DEACTIVATING the Quedan and Rural Credit Guarantee Corp. (Quedancor) at a time when financial markets are faced with a crisis could make the local farm sector more unattractive to local banks and other lenders, its officer in charge (OIC) said.

Quedancor OIC Federico Espiritu told the BusinessMirror in an interview that deactivating the government-owned and -controlled corporation without a viable alternative will make the local farm sector less attractive to banks and lenders and defeat the purpose of the government to make the agriculture sector a significant contributor to the country’s economy.

“With the financial meltdown, the banks will be averse to lend to farmers. There has to be a risk-mitigating system that will encourage bankers and other financial institutions to provide loans to farmers,” said Espiritu.

He said Quedancor can effectively provide the risk-mitigating system as its obligations are backed by sovereign guarantee. This means the national government will answer for the payment of guarantee obligations duly incurred by Quedancor under the provisions of Republic Act (RA) 7393, also known as the Quedancor Charter.

“Quedancor is also the vehicle by which commercial banks comply with the agri-agri law,” said Espiritu.

Under RA 7393, commercial banks can also comply with Presidential Decree (PD) 717 or the agri-agra law by investing in Quedancor’s authorized capital stock. Also, loans extended by bank institutions to farmers, fishermen, cooperatives, rural workers and rural enterprises covered by the guarantees of Quedancor will be deemed as compliance with PD 717.

Espiritu estimated that the local agriculture sector is in need of P500 billion in credit for it to become fully developed. But based on figures released by the government, not even half of this had been lent out to farmers.

Earlier, the country’s economic managers said they are looking at more investments in the farm sector and making more credit available to farmers as one strategy of shielding the Philippines from the financial meltdown gripping capital markets all over the world.

To jump-start the flow of credit to farmers, the Department of Agriculture has put up the Agricultural Guarantee Fund Pool (AFGP). AFGP would also perform the functions of Quedancor as it could be availed of by rural banks, thrift banks, irrigators’ associations (IAs), rice millers and grains traders to guarantee loans of farmers engaged in rice production against typhoons, floods, pests and other risks.

Earlier, Agriculture Secretary Arthur Yap said he hopes the creation of the fund pool will “encourage greater participation by credit institutions in providing funds to farmers.”

Generally, banks would not directly fund agrifishery-based projects, especially those of individual marginalized farmers and fishers, because of the inherent risks in agricultural activities.

In a paper he wrote entitled “Saving Ailing Quedancor,” Espiritu noted that banks have lobbied for the establishment of a guarantee fund to cushion the risks in agriculture as early as the 1970s.

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DEACTIVATING the Quedan and Rural Credit Guarantee Corp. (Quedancor) at a time when financial markets are faced with a crisis could make the local farm sector more unattractive to local banks and other lenders, its officer in charge (OIC) said.

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