Agri-Credit Interventions as a Lifeline for Filipino Farmers

As Filipino farmers face worrisome challenges, agri-credit interventions can be a source of lifeline for them.

Farmers have been greatly affected by the downturn of their businesses due to several economic losses. They find it challenging to maintain sustainability and access resources necessary to diversify into other businesses.

Banks should focus on providing loans for farmers as it serves as the capital to meet the rising demand for food supply and generate income growth in the country. However, some banks opt to pay penalties for noncompliance with the mandated credit quotas for the agriculture and agrarian (agri-agra) reform sectors owing to the risks associated with lending to these sectors. Thus, numerous small farmers are being denied access to the markets they need to grow.

The APCP Intervention

The Agrarian Production Credit Program (APCP) is a Php 2.5-billion credit facility and capacity development program implemented jointly by the Department of Agriculture (DA) and the Land Bank of the Philippines (LBP) with support from Department of Agrarian Reform (DAR), Department of Environment and Natural Resources (DENR) and the Philippine Crop Insurance Corporation (PCIC).

It offered financing programs to farmers at an affordable cost, while strengthening them through capacity building with agrarian reform beneficiaries organizations (ARBOs) as lending conduits. Launched in October 2012 as a five-year program, APCP was extended for another five years, and ended in October 2022.

A 2021 study by the Asian NGO Coalition for Agrarian Reform and Rural Development (ANGOC) examined the effectiveness of the government’s agri-credit intervention as part of the regional program on smallholder agriculture towards sustainable food systems and livelihood. The study was supported by the Initiatives for Dialogue and Empowerment through Alternative Legal Services (IDEALS), Fair Finance Asia (FFA), and Fair Finance Philippines (FFP).

The study employed two types of primary sources: analysis of agricultural finance national assessment reports from the Philippine Institute for Development Studies (PIDS) and the Multi-Sectoral Management Development Corporation (MMDC) and focus group discussions with small farmers, civil society organizations, and program implementers.

Agricredit as Source of Survival for Smallholders

According to the study, the APCP prioritized giving access to credit for families of small farmers in remote areas with limited opportunities for livelihood improvement. Funds are made available to them for agricultural inputs such as seeds and fertilizer. 

The DA issued Php 2 billion, while the APCP contributed Php 500 million to fund the program’s implementation. Research revealed that between October 2012 and February 2016, the program successfully loaned PhP1.95 billion to 526 ARBOs or 31,036 ARBs, with an 89.7% repayment rate. Additionally, LBP extended a total of Php 9.231 billion in production loans to 886 ARBOs with 68,963 rice farmers from October 2012 to December 2020.

Furthermore, reports showed that from January 2017 to May 2020, DAR led the provincial and municipal offices of DA and DENR to provide capacity building programs to ARBO borrowers. 

The DAR-Program Beneficiaries Development team conducted training on governance and financial management, while DA and DENR provided training on farm technologies and agri-enterprises. They dispatched consultants and mentors to assist ARBOs with financing, repayment procedures, crop insurance, organizational management, and marketing support.

Overcoming Constraints

ANGOC cited a comprehensive study on credit programs to smallholders which revealed that several ARBOs failed to repay their LBP loans, and given that the majority of these cooperatives lacked buffer funds for relending, they chose to default on their LBP loans, which barred them from taking a re-loan from LBP.

During the discussion with program administrators who participated in the study, they mentioned that repayment declined due to natural disasters such as pest infestations, drought, storm surges and the COVID-19 outbreak, which led to reduced productivity and income. 

ANGOC’s research gathered that while the APCP is a big step to helping the agricultural sector thrive, it can still be improved to better serve Filipino farmers. 

Farmers need to be self-sufficient, self-reliant, and autonomous. The agricultural industry in the Philippines needs a kind of funding service and capacity building programs that empowers farmers to have higher income levels, and to be resilient to calamities and climate change.

Moreover, the study acknowledged how the program’s capacity building program can be enhanced to be in the fulfillment of the LBP’s standard credit scheme for ARBs and ARBOs. The farmer cooperatives are not intended to be marketing and lending conduits. Farmers can undergo training to become eligible for LBP’s regular lending programs.

Championing Youth-led and Women-led Successes

ANGOC acknowledged how young and women farmers in the country are often held back by barriers that prevent them from investing in their livelihood despite the roles they fill in agriculture. The study recommended to provide credit windows, and to start developing training programs for women and youth to further support family farming and the development of their farmlands. 

A year since the study, APCP has grown and improved its services to cater more farmers in the country. 

Currently, APCP is implementing its Financial Assistance for Women in Agriculture program (AgriPinay) as part of its Gender and Development (GAD) efforts. AgriPinay aims to improve women’s access to rural credit to empower them in the agriculture and fisheries sector. Through this program, DA provides credit services and relevant capacity building and training activities to female members of households of small farmers and fisherfolk (SFF) and women in indigenous groups. 

AgriPinay offers a loanable amount of up to P100,000 per beneficiary with 0% and no collateral. This loan is intended to fund their production, processing, marketing, etc. that is payable in up to 5 years.

Additionally, APCP is also implementing its Kapital Access Young Agripreneurs (KAYA) loan program to finance the capital requirements of start-up or existing agri-based projects of young entrepreneurs and agri-fishery graduates who are 18-30 years old. 

Graduates of formal and non-formal agri-fishery schooling are welcome to apply for lending programs to finance capital requirements of their startup or existing agri-enterprise. Every borrower can avail up to P500,000 with 0% interest, up to 5 years to pay based on projected cash flow.

Through these programs, the APCP is intensifying youth support and gender equality in agribusiness. In order to provide food security, it is crucial that all farmers have access to resources that enable them to produce more and better quality crops while keeping costs low.

The interventions in the credit program plays an important role in improving the quality of production and quality of life of the farmers. With the proper support from the right institutions, the agriculture industry in the Philippines can thrive.