New BSP financing network is more agri-friendly
The Bangko Sentral ng Pilipinas has approved the agricultural value chain financing network, which gives farmers access to financing and enables them to higher value markets.
The BSP said the agriculture and fisheries sectors have had difficulty obtaining credit even if they account for 10 percent of the country’s gross domestic product, employing 11.2 million Filipinos in 2014.
The reason, the BSP said, is because the sectors are considered “high-risk” due to inherent susceptibility to weather conditions, flooding, pest infestations, and man-made calamities, among others.
It said the agricultural value chain financing network addresses the credit risks associated with the agriculture and fisheries sector by shifting the focus of lending from individual farmers and fisherfolk to the whole value chain.
A value chain is a set of actors, suppliers, processors, and aggregators who conduct linked sequence of value-adding activities involved in bringing a product from its raw material stage to the consumers.
Participation in a value chain allows farmers to leverage on effective farming technologies and methods, access to formal financing, and sustainable market demand, the BSP said.
The BSP cited as example small onion farmers who were previously just producing for a small localized market.
By integrating into a value chain, they were able to access financing that allowed them to upgrade their products and processes, and to be assured of a steady market through a leading fast-food chain.
Incentives are also given to financial institutions that comply with regulatory expectations.
The incentives include compliance with agri-agra requirement and an additional 25 percent increase in the single borrower’s limit for loans granted to actors in the agricultural value chains for a period of three years.
The BSP hopes that the issuance will provide the necessary guidance for banks to be able to serve the needs of the agriculture and fisheries sector, specifically the smallholders, in a manner that is viable and sustainable.