According to the 2022 Countryside Bank Survey (CBS) report released by the Bangko Sentral ng Pilipinas last week, vulnerabilities to natural calamities and harvesting uncertainties remain the most common problems that banks face when extending credit to agriculture, which hampers the sector’s growth.
The CBS findings, a collaboration between the BSP and the Department of Agriculture, showed that these inherent risks were aggravated by the pandemic, which had affected the health and livelihood of farmers and jeopardized their capacity to pay bank loans. As it is, the CBS reported that agricultural borrowers already often struggle to meet basic credit criteria, making it a challenge to secure loans.
At the same time, respondent banks said diseases such as the African swine flu and avian flu, along with pest infestations, posed “significant challenges to agriculture.”
“Major exogenous factors affecting the agricultural sector include extreme weather and climate conditions, notably typhoons, El Niño and La Niña, which can damage crops and disrupt farmers’ production and incomes,” the BSP said.
CBS data showed that the share of agricultural loans and services had increased to 18.1 percent in 2022, from 17.6 percent in 2021, as the economy emerged from harsh lockdowns. The BSP also said the bigger lending to farm activities coincided with the enactment of Republic Act No. 11901, which gave banks greater flexibility in allocating the 25 percent mandatory credit quota to a range of borrowers in the agriculture, fisheries, and agrarian reform sectors.
To encourage more lending, two thirds of banks polled stressed the importance of credit support mechanisms like guarantees and loan insurance, access to borrower information, and crop insurance, as they have expressed a willingness to increase their lending to the sector on expectations of strong demand postpandemic.
The uncertainties behind agriculture production in this country, which remains among the most vulnerable to climate-related disasters in the world, make access to funding and financing a challenge. This necessitates the intervention of government, to make it more attractive for all stakeholders, if agriculture is going to be strengthened.
Considering natural disasters and the outbreaks of pests and disease that could cripple the production potential of any farm, which affects the capacity of farmers to pay back loans, better protections will need to be put in place, protecting not only the farmers, but the banks as well, and ultimately, the economy in general.*
