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Commentary

Agriculture credit breakthrough

On Nov. 23, an agriculture breakthrough occurred. The Bangko Sentral ng Pilipinas invited the heads of 30 commercial banks to a meeting on the need for more accessible agriculture financing. This was in response to an earlier discussion among BSP Governor Nestor Espanilla Jr., Deputy Governor Chuchi Fonacier and the Agri Fisheries Alliance (AFA). For AFA,  the Coalition for Agriculture Modernization in the Philippines (CAMP) acted as the initiator while the Philippine Chamber of Agriculture and Food Inc (PCAFI) took the lead.

During the discussion, a major benefit was cited resulting from the Personal Property Security Act (RA11057) signed on Aug. 18. Previously, banks would limit collateral only to land and other real property assets. Under the new law, collateral would now include movable assets such as accounts receivables, inventory, equipment and agriculture products. However, it was agreed that there was still a need to inform banks on how to lend to agricultural value chain participants, who would use the funds to support the higher-risk small farmers and fisherfolk.

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Representing Espenilla for the opening remarks, Fonacier said: “The percentage of loans for production and  economic activity for agriculture, fisheries and forestry,  is a paltry 2.9 percent, while  the credit gap sits at P367 billion. Agriculture accounts for 27 percent of total employment in the country,  with some 11 million Filipinos engaged in agricultural labor. One of the major hindrances to the flourishing of the agricultural sector is the severely limited access to finance.”

We must realize  that while our GDP growth has averaged 6.5 percent in the last five years, agriculture growth averaged only 1.1 percent. The sector has  the highest poverty rate. There can therefore be no inclusive growth if there is no  agriculture growth.

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PCAFI president Danny Fausto gave an overview of agriculture credit, while PCAFI director Pablito Villegas explained the concept of agriculture value chains.  Specific value chains were then given by successful agribusiness entrepreneurs for the following sectors:  poultry, swine, dairy, aquaculture, vegetables, rice, corn and processed meat.

Millennial sector leaders gave valuable insights. Clarice Ong Tiu of Santeh Foods Corp. showed the great value in the “bangus” value chain: hatchery/nursery, P31 billion; farming, P40 billion; trading, P40 billion; processing, P10 billion, and retailing, P80 billion. Julius Barcelona of Harvest Agribusiness  Corp. identified untapped bankable borrower segments—input suppliers and technology providers, traders,  individual farmers and farming cooperatives. He said banks could at times go further and provide assistance in business and private development, which would cut their financial risks.

In response to these, a bank official said: “This meeting has opened my eyes to the lending opportunities in several agriculture value chains.  I request  further in-depth meetings on certain sectors so that we will know where in the value chain are there good cash flows and lower risks to help  our loan decisions.”

Fausto said the lack of agribusiness knowledge could be addressed by each commercial bank having a dedicated agriculture lending section to better understand proposed agriculture loans in the context of an agriculture value chain. If banks respond to this challenge, the major hindrance of “very limited access to finance” will be addressed and agriculture lending rate will significantly improve.

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