PREFACE

Introduction

This Training Manual on Agricultural Microfinance is an output under the five-year IFAD-supported
APRACA FinPower Program of Accelerating the Financial Empowerment of Poor Rural Communities in Asia and the Pacific through Rural Finance Innovations. The program aims at promoting the financial empowerment through policy dialogues, innovative pilot programs, and knowledge-sharing among actors in the rural finance sectors.

The training manual design began in time during the conduct of the regional and national policy fora on creating the conducive rural finance policy environment and regulatory framework, the first of which was the regional forum in Kunming, China in April 7-9, 2007, then followed by the national forum in Kampong Cham, Cambodia on July 10, 2007, Vientiane, Lao PDR on July 13, 2007, and in the Philippines on September 27, 2007.

From the outputs of the above forums, there were substantial information gathered pertaining to the challenges and issues which characterized the state of agricultural microfinance in these countries. The insights and features surrounding these developments in rural and agricultural finance were then developed and used to configure the framework from which the design of this Training Manual is anchored. To strengthen the base of the training design, interviews were conducted among selected members of APRACA to validate and clarify perceived training needs gathered from different institutions and literatures.

In furtherance to the goal of IFAD-APRACA FinPower Program of promoting financial empowerment of the poor in the Asia-Pacific countries, this training guide is expected to further strengthen the capacity of APRACA member institutions in making available agricultural microfinance services on a sustainable basis. The participants trained under this program will be better prepared to design, implement and manage delivery of financial services for the rural and agricultural poor.

A significant number of households in the Asia-Pacific region are poor and earning less than a dollar (USD) a day. They are mostly in the rural areas relying mainly on agriculture related occupation and livelihood. To improve their living conditions and reduce poverty, they must have regular and sufficient income. They need microfinance loans for their working capital requirements, but financial institutions in the formal sector are shying away from making available credit access to them in view of the many risks with which the credit providers are normally exposed to as offshoot to production and price seasonality, lack of infrastructure and
technical support services, the occurrences of natural calamities and disasters, project failures attributable to the weak capacity of the borrowers, and the inefficiencies and weaknesses of the methodologies and systems applied by the credit providers. This limits available credit supply to the agriculture sector since the other sources, consisting of semi-formal institutions and non-government organizations (NGOs) as well as the informal lenders have limited funds to match the seemingly huge demand.

The farmer’s credit requirements encompass the provision for inputs to production and post-production activities such as planting, harvesting, processing, transporting and marketing of products. In view of the lack or inadequacy of collateral, credit approval revolves around the character of the borrower, anticipated harvest and sales, and projected cash inflows from all sources, including overseas remittances from relatives working abroad.