The government is planning to use P2 billion of the Erap Bonds as seed fund for the Farmers Trust Guarantee Fund (FTGF) to finance projects for farm production and integrated agro-processing facilities with the state-owned Quedan Guarantee Fund Corp. (Quedancor) as fund manager.
The proposal was presented to the Economic Mobilization Group (EMG) and was now under consideration by the National Development Co. (NDC) which administers and evaluates projects for funding by the proceeds of the Erap Bonds.
Under the proposal, NDC was asked to set aside P2 billion from the Erap Bonds to enable FTGF to issue long term bonds which would then be used to finance the projects specifically for integrated farms that form critical linkages between small farmer/producers and agro-processors.
Documents obtained from the EMG indicated that the proposal was now being considered by the NDC and the Department of Finance has already conducted a technical evaluation on the proposal.
Quedancor chairman Galo Garchitorena explained that the FTGF was created by Executive Order 151 to provide funds for agriculture by mobilizing private funds, specifically from private financial institutions. The first portion of the fund is the development and research fund that will underwrite the development of projects and the second portion is the guarantee fund itself.
The development fund, Garchitorena said, was supposed to be funded out of the Presidential Social Fund and the FTGF had originally asked for P300 million. However, the Office of the President has been unable to finance this portion due to a large number of competing programs that have to be funded.
To provide a seed fund for the FTGF, the proposal was for FTGF to be able to issue long term bonds covered by a government guarantee with the proceeds to be used for agricultural projects. Garchitorena said there was no problem with the prospective subscriber base because private banks were seriously interested.
As an added sweetener, Garchitorena explained that the FTGF bonds would qualify as compliance with the Agro-Agra Law which requires financial institutions to set aside at least 25 percent of their loanable funds for lending specifically to agricultural.