RBAP-MABS gears up to support expansion of micro agri lending

In light of the BSP’s approval of micro-agri lending expansion last week, the Rural Bankers Association of the Philippines (RBAP) Microenterprise Access to Banking Services (MABS) Program is gearing up to support the extension of this product among all qualified RBAP member rural banks.

Micro-AgriSupported by the United States Agency for International Development (USAID), the RBAP-MABS Program has been promoting a unique agricultural financing approach, which follows the lessons learned from more than a decade of microfinance lending in rural communities. It provides technical assistance and training to develop rural banks’ capacity to profitably offer microfinance products and services for microentrepreneurs, small farmers and low-income households. While RBAP-MABS does not provide loan funds or guarantees, it supports savings mobilization and commercial sources of capital and investment to finance and support sustainable microfinance services.

Departing from traditional agricultural project-based lending programs, the MABS Approach to agricultural microfinance involves determining loan amounts and repayment schedules based on (1) the farm household’s entire cash flow and (2) existing capacity to repay loans, rather than the cost of production inputs.  In addition, instead of lump-sum payments on the loan, micro-agri loans are offered with affordable and timely amortized payment schedules, which take into

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account the multiple income sources that most farm households have.  The MABS Approach to agri microfinance also offers an option for up to 40% of the loan amount to be paid as a balloon payment at the time of harvest, with the rest of the loan being regularly amortized.  This approach has helped farmers better manage their payments and reduced the risk of default. Banks offering the micro-agri loan also do not require hard collateral normally required for traditional agricultural lending.

Since late 2004, when the RBAP-MABS Approach to micro agri lending was first pilot tested and offered to MABS participating rural banks, more than PhP500 million in micro agri loans were disbursed to more than 17,000 farmers. The RBAP-MABS program is open to all 650 member rural banks and, with the support of its Service Providers, plans to open up and offer more training to interested and qualified rural banks in 2010 to expand micro agri and other microfinance products and services.

pagadian micro-agri trainingLast week, the RBAP-MABS program held its first training course for the year on micro agri lending in Pagadian City in Mindanao. Attended by 20 rural bankers from 6 rural banks, the training course focused on market research, product development, the use of character analysis and cash flow tools, action planning, target setting, and practical tips in implementing and monitoring a micro agri loan product.

RBAP anticipates that more rural banks would be encouraged to offer agricultural microfinance products and services under the revised micro agri lending regulations recently issued by the BSP.