AGRARIAN REFORM CREDIT

A Special Cooperative Association Line of Credit (SCALC) will be created to provide credit not available through normal channels to cooperatives established under the Land Reform Act of 1980. Credit will be provided for farm management expenses, crop production, and farm maintenance and development. BFA will use the SCALC to facilitate its own cooperative lending, to discount loans issued by commercial banks, and to enable commercial banks to discount BFA loans. Thus, cooperatives will be able to do all their banking with a single institution. Once this system takes hold, BFA will use roll-over funds in its small farmer and reform lending credit programs. In addition, the present overdraft system will be replaced by an integrated credit system which will be implemented in conjunction with the new cooperatives. To ensure that SCALC does not have a lower interest rate than normal crop production lines and that its resources are retained for cooperative"s special needs, a minimum interest rate of 13% will be set. Long- and short-term TA will be provided to help BFA develop an improved credit system that will serve cooperatives" long-term needs and to help it develop and institutionalize (in conjunction with the Salvadoran Agrarian Transformation Institute and the Ministry of Agriculture) a system of farm and financial planning for the cooperatives. First year plans will emphasize crop production; more sophisticated plans, aimed at increasing income and employment levels, will follow. Amendment No. 1 of 6/11/81 increases funding. Amendment No. 2 of 12/4/81 extends the project to 12/83 and increases funding, mainly to establish an Integral Credit Line (replacing two previous credit lines, including the SCALC) to serve Phase I and Decree 207 reform beneficiaries and to establish an Investment Credit Discount Line in the Central Reserve Bank for non-BFA Phase I clients. Funds will also be used to procure vehicles, support an integrated pest management (IPM) program, and provide increased TA to the BFA. (PD-AAL-275) Amendment No. 3 of 3/29/83 extends the project to 12/84. Capitalization of the Integral Credit Line will continue, a computer system will be procured for BFA, and further TA will be provided, with the prime goal to strengthen BFA field operations. (PD-AAM-845) Amendment No. 4 of 3/13/84 increases funding in order to: increase the credit available to Phase I and Phase II beneficiaries and other small farmers; procure vehicles and finance BFA training of credit agents from other financial institutions; and expand field research and extension in cotton IPM from 7,000 manzanas (mz) to 11,000 mz in western El Salvador and to introduce cotton IPM in the east. Additional TA will be provided to BFA. (PD-AAP-396)