BSP’s Espenilla says banks missing out on agri opportunities

Posted on May 13, 2017

THE CENTRAL bank wants lenders and financial institutions to recognize possible growth opportunities in the agricultural industry, with the regulator urging banks to expand their services to the sector.

“My hope is the 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,” Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor A. Espenilla, Jr. said during the BSP-Asian Development Bank (ADB) Conference on Financing Agriculture Value Chain in the Philippines this week.

Mr. Espenilla was referring to recent data from the Agricultural Credit Policy Council (ACPC), particularly the large portion of unmet credit demand for priority agricultural commodities that was estimated at around P364 billion.

Also citing data from ACPC, Mr. Espenilla noted that 53% of Filipino farmers get their credit from formal sources, to which he noted “is quite an encouraging figure considering that only 12% of Filipino adults borrow from a formal financial institution in 2014.”

“Financing today is a very competitive and complex business but I am confident that you will play a crucial role in providing adequate financial services to the agricultural sector,” Mr. Espenilla said during his speech.

The central bank deputy governor, who takes over the top job at the BSP in July, also cited the BSP’s efforts in creating a more inclusive financial system through BSP Circular 908, which outlined the new rules for the Agricultural Value Chain Financing Framework, which allows farmers and fisherfolk to take out bank loans as part of a value chain.

Under the framework, agricultural workers are evaluated as part of a bigger and organized “value chain” or a linked sequence of product processing from raw materials to final consumer goods.

Value chains may either be producer-driven among farmers, buyer-driven or among retailers and exporters, facilitator-driven, or integrated with big firms.

“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,” Mr. Espenilla said.

In 2016, the agricultural sector’s share of total gross domestic product (GDP) fell to 1.1% from 0.2% in 2015.

The Philippine economy grew 6.8% by end-2016, falling within the government’s 6-7% target for 2016 and higher from the revised 5.9% in 2015 and hitting a three-year high since the 7.1% recorded in 2013. -- Arra B. Francia