Sikat Saka Program and its benefits and impacts to small farmer-borrowers

This study is an assessment of Sikat Saka Program, a direct lending program of the Department of Agriculture (DA) in collaboration with the Land Bank of the Philippines. The program, which is the credit component of the Philippine government's Food Staples Sufficiency Program (FSSP), aims to provide timely, adequate and affordable production credit to small palay farmers, to improve the viability of their palay production, establish their credit worthiness with a financial institution, and strengthen them as organized groups. Under this study, the performance of the program was assessed mainly from the farmers' point of view in terms of its effectiveness in delivering credit and other services and the benefits and positive impacts that it creates for its farmer beneficiaries. A quasi-experimental design was used in the survey of small palay farmers. Descriptive analysis and Ordered Probit model were employed to describe the characteristics of farmer-respondents, their acceptance and satisfaction rates for the program and their perceived program impacts. For the impact evaluation, three estimation procedures were used to measure the impacts on palay yield, gross palay sales, and net farm income of farmers in one cropping using three different treatment variables. The first estimation procedure, which is a regression analysis, used availing loan as the treatment variable. Two models for each outcome variable were estimated namely, the Least Squares (LS) regression and the Instrumental Variable (IV) or Two-Stage Least Squares (2SLS) regression. Of the two models, the LS estimates were found to be more efficient. The other estimation procedure employed is the Difference-in-Difference (DID) evaluation method. The impact of the program in terms of the length of program implementation or the presence in the area, was measured using two treatment variables: type of implementation site � whether a pilot or an expansion province and the number of program implementation month in the area. The survey results show that the design of Sikat Saka Program is acceptable to small palay farmers in the six implementation sites covered in this study. Most of the farmers are very satisfied with the program eligibility criteria, requirements and loan features, especially the low and declining interest rate on Sikat Saka loan. The very satisfactory credit service of the program has been translated into significant impacts on its farmer beneficiaries. From the interview, the farmer beneficiaries expressed their strong agreement that the program has improved their financial access and inclusion, farm production and marketing, and farm income. Results of the LS estimation show that availing the Sikat Saka Program had a positive impact on yield of palay and net farm income of farmers per cropping. However, the impact on yield was only exhibited after the program has been implemented in the area for quite some time already while the impact (or maybe effect) on gross palay sales was only short-term and was not sustained over the months or years of program implementation. While the program is undoubtedly performing well in providing timely, adequate and affordable production loan to small palay farmers, findings reveal the shortcomings of the program in terms of fulfilling its commitment to provide extension services and assured market for their produce. These have also been the source of the problems and concerns raised by the farmers. Thus, it is strongly suggested that non-financial components of the program be strengthened, especially marketing component of the program. Conducive marketing arrangements and strategies for the farmer beneficiaries in partnership with NFA must be explored. Developing capacity building program to complement the financial component is also suggested if the program wants to have significant impact on the viability of palay production and to support the Food Staples Sufficiency Program of DA.