Bankers help farmers through milk

Today, a few bankers may be milking farmers. They give farmers difficult loans to repay. They then get the farmers’ lands used as collateral when the farmers default on their loan payment.

But here is a banker doing the exact opposite. Instead of harming farmers, he helps them through milk! This is the story of Danilo Fausto (0917-326-7769, e-mail [email protected]), investment banker and chair of the National Confederation of Dairy Producers in the Philippines.

Addressing poverty

Heeding the call of President Cory Aquino in 1986 to go to the countryside, Fausto bought a few carabaos and returned to his rural roots in Talavera, Nueva Ecija. There he saw how a poor farmer could make money providing dairy products, and thus getting out of poverty.

Most bankers are to be commended. They help ensure that a project is profitable, and therefore sustainable, before a loan is given. Speaking like a banker, Fausto says that for a P60,000 investment in a dairy cow, a farmer can get P7,000 in monthly dairy revenue, spend P2,500 in monthly costs, and thus get P4,500 in monthly profit. This means a P54,000 annual profit on a P60,000 investment, or a 90 percent Return on Investment (ROI).

Today, 2.4 million farmer families in the Agrarian Reform Program earn an average of P4,200 a month. This is below the family subsistence level (P4,800) and the poverty level (P7,015). Give this farmer just one dairy cow, which will give him an extra P4,500 income. Total income will then exceed the subsistence and poverty levels at P9,000 a month. Why aren’t we doing this?

No program

Fausto says: “Because there is no program for it.” He laments the fact that many of the municipal agricultural extension workers do not even know the benefits of having dairy cows. This started happening when they were devolved out of the Department of Agriculture (DA) and made to work for mayors, many of whom are not agriculture-oriented. Many extension workers are consequently assigned to non-agricultural work.

Fausto agrees with our previous recommendation  that the DA, Department of Interior and Local Government (DILG), and the government-private sector National Agriculture and Fishery Council (NAFC) work together on a Memorandum of Agreement (MOA) to address this important and long-festering issue.

Being an investment banker himself, Fausto knows the economics of dairy production. He believes most banks are not lending funds to farmers for this profitable venture because they simply do not know its potential. He further says that the DA still has to act on his proposal for a comprehensive dairy program because it likewise lacks knowledge on this issue.

National context

Today, our import-dependent dairy industry is worth P120-130 billion annually. But it is foreigners, not Filipinos, who benefit from this significant domestic market. Filipinos have less than 1 percent of this business because they have not tapped its potential. Fausto believes that the DA should now step in to correct this situation of 99 percent imported dairy milk when we can produce the milk ourselves.

Fausto is passionate about his advocacy. “You want to get out of this poverty?” he asks. “Give a farmer family only one dairy cow, and that family will cross the poverty threshold.” But this needs a comprehensive system of technology transfer, funding, and support services. Fausto says there is no such system today.

To jumpstart this initiative, we recommend that dairy cows be given as grants to proven credible farmer cooperatives in different parts of the country. One such source is the Agricultural Competitiveness Enhancement Fund (ACEF). This has been wisely “re-engineered” by the congressional agriculture committee chairs Sen. Francis Pangilinan and Rep. Mark Mendoza, and Agriculture Secretary Proceso Alcala. ACEF can now give grants to demonstrate how our dairy industry can be globally competitive.

Once the bankers see the success from these grants, they will be more confident in lending loans to farmers for dairy cows. Contrasting the few bankers who may be milking farmers, the majority of enlightened bankers can become a massive significant force in helping farmers get out of poverty through milk.

(The author is chairman of Agriwatch, former secretary for presidential flagship programs and projects, and former undersecretary for agriculture, and trade and industry. For inquiries and suggestions, e-mail [email protected] or telefax (02) 8522112.)