Full support for the agri sector
CONSIDERING that 32% of the country’s total land area are intended for agriculture which remains as a primary source of income for 31% of the Filipino work force, the share of agriculture sector to the Philippines’ gross domestic product (GDP) falls behind other segments and has been declining over the past years from 10.5% in 2013 to 9.7% last year.
The figure suggests that there are fundamental constraints that hamper the potential growth of the sector. The new Bangko Sentral ng Pilipinas ( BSP) Governor Nestor A. Espenilla, Jr., who will assume the post in early July, identified that one of these factors is the farmers’ lack of access to financing.
During the BSP- Asian Development Bank ( ADB) Conference on Financing Agriculture Value Chain in the Philippines held last month, Mr. Espenilla cited a recent data from the Agricultural Credit Policy Council ( ACPC), where he serves as alternate vice- chair, which shows that 53% of Filipino farmers get their credit from informal sources.
In his speech, he urged banks and financial institutions to expand their services to the agricultural industry as he believes that access to finance is a key driver for the sector to recover from its current economic status.
“My hope is that banks and other financial institutions will see the ACPC figures as an invitation to study the agricultural sector closer and to recognize the business opportunities and the growth potential that they can offer,” Mr. Espenilla said.
He shared that there is still a huge unmet credit demand for priority agricultural commodities amounting to estimated P364 billion, according to a study done by the ACPC.
“Financing today is a very competitive and complex business but I am confident that you will play a crucial role in providing adequate fi nancial services to the agricultural sector,” Mr. Espenilla said.
The monetary authority’s approach to create a more inclusive financial system in agricultural sector is acted through its BSP Circular 908 that outlines the Agricultural Value Chain Financing Framework (AVCF). This encourages financial institutions to reach the unserved and underserved markets in a sustainable manner, and allows smallholder farmers and fisherfolk to render bank loans as part of a value chain.
“Appreciative of the potential of the AVCF as a platform for sustainable agricultural financing, the BSP issued a circular to set the guidelines and incentives for value chain fi nancing,” he said.
Farmers’ participation in a value chain allows them to leverage on effective farming technologies and methods, access to formal fi nancing, and sustainable market demand. This is a promising approach to increase profit and attract greater opportunities for expansion as farmers are able to supply directly to institutional markets and assured with a steady market.
On the other hand, the incoming central bank governor also said that the challenges and constraints faced by the Philippine agriculture are not solely anchored on access to credit.
“On a broader scale, other factors include the lack of adequate infra, variability of income due to price volatility, poor market or supply chain linkages, susceptibility to various risks and seasonality of crop production cycles,” he said.
Noting his rich and excellent monetary policy and banking regulatory experience, Mr. Espenilla promised to create a fi nancial system where no one gets left behind and where there is a strong direction of fi nancial consumers.