – PhP233.141 M

CAP-PBD - PhP176.740 M 5:25:70 CPS - PhP 56.401 M♦ Fund Allocation a. Credit - P116.570 M (50%) b. ID/ED/CAPDev’t - P116.570 M (50%) > ID - P47.038 M (40%) > ED - P30.317 M (30%) > CAP-Dev’t - P19.556 M (17%) > Prog. Mgt. - P15.815 M (13%)