Rationale

1. Access to formal financial institution savings and credit services provided by banks, non-government organizations or cooperatives is very limited in upland areas.
2. Other informal savings and credit associations are also rarely found in upland areas, especially amongst the tribal communities.

Issues and Concerns

1. Few upland households have adopted the savings culture. Most depend on high interest ?cash advances? from local traders to survive when funds run out. Such loans are repaid at the next harvest.
2. Most people complain about the lack of access to affordable credit finance to purchase better quality farm inputs to improve agricultural productivity and their related disposable incomes.
3. Few households have access to ready cash to deal with emergencies.
4. Financial institutions remain hesitant about expanding their services in the uplands.

Objectives

1. To establish savings-based credit delivery systems in the uplands providing production and providential loans.
2. To make reasonable loan terms and conditions adapted to local realities and interest is charged at affordable rates without subsidy.
3. Ultimately, to provide sustainable savings and credit services provided by viable rural banks, non-government organizations (NGOs) and cooperatives using their own proven operating systems.

Benefits

1. High opportunity to engage in other livelihood activities ? enterprises because of available capital.
2. Access to low-interest non-collateralized loan facilities and savings facilities.
3. Opportunity to establish and develop village-based financial intermediaries.

General Mechanisms

DA and EC as joint trustors have established two UDP-initiated trust funds which are separately administered by the two principal government financial institutions serving the rural sector.

The Land Bank of the Philippines (LBP) administers the larger Upland Development Trust Fund (UDTF) providing new and existing upland cooperatives with grant financed Institutional Building (IB) assistance to secure their access to LBP accreditation and eventual UDTF loan financing. Loan fund for providential/ emergency purposes are made available by cooperatives and rural banks from their own resources.
The People?s Credit & Finance Corporation (PCFC) administers the Upland Microfinance Trust Fund (UMTF) providing investment and institutional development loans to its established Microfinance institution clients (MFIs ? rural banks, cooperative rural banks and NGOs).

Both LBP and PCFC allocate parts of their resulting trust fund loan interest income to build-up IB and loan loss reserve funds.

Key Activities required to encourage the development of rural financial services are:

1. Financial market surveys in the upland areas requiring new financial services.
2. Exposure of officials and residents of potential new areas presently un-serviced to appropriate rural banks, NGOs and cooperatives through cross-visiting.
3. Strengthening of existing and expansion of new services provided by partner financial institutions.
4. Provision of compulsory savings schemes and loan services.
5. Linkage of agricultural production loanees to guaranteed markets for their produce where feasible.