By Marissa Mae M. Ramos
THE Development Bank of the Philippines (DBP) has been designated as the government’s infrastructure financing bank. Since then, it saw a double-digit expansion in its loan portfolio, with outstanding credit standing at P250.59 billion as of the first half this year. Of that amount, around 33% (P82.88 billion) was lent to the infrastructure and logistics sector.
But their portfolio in the agriculture sector continues to be sizeable, with the sector receiving loans totaling around P40 billion or around 16% during the same period.
The Bank’s involvement in financing agriculture is perceived to be vital to the sector’s growth as one of their mandates is to serve the needs of agriculture enterprises in the countryside.
One such program is the Sustainable Agribusiness Financing Program (SAFP), which provides funding up to a maximum of 90% of the total cost in projects engaged in agribusiness. Under the SAFP are two sub-programs geared towards lending to the broiler poultry (Broiler Contract Growing Program, or the BCGP) and dairy farmers (SAFP-Dairy).
In addition, the Bank had further ventured on adopting advancements in better serving its clients. With technology refining the ease of doing business, DBP sees fresh opportunities to bolster projects of Filipino agripreneurs.
For this quarter, BusinessWorld interviewed DBP President and Chief Executive Officer Cecilia C. Borromeo to walk us through the new light they are crossing to serve the agriculture sector.
DBP has been more known on lending primarily to infrastructure projects in agriculture. What measures were taken to have your programs intended for Filipino entrepreneurs in the micro, small, and medium enterprises (MSMEs) become more well-known?
One major measure was to partner and work closely with the Department of Trade and Industry (DTI), the main agency which deals with MSMEs nationwide. DTI invites DBP to many relevant initiatives and projects for MSMEs including the following:
•Policy-related matters — DBP is a member of the MSME Development Council, which provides primary direction for the promotion and development of MSMEs in the country; ensure compliance with the Magna Carta for MSMEs; and craft strategy to ensure that the MSME is integrated in all Philippine development plans.
• Business development and SME capacitating events — DBP has committed to be a resource for DTI’s Kapatid Mentor ME (KMME) program where the DBP had a memorandum of agreement with DTI.
• Active participation to trade events like the Sikat Pinoy Food Fair last March 14-18, [and] the 2018 National MSME Summit in Pampanga last July 9, among others.
• Constant exposure through Negosyo Centers — DBP is often invited to visit DTI’s Negosyo Centers, hubs of DTI’s SME development and marketing activities.
• Program development — recently, DTI has also requested DBP’s assistance to craft a special program for the revival of the local shoe industry with majority of shoe businesses being MSMEs.
Other measures not related to DTI include the following:
• Making available MSME programs in the DBP website where an online loan application is also made available;
• Promptly and comprehensively answering queries from potential borrowers;
• Putting up booths and distributing program brochures in MSME-related marketing events like trade fairs and expos;
• Providing brochures, relevant MSME-related materials, and technical and advisory services on MSME programs through DBP’s 22 lending centers and through lending groups across the country;
• Cooperating with relevant MSME trade associations like Chinese Filipino Business Club, Inc. and different chapters of the Philippine Chamber of Commerce and Industry (PCCI), among others.
In regard to this, one of your programs that was available for MSMEs was the SAFP. How has it been implemented since its launch? Would you say that it is meeting its objectives?
Yes, it has contributed to the government’s objective on food security. The Bank has already approved P3.2-billion for 182 borrowers with released amount of P2.3-billion as of September 2018.
What can you say was the advantage of SAFP in delivering assistance to entrepreneurs in the agricultural sector compared to similar programs offered by other banks?
Except for DBP and Land Bank of the Philippines, the remaining eight of the top banks in the country do not offer any specific agricultural program. Traditionally, banks view agricultural projects as high risk and consequently, would rather pay the penalty of not complying with the agri-agra law than to lend to agricultural projects.
Compared to other banks, DBP emphasizes supporting agricultural projects with post-harvest and or infrastructure facilities which all add value to agricultural products versus mere production which generates raw agricultural materials. In effect, DBP looks into the whole value chain from production to consumption.
In addition, DBP considers the nature of each unique agricultural project, including the business plan, the cash conversion cycle, through its operations, backward and forward linkages when granting loans.
Finally, DBP is willing to fund novel agricultural projects for as long as it is viable and sustainable. One example is funding the integrated farm development of a business that developed the first tropical Philippine peking duck variety in the country.
How does the Bank attract customers to use this program over other government programs?
The bank employs several means to promote the use of SAFP to complement other government programs including the following:
• Partnering and or collaborating with other relevant stakeholders in the agricultural sector including both the public and private sector. Government agencies include the Department of Agriculture, Department of Agrarian Reform, Department of Environment and Natural Resources, and DTI; integrators like San Miguel Foods, Inc., Bounty Fresh Food, Inc., Charoen Pokphand Foods Philippines Corp., Cargill Philippines, Inc., and others; and agricultural supplies, etc. in reaching out to farmer’s and fisher folk groups.
• Targeting specific value-adding networking and marketing events in agriculture including investment fora, technical working groups, senate and house hearings and public consultations, among others, wherever these may be.
• Promptly replying to both email and phone queries on agricultural projects.
SAFP seems motivated by the eligibility of the projects that borrowers apply to the program, while commercial, thrift, rural, and cooperative banks were qualified borrowers. In that case, how do these banks apply for the program?
SAFP can be accessed through DBP’s wholesale lending operations by different banks following the standard bank policy, processes, and practice for wholesale lending.
Wholesale borrowers were qualified to apply for the program given at least a year of profitable operation. Can you describe how the bank perceive or handle the risk?
The Bank can lend to wholesale institutional borrowers with at least three year track record of profitable operations. The participating financial institution (FI) should also have a good credit risk management system. FIs will also have to undergo an accreditation process for them to access the funds of the bank for their on-lending operations.
How was the repayment for rate for the program?
As of September 2018, collection efficiency is around 80%.
Were there rewards or incentives for good payers?
If the borrowers pay on time, it improves their credit risk ratin. A good credit rating will translate to lower interest rate.
What was the motivation of DBP in offering the SAFP sub-programs targeted for select industries (such as SAFP-DAIRY and BCGP)?
As the country’s premiere development policy bank, DBP supports the national agenda. One of the important programs that we supported was the improvement of the country’s dairy industry. Hence, we signed a Memorandum on Agreement with the National Dairy Authority (NDA) to craft a program for the local dairy industry, which resulted in the creation of SAFP-Dairy. Moreover, DBP supports the vision of NDA to provide a good quality of life for dairy farmers and ensure safe and quality milk and milk products to consumers by 2020. This, in turn, will hopefully contribute to building a nation of healthier children, wealthier dairy farmers while expanding agribusiness expansion, and creating more jobs in agriculture.
How would SAFP contribute to Agri-Agra law to improve the status of farm production in the country?
SAFP is DBP’s generic lending program for agriculture. The program allows us to lend to the whole value chain of an agricultural project including production, harvesting, post-harvest processing, and marketing-related activities for crops; livestock and poultry; fisheries and aquaculture projects. All loans extended for agricultural projects under SAFP can form part of the Bank’s compliance with the Agri-Agra law.
DBP has recently partnered with Lendr to increase your presence in credit assistance. Which programs were offered through this partnership? Do you have plans to add more programs through this channel, particularly your programs for agripreneurs?
One of DBP’s newest lending programs, the Small Business Puhunan Loan Program (SBPLP) will be marketed under FINTQnologies’ online platform, Lendr. The SBPLP requires fewer documentary requirements, and significantly faster turn-around time for loan processing. It covers the financing of permanent working capital up to a maximum of P1 million, which is payable up to two years.
One of our pilot sub-programs under the SBPLP is the Cignal Dealer’s Financing Program, which aims to finance the short and long-term inventory requirements of top Cignal dealers.
DBP hopes to see [that] through the partnership with Lendr, we can significantly contribute to the Bank’s MSME portfolio. DBP may opt to offer more programs under Lendr as it grows the MSME portfolio under such platform.
How do you see the bank’s involvement in agri-business ventures in shaping the economic development in the agricultural sector?
In the short term, DBP desires to showcase to other banks that under the right conditions, the agricultural sector is worth supporting for a variety of reasons. We believe in helping the sector to increase agricultural productivity as a means to achieve food security and self-sufficiency, eradicate extreme poverty and hunger, and improve the sector’s competitiveness compared to other countries while preserving the environment and promoting innovation. Achieving all these lofty goals will ultimately benefit DBP by keeping the Bank relevant and viable while contributing to the socio-economic agenda of the government and the Sustainable Development Goals.
One good example of this is the BCGP, a SAFP sub-program which supports large-scale tunnel ventilated poultry projects. These projects ultimately produce chicken meat, which is still the cheapest source of meat in the country. These projects take advantage of economies of scale, automation, and climate control technologies for better cash conversion cycles. One can grow and harvest broiler chickens in about 28 to 32 days.
These projects provide employment too, and oftentimes also offer CSR (Corporate Social Responsibility) programs to local communities, including scholarships and alternative livelihood opportunities, among others.
Finally, facilities built under this program are durable and build to last since they were designed to withstand wind speed of up to 250 kilometers-per-hour. There is also little waste since manure is easy to consolidate and sell to farmers and fertilizer producers.
In line with the Bank’s Vision 2040 to be catalyst for a progressive and prosperous Philippines, in the long-term, DBP would like the Philippines to be an agricultural powerhouse like our neighboring Asian countries. If increasingly more banks prudently support good agricultural projects then everyone will ultimately benefit — the agripreneurs, the banking system, the private and government sectors, and the Filipino people in general.