The government is dangling perks to lenders that will increase loans for activities that support the improvement of agricultural value chains.
In a statement Wednesday, the Bangko Sentral ng Pilipinas (BSP) said the Monetary Board—its highest policy-setting body—last month approved the adoption of an agricultural value chain financing framework.
The framework listed down the regulatory incentives to be granted to financial institutions that will engage in such type of financing.
These include direct or allowable alternative compliance to the mandatory agriculture and agrarian or agri-agra reform credit allocation.
Another incentive to be given away is an additional 25-percent increase in the single borrower’s limit for loans granted to borrowers involved in agricultural value chains for a three-year period.
According to the BSP, it “supports the promotion of agricultural value chain financing as an effective and organized approach to channel financing to the agriculture and fisheries sectors and promote financial inclusion.”
“By encouraging the linking of various actors/players in an agricultural value chain, credit risk of participating smallholder farmers/fisherfolks can be reduced. As a result, this type of financing would facilitate and allow small farmers/fisherfolks to have, if not more, access to credit,” the BSP explained.
Better access to credit in agricultural value chains is seen “further improving productivity in the agriculture and fisheries sectors and at the same time uplifting the lives of these marginalized farmers/fisherfolk,” the BSP said.
The new agricultural value chain financing framework provided for “minimum prudential expectations,” the BSP said, including the need for adequate policies and procedures on the analysis of the value chain, availability of appropriate products, utilization of innovative disbursement schemes, as well as adoption of anchor-firm triggered loan release.
The BSP added that the framework likewise allows financial institutions to establish disaster contingency mechanisms that will entail adoption of risk mitigants to minimize losses as well as provide relief to borrowers.