Announcement of Philippines Rural Finance Project on June 24, 1991

FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. *Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 91/102 Contact: Pastor B. Sison Tel: (202) 458-0344 PHILIPPINES: RURAL FINANCE PROJECT The following is information on a project approve4 by the World Bank's Board. DATE: June 24, 1991 WORLD BANK GROUP SUPPORT: World Bank loan: $150 million. The loan is for 20 years, including five years of grace, with a variable interest rate, currently 7.73 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.25 percent on the undisbursed balance. TOTAL COST: $203.5 million OTHER FINANCING: Subborrowers, $30 million; Participating financial institutions, $20 million; Land Bank of the Philippines (LBP), $3.4 tillion; Agricultural Credit Policy Council, $100,000. IMPLEMENTING AGENCY: LBP ESTIMATED COMPLETION DATE: 1997 PROJECT DESCRIPTION: The objectives of the Rural Finance Project are to expand the volume of commercial credit for agriculture and rural develop- ment and to enhance the policy and institutional framework of the rural financial sector by: (a) supporting the Agricultural Loan Fund/Countryside Loan Fund (AFL/CLF) rediscounting facility as the government's primary mechanism for financing private investment in the agriculture and rural sectors; and (b) providing institutional and financial strengthening of the rural banking system to improve access to credit. The credit component of the project will finance private investments in agriculture and other viable rural operations. Subloans will be made for seasonal production, fixed assets, and incremental working capital in agricultural and non-farm rural investments, such as poultry, livestock, fisheries development, plantation crops, farm mechanization, agro-processing, workshops, and post- harvest facilities. Policy and institutional development measures include: (a) further liberalization of banking policies concerning opening new branches in rural areas, merging of rural banks, placing ceilings on the maximum shareholdings by a single investor, and other measures to induce participating banks to re-capitalize rural banks that have equity deficien- cies; and (b) strengthening existing insurance/guarantee funds to enable hem to offer adequate services at market prices. The project will also inance studies and training, including: (a) policy-related studies on rural credit constraints, with special emphasis on term lending and resource mobilization; and (b) training for CLF and the participating financial institution project staff, as well as for cooperative members and management to enhance their ability to handle credit operations.