IMPACT ASSESSMENT ON THE PROVISION OF AGRI CREDIT AND

MICROFINANCE PROGRAMS TO AGRARIAN REFORM

BENEFICIARIES IN DAVAO DEL SUR

(good day Mam, ang approved title: “A Case Study on Agri-Credit Practices of an Agrarian Reform
Beneficiaries Organization (ARBO) in Davao del Sur” bale po kung ano ang good practices ng isang
successful ARBO namin dito sa Davao del Sur after availing the DAR-LBP Credit Program, they
graduated from the said program and naging regular window na sila Landbank. Ang comment po
IMRAD format. Please po kung matulungan niyo kami ditto. salamat

__________________

A Concept Paper
Presented to the Faculty of Professional Schools
University of Mindanao
Davao City

______________________

In Partial Fulfillment of the Requirements

For the Degree in Master in Public Administration
Course Professor: John Vianne B. Murcia, PhD

PERLITA G. EROJA
Mobile Number: 09076396677

May 2023
 RATIONALE

Agriculture has been and still remains the backbone of many developing

countries (Tenaw, S. et al 2009). Agriculture sector has an important role in the

economy (BANK, Z.T.) in any country including the Philippines. One of the essentials in

sustaining the agricultural development is access to credit of the farmers (Moahid, M.,

Khan, G.D., et al., 2021) especially the smallholders and the agrarian reform

beneficiaries (ARBs). Access to rural financial services has a potential to make a

difference in agricultural productivity, food security, and poverty reduction. Credit

programs have been long viewed as salient means to develop the Philippine agriculture

sector, especially small-farm agriculture. (Galang, Ivory Myka R.. 0008). In RA 6657,

the Comprehensive Agrarian Reform Program (CARP) Law, Section 35, states the

mandate of extending to small landowners, farmers' organizations the necessary credit,

like concessional and collateral-free loans, for agro-industrialization based on social

collaterals like the guarantees of farmers' organization (officialgazette.gov.ph/1988).

That is why in support of the government’s aggressive drive to increase the

productivity and income of farmers and fishers through greater access to financing, the

Department of Agrarian Reform (DAR) is pursuing a more focused and direct approach

in lending to provide more agrarian reform beneficiaries (ARBs) and individual small

farmers with access to credit (balitang-dar/2022). Not only in the Philippines, but also in

other countries like India, the government’s initiative to produce sufficient food to feed

India’s large population and generates some net export surplus is the infusion of
massive credit to farmers to buy modern inputs ranging from seeds, fertilizers,

pesticides, farm machinery, etc. (Gulati, A et al, 2019). However, there have been little

to no study how access to credit affects the agricultural performance of poor agricultural

producers, including the beneficiaries of the agrarian reform program (Galang, Ivory

Myka R.. 0008). This study will utilize the data from the Department of Agrarian Reform

Provincial Office of Davao del Sur base on Agricredit and Microfinance Project through

different DAR-Landbank Partnership Program accessed by the different Agrarian

Reform Beneficiaries Organization (ARBOs) for relending to ARBs, its impacts to their

farm productivity and the improvement of the quality of lives (Fabella, R.V., 2014) as

what the mission of the department is focusing.

 REVIEW OF RELATED LITERATURE

Agriculture is the process of producing natural resources for human survival and

economic gain. It blends the creativity, ingenuity, and expertise required for crop

growing and animal husbandry with current production methods and new technologies.

Agriculture is critical to the economic prosperity of every country. Agriculture has a

wide range of effects on society, including supporting people through food, habitat, and

employment; providing raw materials for food and other products; and fostering strong

economies through commerce. Agriculture is very important in the Philippine economy.

It employs approximately 40% of Filipino employees and contributes an average of 20%

of the country's GDP. As a result, agriculture is the economic backbone (Parida, M.,

Dash, S.R. and Sau, P. 2018)

While agriculture is the economic backbone of the country, farmers are the

soldiers in the battle of cultivation (Parida et. Al 2018). Agriculture is the primary source

of food (Iftikhar, S. and Mahmood, H.Z., 2017). There is a direct and indirect link

available in between agricultural development and livelihood of farmers. It has always

been the main concern of the farmer to produce food and producing enough food to

meet the needs of a growing population has always been the greatest concern of food

policy-makers around the world (Jouzi, Z., Azadi, H., Taheri, F., Zarafshani, K.,

Gebrehiwot, K., Van Passel, S. and Lebailly, P., 2017) But this would not have been
possible without the infusion of massive credit to farmers to buy modern inputs ranging

from seeds, fertilizers, pesticides, farm machinery, etc. (Gulati, A. and Juneja, R., 2019)

Capital is a crucial requirement for strengthening a significant agricultural sector.

(Maryville Online 2022). It is critical in agricultural development because timely capital

availability leads to the adoption of improved seed, fertilizer, and contemporary

technology, which raise farm production and, eventually, growth rate. As a result, farm

loan is a crucial component of agricultural modernization and economic growth.

Agriculture credit can increase the food production which ensures the food

security (Asghar, N. and Salman, A., 2018). In RA 6657, the Comprehensive Agrarian

Reform Program (CARP) Law, Section 35, states the mandate of extending to small

landowners, farmers' organizations the necessary credit, like concessional and

collateral-free loans, for agro-industrialization based on social collaterals like the

guarantees of farmers' organization (officialgazette.gov.ph/1988). That is why in

support of the government’s aggressive drive to increase the productivity and income of

farmers and fishers through greater access to financing, the Department of Agrarian

Reform (DAR) is pursuing a more focused and direct approach in lending to provide

more agrarian reform beneficiaries (ARBs) and individual small farmers with access to

credit. (balitang-dar/2022). There are already several agri-credit and microfinanance

programs initiated by DAR in partnership with Landbank of the Philippines as the

financing arm to provide agrarian reform beneficiaries organizations (ARBOs) and for

relending to ARBs for their farm productions. Some of these are the Credit Assistance

Program for Program Beneficiaries Development Window 1, intended for financing

traditional crops and CAP PBD Window 2 to finance rubber replanting activities (1996-
2006); CAP PBD Window 3 (2016–2019) an extension for Window 1 - a credit

assistance to ARBs and ARB household members through their respective

organizations or other conduits to support their individual or communal crop production,

agri-enterprise and livelihood projects; Agrarian Production Credit Program (APCP), a

program jointly implemented by the Department of Agriculture (DA), the Department of

Agrarian Reform (DAR), and the Land Bank of the Philippines (LBP) which caters to

Agrarian Reform Beneficiaries (ARBs) whose organizations are not yet eligible to avail

of loans from LANBANK where ARBOs avail loans under the program and in turn re-

lend to eligible ARBs to finance their agri-production projects and activities; Expanded

Assistance to Restore and Install Sustainable Enterprise for ARBs and Smallholder

Farmers (E-ARISE ARBs) – a calamity loan designed to finance the needs of affected

men and women ARBs in agrarian reform areas affected by natural disasters;

Enhanced Partnership Against Hunger and Poverty (EPAHP) Lending Program – a

program supports the national government’s efforts to reduce incidence of hunger and

poverty in the country and aims to provide credit assistance to qualified community-

based organizations to address hunger, food, nutrition, and poverty in the countryside;

Accessible Fund for Delivery to Agrarian Reform Beneficiaries (AFFORD-ARBs) – a

program aims to provide timely direct credit assistance to small farmers for crop

production such as rice, corn and high valued crops and acquisition of small farm

implements; and all other farmer’s credit assistance initiated by other agencies like the

Department of Agriculture (DA) and Philippine Coconut Authority (PCA). Of the above

mentioned credit programs, four (4) out of five (5) were availed by our ARBOs for

relending to ARBs and Smallholder farmers.

 The proponent's proposed study sought to investigate the impact and utilization

of agriculture credit obtained by ARBs in Davao del Sur through the DAR-LBP

partnership program.

There have already been studies undertaken by many scholars from various

nations on the impact of agricultural loan on farm productivity, particularly in the

betterment of farmers' livelihoods. One of these studies is the "Facilitating Access to

Agricultural Credit" study by Masaood Moahid et al. 2023, which aims to explore the

influence of agricultural loan on the agricultural input expenditure of disaster-affected

farmers in Bangladesh. This study estimates the causal influence of access to

agricultural credit on agricultural input expenditures of disaster-affected farming

households in coastal districts of Bangladesh using a quasi-experimental design. It

suggested that agri-credit might help farmers in the face of negative revenue shocks,

particularly during natural disasters. The study uses data from Bangladesh's Household

Income and Expenditure Study (HIES) 2016-2017, which is a nationwide representative

five-year interval survey, on 2,519 disaster-affected agricultural households.

Furthermore, the identification approach of propensity score matching (PSM) is utilized

to estimate the average treatment effect on the treated (ATET), and Mahalanobis

distance matching (MDM) is employed for the robustness test. Furthermore,

heterogeneity analysis was carried out to investigate the influence of agricultural credit

on various types of farming households. According to the findings, access to agricultural

loans has a positive and significant impact on farm input expenditure for disaster-

affected farmers. As a result, agricultural credit accessibility could be used as a policy

tool to help disaster-affected farmers improve their investment capacity and, as a result,
agricultural output. The data also indicated that the credit for agricultural uses was

partially utilized for other purposes.

Another study made in Odisha, India, majority of farmers don’t have adequate

financial background to do cultivation. Most of the credit availed in rural areas was

utilized for farming purpose only. The average amount of loan received was more than

80% of applied amount. Data has been collected from a sample of 720 farmers in 9

different blocks. The finding of study indicates that reasonable amount of credit ensures

farmers to profitable farming activities. This study was revealed that agricultural finance

is strategically important for eradicating poverty and boosting prosperity. It was also

observed that agricultural credit can play an important role by providing the needed

liquidity to farmers who do not have sufficient investable funds to exploit the opportunity.

This study analysed that the socio-economic status of farmers, utilization patterns and

repayment status of credit of the study area. It will helpful to policy maker and financial

institutions to formulate the loan disbursement policies related to agricultural credit in

Bangladesh.

In another study in Bangladesh, access to credit or participation in the credit

program has positive impact on agricultural production (Khondker, B.H., Bidisha, S.H.

and Suhrawardy, G.M., 2013) and it has been evidenced in the study through both

quantitative and qualitative method. Estimates suggest that, availing credit have

significant positive effect on total household crop production, in comparison to an

otherwise similar household without receiving credit, households with credit have more

crop worth. This observation has been supplemented by the FGD findings that

households use credit, along with the other ingredients of their financial portfolio like
savings, additional income, for the production of food crops, poultry and dairy products.

The FGD findings noted that access to credit has given the opportunity to marginal and

small farmers to plough their small plot of land and also has made the lease of

additional land possible and in this way enables them to purchase food, to meet

educational and health expenditure, for expenses like marriage, for safeguarding

themselves in case of income shocks etc.

In the above mentioned research, it has been observed that agricredit has really

a positive impact to the lives of the farmers but in the proposed study which particularly

focus on the provision of agri-credit to the agrarian reform beneficiaries in Davao del

Sur, one of the research gaps identified is the amount of loan provided to farmers

enough to support their agricultural activities especially in this present time where rising

prices of inputs, agricultural labor, farm machineries and post harvest facilities rentals.

And did farmers be able to pay their land amortization in Landbank and send their

children to school as the result of their loan availment and in turn pay taxes to

government as their moral obligation.

 REFERENCES

Acpc.gov.ph. (2020). Agrarian Production Credit Program (APCP) I Agricultural Credit

Policy Council. [online] Available at: https://acpc.gov.ph/agrarian-production-

credit-program-apcp/

Asghar, N. and Salman, A., 2018. Impact of agriculture credit on food production and

food security in Pakistan. Pakistan Journal of Commerce and Social Sciences

(PJCSS), 12(3), pp.851-864.

BANK, Z.T., IMPACT OF MONETARY POLICY RATE AND CREDIT DISBURSEMENT

ON AGRICULTURE SECTOR GROWTH OF PAKISTAN.

Fabella, R.V., 2014. Comprehensive Agrarian Reform Program (CARP): time to let

go. Philippine Review of Economics, 51(1), pp.1-18.

Galang, Ivory Myka R.. 0008. Land Tenure, Access to Credit, and Agricultural

Performance of Agrarian Reform Beneficiaries, Farmer-beneficiaries, and Other

Rural Workers. © Philippine Institute for Development Studies.

http://hdl.handle.net/11540/14038.

Gulati, A. and Juneja, R., 2019. Agricultural Credit System in India.

https://media.dar.gov.ph/source/2019/05/27/mc-06-s-2015

Iftikhar, S. and Mahmood, H.Z., 2017. Ranking and relationship of agricultural credit

with food security: A district level analysis. Cogent Food & Agriculture, 3(1),

p.1333242.
Jouzi, Z., Azadi, H., Taheri, F., Zarafshani, K., Gebrehiwot, K., Van Passel, S. and

Lebailly, P., 2017. Organic farming and small-scale farmers: Main opportunities

and challenges. Ecological economics, 132, pp.144-154.

Khondker, B.H., Bidisha, S.H. and Suhrawardy, G.M., 2013. The Role of Credit in Food

Production and Food Security in Bangladesh. A published study for National

Food Policy Capacity Strengthening Programme, Bureau of Economic Research,

University of Dhaka.

Maryville Online. (2022). Why Is Agriculture Important? Benefits and Its Role. [online]

Available at: https://online.maryville.edu/blog/why-is-agriculture-

important/#:-:text=Agriculture%20impacts%20society%20society%20in

%in20many.

media.dar.gov.ph/magazines/balitang-dar/2022/1/magazine.pdf

Moahid, M., Khan, G.D., Bari, M.A. and Yoshida, Y., 2023. Does access to agricultural

credit help disaster-affected farming households to invest more on agricultural

input?. Agricultural Finance Review, 83(1), pp.96-106.

Moahid, M., Khan, G.D., Yoshida, Y., Joshi, N.P. and Maharjan, K.L., 2021. Agricultural

credit and extension services: Does their synergy augment farmers’ economic

outcomes?. Sustainability, 13(7), p.3758.

officialgazette.gov.ph/1988/06/10/republic-act-no-6657/
Parida, M., Dash, S.R. and Sau, P., The Agricultural Productivity and Agri Credit in

India: an Analysis Through Porter’s Five Forces Model. THE COMMERCE

REVIEW, p.63.

Riaz, A., Khan, G.A. and Ahmad, M., 2012. Utilization of agriculture credit by the

farming community of Zarai Tariqiati Bank Limited (ZTBL) for agriculture

development. Pakistan Journal of Agriculture Sciences, 49(4).

Tenaw, S. and Islam, K.Z., 2009. Rural financial services and effects of microfinance on

agricultural productivity and on poverty. University of Helsinki Department of

Economics and Management (Discussion Papers series), 1, p.28.

www.fao.org. (n.d.). Fact Sheet Philippines – Women in agriculture, environment and

rural production. [online] Available at:

https://www.fao.org/3/ae946e/ae946e03.htm#:-:text=Agriculture%20plays%20a

%20significant%20role.