The Land Bank of the Philippines has committed to drastically increase lending to small farmers and fisherfolk from P37.9 billion to P115 billion over the next six years, in keeping with President Duterte’s goal of dispersing the benefits of growth to the countryside through the development of the farm sector.
New LANDBANK president Alex Buenaventura said that to accomplish this goal, he will initiate a “reengineering” of the credit facilities for small stakeholders in the agriculture sector, and encourage them to enter into “corporatives.”
Under his proposal, a corporation would be formed to manage the consolidated farms of small farmers who wish to take part in the corporative. The corporation would be owned 40 percent by LANDBANK and 60 percent by participating commercial banks. The farmers would provide the manpower to keep their lands profitable.
Buenaventura said that under his proposal, 99 percent of the corporation’s earnings would be distributed to the participating farmers “pro-rata according to their respective land ownership” while 1 percent would be declared as dividends of the corporate owners.
He further explained that part of the proposal is to enable commercial banks taking part in the corporative to fulfill their part under the Agri-Agra Law of allotting 15 percent of their total loanable funds for farmers and fisherfolk and another 10 percent for agrarian reform beneficiaries, rather than pay fines for failing to comply with the law’s requirements. Buenaventura is set to discuss this before concerned regulatory bodies.
“Also, a portion of the profits earned every harvest by the farmers would be used by them to buy equity in the corporation, until such time that the 60 percent owned by commercial banks is fully divested to the small farmers,” Buenaventura said.
The corporative business model of LANDBANK will serve as a common vehicle for the following lead government agencies to promote inclusive growth among their targeted small farmers: the Department of Agrarian Reform (DAR), the Department of Agriculture (DA), the Office of the Presidential Adviser on the Peace Process (OPAPP), and the National Commission on Indigenous People (NCIP).
Buenaventura said his proposal is still a work in progress and is currently being presented to various experts and stakeholders in the agriculture sector to further finetune the LANDBANK’s corporative approach, which aims to make small Filipino farmers globally competitive and among the most productive and profitable in Asia.
He noted that loans to the agriculture sector stood at P37.9 billion as of September 2016, which represents only 8.2 percent of the Bank’s total loan portfolio of P482 billion.
Given LANDBANK’s high growth performance as shown by the net increase in its income from P4.1 billion in 2006 to P10.3 billion as of September this year, “it is in a very good position to further expand its services, reach and support especially to its mandated sector, the farmers and fishers,” Buenaventura said.
“We will work on tripling loans to small farmers and fishers to P115 billion by 2022, or in the next six years,” Buenaventura added.
He said the possible cash crops that farmers can plant under the corporative are palm oil, rubber, banana, coconut, cacao and abaca, which have high export potentials.
The scheme will also work for palay farmers who could face new challenges next year with the possible lifting of the quantitative restrictions on rice in 2017.
Buenaventura noted that previous contract growing arrangements only allowed big farmers to have access to bank loans, shutting out small stakeholders in the farm sector.
Buenaventura’s innovative strategy of dramatically increasing loans to small farmers is in compliance with President Duterte’s directive to promote inclusive growth in rural areas through agriculture, and in line with the administration’s 10-point socioeconomic agenda that encompasses “increasing agricultural and rural enterprise productivity and rural tourism.”
Under the setup, the DAR will identify the lands owned by small farmers that can be formed into corporatives cultivating rice, sugar and banana.
He is also enjoining the OPAPP to pilot palm oil corporatives in the Autonomous Region in Muslim Mindanao (ARMM) and in conflict-affected areas in Mindanao.
Buenaventura proposed that the DOLE will provide additional livelihood opportunities for farmers, while the DILG could assist in convincing local government units to waive the unpaid real property taxes of farmers.
A successful corporative will have to organize farmers multipurpose cooperative that will provide consumer stores, emergency loans, savings program, tuition assistance for their children, housing loans, micro-insurance, value formation, health program and other benefits.