FROM THE MARGINS
JAIME ARISTOTLE B. ALIP, PHD
Putting agriculture at the forefront of our development agenda is a good move on the part of President Marcos. His assumption of the post of Agriculture Secretary is an affirmation of the promise made during his presidential campaign to lower the price of rice to P20 a kilo. While he clarified in a later interview that this was just an “aspiration,” the move to lead the Department of Agriculture (DA) is a clear statement of support for the sector.
Food security is becoming a global concern, given pandemic scars, the rise in fuel prices, inflation, and other challenges caused by the Russia-Ukraine war. Not surprisingly, the public awaits with bated breath President Marcos’ plans to ensure food availability amid our economic woes. With the Philippine Statistics Authority (PSA) reporting that June inflation has risen to 6.1 percent due to higher food and transport costs, now, more than ever, the government needs to focus on our much-neglected agricultural sector.
Agriculture and poverty
Agriculture has been called the Achilles heel of the Philippine economy, with perennial problems of low productivity and import-dependence. Data from the PSA reveal very low annual growth rates of 1-3 percent for the sector. For the last 10 years, its contribution to our gross domestic product is only 0.3 percent, compared to 1.4 percent for industry and 3.1 percent for services. There is also widespread poverty in the sector, with three-fourths of the poor population living in rural and agricultural areas.
Clearly, investing on agriculture is the key to economic recovery. Ensuring a higher growth rate for the sector will address our poverty problem and alleviate unemployment.
Why financial inclusion matters
Based on PSA data, palay production in the first quarter reached 4.9 million metric tonnes, up 0.5 percent from last quarter and up nine percent from last year. This was the country’s highest harvest on record for the first quarter, according to DA. There is no supply problem, since imported rice is available, courtesy of the Rice Tariffication Law (RTL). Yet still, rice prices continued to increase. What is tragic is that this has not redounded to the benefit of our farmers, as farmgate prices even declined. It is really ironic – and sad – that even as we face a looming food crisis, our food producers continue to languish in poverty, with limited access to much-needed financing to boost their production.
While the appeal of former DA Secretary William Dar for more government funding makes sense, there is another aspect that needs attention. About seven in 10 adult Filipinos are financially excluded, according to the 2019 Financial Inclusion Survey (FIS) of the Bangko Sentral ng Pilipinas (BSP). Financial exclusion disproportionately affects millions of Filipinos in the lower income class and those who are unemployed, less educated, and belonging to the younger generation. Financial exclusion is also prevalent in the agriculture, MSME and startup sectors, as well as informal workers.
Clearly, apart from additional funds for infrastructure, subsidies, research and development (R&D) and farm mechanization, we also need to ensure that farmers and fishers are given access to finance. This is crucial because our agricultural producers are financially excluded. They lack the documents required to open bank accounts, and those that have accounts have difficulty meeting the associated costs in maintaining their accounts. They have limited awareness and knowledge about financial products and services.
Due to the Covid pandemic, there was regulatory relief extended by the government in the last two years, but formal financing for the sector remained limited because banks and other financial institutions are always cautious in lending to agriculture and MSME sectors.
Public-Private Partnership
The finance sector has a key role to play in facilitating agriculture’s contribution to economic growth and poverty reduction. Our agriculture industry is resilient, as stated by former chief economist Cielito Habito early this year, noting a 25 percent increase in employment for the sector. Apart from the increase in production noted by the DA, a rapidly evolving technological landscape – due in part to the challenges of living amid the Covid pandemic – is opening up new possibilities.
It is early days yet. The newly-installed President and Agriculture chief would do well to look into business models of public-partnership that have exhibited positive impact. I am sure that there are many, but the one that I am most familiar with is the partnership of state-owned insurer, Philippine Crop Insurance Corp. (PCIC), with the CARD Pioneer Microinsurance, Inc. (CPMI), for the first private sector-led crop-insurance product in the Philippines.
This partnership is important because the private sector is reluctant to offer insurance when insurance claims vary dramatically from year to year. A purely private crop insurance market is impossible because the risks are too large.
The challenges are plenty, but opportunities also abound. Certainly, President Marcos’ move to head the DA is a good start. I hope that it is just the first of many seeds that he will plant to give priority to Philippine agriculture. With him personally overseeing the DA, I join everyone in hoping the best for the sector.
(Dr. Jaime Aristotle B. Alip is a poverty eradication advocate, with more than 35 years of experience in microfinance and social development. He is the founder of the Center for Agriculture and Rural Development Mutually-Reinforcing Institutions (CARD MRI), a group of 23 organizations that provide social development services to eight million economically-disadvantaged Filipinos and insure more than 27 million nationwide. CARD’s innovative financial and enterprise development services targeting the poor has won many accolades, including the Ramon Magsaysay Award for Public Service in 2008. Dr. Alip is an alumnus of the Harvard Business School, the Southeast Asia Interdisciplinary Development Institute and the University of the Philippines.)