Potential Effects of Modifying the Masagana 99 Program of the Philippines
Castillo, Eulogio Torres
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https://hdl.handle.net/2142/69844
Description
Title
Potential Effects of Modifying the Masagana 99 Program of the Philippines
Author(s)
Castillo, Eulogio Torres
Issue Date
1982
Department of Study
Agricultural Economics
Discipline
Agricultural Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, Agricultural
Abstract
The study was conducted to find alternative policy measures to improve the Masagana 99 program of the Philippines by improving farm performance as well as the viability and outreach of the lending program. The program is being threatened by the poor repayment of production loans by farmer-borrowers. Loan default rate is high (about 24%) in spite of the claimed increases in farm productivity and income, and farmers' access to cheap loans in the program.
Linear programming is used to determine the effects of simulating changes in types of loan disbursement, interest rate, credit limit, coordinated changes in interest rate and credit limit, and the assumed responses of farmers to such policy changes.
Results show the importance of expanded loan programs and increase in interest rates in improving the Masagana 99 program. Increases in credit limit increase net cash flow, induce reservation of credit, reduce borrowing, and induce commitment of cash by the farm firm to production uses. Given such outcomes, it is logical to expect farmers to improve in loan repayment (pay their loan), as they consider the credit as a valuable and stable source of liquidity, a consequence that can enhance the viability and outreach of the lending program. Increases in interest rate can also promote viability and outreach of the lending program particularly if along higher rates, higher credit limits are also provided to farmers. Disbursement of loans all in cash is not found superior over loan disbursement partly in cash and partly in kind. However, the differences in the optimal solutions between the two types of disbursement are small and are attributed to the reserve prices of liquidity assumed in the study.
The study assumed that farmers will value the credit and will respond positively to the program if the credit is perceived as available and permanent source of liquidity. This perception of farmers about the credit should be promoted in the program because perception of instability would sharpen the belief that the loan is a dole-out, hence need not be repaid--a defeat of the program.
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