The Rural Bankers Association of the Philippines said in an interview that crop insurance complements countryside financial institutions.
Ian Pama, RBAP president, said crop insurance will secure loans granted to farmers.
"It will be good for us, simply because the farmers are assured of yield and they can pay us," he said.
The yield, however, is not actually production but money that covers the equivalent of a shortfall in output.
Pama also explained that crop insurance helps boost lending activities in the provinces since rural banks will have enough liquidity to circulate in the area.
This is also the reason why rural banks have been gearing up to be insurance agents, particularly in micro insurance.
"We are also looking at micro insurance, where we can be agents," Pama said.
He said banks are now looking at possible areas where they can fully maximize the benefits of both micro and crop insurance.
The Insurance Commission has approved seven rural banks to be insurance agents in their specific areas and 47 more banks are in the process of getting the license.
Sixty more banks have received a no objection note from the Bangko Sentral.
Pama also mentioned the usefulness of the Agriculture Guarantee Fund Pool (AGFP), which secures payment for about 85 percent of total loans obtained by the farmers from the banks.
As of December 31, there were 61 rural banks that have enrolled with AGFP.
The AGFP has approved a guarantee line of P2.8 billion for 2011.
The AGFP paid P38.3 million to the banks to honor the guarantee.
The AGFP is sourced from the contributions of several government-owned and controlled corporations (GOCCs) and government financial institutions (GFIs).
It is a fund set up by the Administrative Order No. 225-A, series of 2008, which states that it should provide guarantee for unsecured loans of small farmers extended by credit conduits such as countryside financial institutions, farmer organizations, small and medium enterprises, and large corporations so they will be further encouraged to lend to the agricultural sector.
Source - http://www.malaya.com.ph/
