Revolutionary change in agri credit

“Change is coming,” President Duterte said.

But for the credit needed so badly by small farmers and fisherfolk (SFF), will this change be revolutionary enough to solve their critical problem?

In his book “Feeding Millions: The Duterte Food Security Blueprint,” Agriculture Secretary Emmanuel Piñol wrote: “The biggest culprit in the very low productivity of the agriculture and fisheries sector is the lack of financing for the country’s small farmer and fisherfolk.”

If we go by the agreements reached by the Agri-Fisheries Alliance’s (AFA) five coalitions with Duterte on April 16 and Piñol on May 24, revolutionary change in credit is indeed coming.

SFF credit is one of the six priority recommendations chosen from approximately 50 gathered from the five coalitions of AFA.

These coalitions represent five different sets of key agriculture stakeholders: Alyansa Agrikultura (AA) for small farmers and fishers, Philippine Chamber of Agriculture and Food, Inc. (PCAFI) for agribusiness, Coalition for Agriculture Modernization in the Philippines (CAMP) for science and academe, Pambansang Koalisyon ng mga Kababaihan sa Kanayunan (PKKK) for rural women, and Agriculture Fisheries 2025 (AF2025) for multisector leaders.

Duterte said: “We must discover what our people do best in agriculture. Then we come in with technology, financing, and marketing. That is the key to combat rural poverty.” Recently, we discussed technology. Today, we address financing.

Sad situation

It is disappointing that the 30 percent (or 11 million) employed in agriculture out of the 37 million total employed have very little access to financial institutions.

The result is that in 2014, only 1.9 percent of total loans went to agriculture. This percentage has been the same for the last five years.

During President Aquino’s administration, the ACPC website (www.acpc.gov.ph) reported the “establishment of a flexible credit facility for the benefit of small farmers listed in the Registry System of Basic Sector (RSBS) as an alternative to the rigid and stringent credit facilities usually provided by banks.”

The SFF credit problem was acknowledged even then. But only P3 billion was allocated for the ACPC to address it. On Dec. 31, 2014, the ACPC announced that it had given loans to 3,378 SFFs. This number is miniscule compared to the 11 million employed in agriculture. P3 billion is likewise miniscule compared to the P778 billion in agriculture loans given in 2014. This small change should give way to a revolutionary change.

The 2014 Land Bank of the Philippines (LBP) Annual Report states that only 9 percent of LBP’s P386-billion loan portfolio went to its mandated sector of SFFs.

Unfortunately, LBP has to meet minimum profit objectives if it is to keep its status as a universal bank. Since loans to SFFs have higher risk, they are given less priority than other types of safer and more profitable loans.

Last July 17, I discussed this problem with Central Bank Governor Amando Tetangco Jr.

He confirmed that if LBP wished to continue being a universal bank, it could not take the large risks that agriculture banks in other countries handle. Those banks are not universal banks, and are instead subsidized by government.

Two choices

This leaves us only two choices: Either LBP forsakes its universal bank status that requires minimum profits, or another financial institution takes on the task of concentrating on SFF loans. If this happens, we will then have an agriculture bank that truly responds to SFF needs. We will then be like other countries which address SFFs and produce much better agriculture development results.

Creative agriculture lending schemes copied from these other countries can also be implemented. The CAMP coalition in AFA, headed by chair Emil Javier and president Ben Pecson, have suggested that SFF loans be coursed through nontraditional sources such as food processors, input suppliers and farm consolidators.

Last July 14, at the National Competitive Summit of LGUs, I talked to Jaime Garchitorena, president of the Credit Information Bureau (CIB). He said that CIB could gather information on these non-traditional sources to determine which specific sources are credit-worthy. This would significantly minimize the risk and expand the reach to deserving SFFs.

The SFFs do not ask for charity. They just want a chance to make a living, feed their families, and preserve their dignity through their own hard work. But today, they have little access to reasonable credit. Even before SFFs start planting and fishing, they are already captured by unscrupulous loan sharks.

Under the Duterte administration, SFF credit should not only undergo a change, but a revolutionary change. For inclusive growth, the SFFs deserve nothing less.

(The author is Chair of Agriwatch. For inquiries and suggestions, email [email protected] or telefax (02) 8522112).