Rural financial services project

The Central Bank will implement the project"s credit and institution building components. Project loan funds, together with funds from the WB"s Agricultural Credit Project and a CB counterpart contribution, will comprise an Agricultural Loan Fund (ALF) through which the CB will rediscount short-term agriculture-based loans made by participating retail banks (PB"s) to small, medium, and large scale enterprises in the rural sector. All loans funded through the ALF will be at market rates. In addition, the CB has agreed not to provide any new agricultural credit involving subsidies, while the Government of the Philippines (GOP) has agreed to a gradual desubsidization of its agricultural credit programs. Most subsidies on GOP agricultural credit provided through the CB will be phased out by 12/31/86. Remaining subsidies on GOP agricultural credit programs will be eliminated according to a program and a timetable to be agreed upon by A.I.D. and the GOP. To support institutional development in the rural financial sector, the project will fund policy and institutional studies, training, and TA. A.I.D. will fund a review of CB rediscounting policies and PB arrearages and a long-term study on constraints to and strategies for expanding rural banking services; the WB will finance studies on crop/subloan insurance and government assistance to low-income groups that lack access to credit. Additional studies will also be conducted. Training of some 1,000 persons will be provided by the Central Bank Institute (CBI), the CB"s training arm: (1) trainer training at banking associations/federations; (2) technical training for CB regional loan teams; and (3) technical, managerial, and staff development for PB"s. Also, trainer training for key CBI staff along with curricula development will be provided early on. Finally, both long- and short-term TA will be funded to assist in CB policy development, studies, and training.