Philippines - Second Rural Finance Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-6369-PH MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON THREE PROPOSED LOANS IN AN AMOUNT EQUIVALENT TO US$150 MILLION TO THE LAND BANK OF THE PHILLIPPINES WITH THE GUARANTEE OF THE REPUBLIC OF THE PHILIPPINES FOR A SECOND RURAL FINANCE PROJECT AUGUST 16, 1995 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENT (as of June 1995) Currency Unit-Peso (P) US$1.00 = P 25.77 P1.00 = 0.0385 ACRONYMS ARF - Agrarian Reform Fund BSP - Bangko Sentral ng Pilipinas (the Central Bank) CARP - Comprehensive Agrarian Reform Program CLF - Countryside Loan Fund CPL - Currency Pool Loan DENR - Department of Environment and Natural Resources DOF - Department of Finance EMB - Environmental Management Bureau FRSCL - Single Currency Loan at fixed rate GOP - Government of the Philippines LBP - Land Bank of the Philippines PFIs - Participating Financial Institutions RBs - Rural Banks RCF - Retail Cofinancing Fund VRSCL - Single Currency Loan at Libor-based floating rate FISCAL YEAR January 1 - December 31  PHILIPPINES FOR OFFICIAL USE ONLY SECOND RURAL FINANCE PROJECT Loan and Project Summary Borrower : Land Bank of the Philippines (LBP). Guarantor Republic of the Philippines. Beneficiaries Investors in economic rural activities, and rural populations. Poverty Category: Not applicable Amount : US$150 equivalent consisting of three separate loans of US$50 million each: (a) Currency Pool Loan (CPL/Loan A); (b) US dollar Single Currency Loan at Libor-based floating rate (VRSCL/Loan B); and (c) US dollar Single Currency Loan at fixed rate (FRSCL/Loan C). Commitment Fee : 0.75% on undisbursed loan balances, beginning 60 days after signing, less any waiver. Terms : Loans A and B, the CPL and the VRSCL, would be for 20 years, including 5 years of grace. The FRSCL, Loan C, would be payable in 15 years with 3 years of grace and 12 years maturity on each disbursed amount. Loan A, the CPL, would be lent at the Bank's standard variable interest rate; Loan B, the VRSCL, at the Bank's standard Libor-based variable interest rate for US dollar, and Loan C, the FRSCL, at the Bank's standard fixed rate term for US dollar for 12 year maturity. Relendinc Terms : The Land Bank of the Philippines (LBP) would relend the proceeds of the Bank loans: Ci) to accredited participating financial institutions (PFIs) in domestic currency under the Currency Pool loan (CPL) and in domestic currency or in US dollars under the Single Currency Loan (SCL) options; and (ii) to LBP's own clients jointly financed with other financial institutions in domestic currency under the CPL terms and in domestic currency or in US dollars under the SCL options. The foreign exchange risk for small and medium sized sub-borrowers would be borne by the Government in exchange for a market related fee payable by LBP. In other cases the foreign exchange risk would be borne by the sub- borrowers. Interest rates charged by LBP to the PFIs would be freely negotiated on the basis of: (i) a market reference rate (the weighted average of Treasury Bill rates for 90 days) for domestic currency lending; and (ii) a LIBOR-based variable interest rate for US dollar lending under the SCL program. Sub-loans would be made at prevailing market interest rates. Sub-borrowers would be given a choice of a This document has a restricted distribution and may be used by recipients only in the perfornance of their official duties. Its contents may not otherwise be disclosed wiihout World Bank authorization.  - ii - fixed rate (the prevauiling variable rate plus a premium) for several years or a variable interest rate periodically adjusted. Maturity would conform to the maturities of sub- loans made by the PFIs and LBP to sub-borrowers, but would not exceed 15 years. Financing Plan See Schedule A. Present Value Not Applicable. Staff Apraisal Report Report No. 13116-PH Map: : IBRD No. 24105R1 Proiect Identification No : PH-PA-4614  MEMORANDUM AND RECOMMWNDAPION