BSP helps farmers gain easier access to credit
The Bangko Sentral ng Pilipinas (BSP) is promoting agricultural value chain financing (VCF) to boost financial inclusion.
BSP Governor Nestor Espenilla Jr. said the central bank recently issued guidelines on agricultural VCF to facilitate credit to the agriculture sector and all players in an organized value chain.
“By encouraging linkages among various players in an agri-value chain, the credit risk of participating smallholder farmers and fisherfolks can be reduced and facilitate their access to more credit,” he said.
To promote micro, small & medium enterprise (MSME) access to finance, Espenilla said the BSP issued comprehensive credit risk management (CRM) guidelines “so banks can be more flexible, extend more credit and implement innovative credit products and lending programs.”
He added a wide range of microfinance services of banks now cover nearly 1.7 million microentrepreneurs with an outstanding portfolio of P13 billion.
Espenilla said the central bank would soon liberalize foreign borrowings by the private sector to improve the ease of doing business in the country.
“This will re-focus the registration process to primarily data-gathering. It will minimize documentary require ments,” he said.
Agricultural VCF is seen 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 will facilitate and allow small farmers/fisherfolks to have, if not more, access to credit,” the BSP said.
Better access to credit in agricultural value chains is expected to further improve productivity in the agriculture and fisheries sectors and at the same time uplift the lives of these marginalized farmers/ fisherfolks,” the BSP said.
The agriculture and fisheries sectors contribute an average of 10 percent to the country’s GDP.
Small-scale farmers can maximize their production by merging with a value chain. This provides them better access to finance, better farming technology and a larger market to serve, the BSP said.
Value chains include suppliers and processors that will aid in the processing of the farmers’ harvest from raw material to finished products.
The agricultural value- chain financing framework also enables the financial institution that has lent financial assistance to borrowers to provide disaster contingency mechanisms. This will help minimize farmers’ losses when disasters or calamities strike.
The BSP is giving incentives to lenders that comply with the value-chain framework’s regulations, which, in turn, will encourage more lending.
Aside from the lack of financial assistance provided to the sectors, damages from calamities, both natural and man-made, make it difficult for farmers and fishermen to increase their production and growth.