FROM THE MARGINS JAIME ARISTOTLE B. ALIP, PHD According to the Philippine Statistics Authority, our economy expanded 7.6 percent in the third quarter of 2022, compared to last year.  The agriculture, forestry, and fishing sector also rose by 2.2 percent, a turnaround from a -1.7 percent decline in the same quarter of 2021.  Still, this sector’s share in the Gross Domestic Product (8.5 percent from 9.6 percent in 2021) continues to decline and that is worrisome, given inflation and food security concerns.  There are many issues besetting agriculture, including access to credit. The banking system generated a total of ₱6.5 trillion loanable funds in 2020, but only six percent went to agriculture, according to the Agricultural Credit Policy Council. The banks’ overall compliance to the Agri-Agra Law was only 10 percent, which is 15-percentage points short of the mandated credit quota. Compliance has also been declining over the past 10 years. This is unfortunate because financial exclusion is prevalent in the agriculture sector, with many farmers remaining unbanked and underserved. Republic Act No. 2137, the Warehouse Receipts Law of 1912, was supposed to help farmers access credit, by allowing them to store their produce in exchange for warehouse receipts that they could trade, encumber or use as collateral for loans. However, this century-old law must be updated to support modern commercial transactions. Warehouse receipt financing The government is already exploring how the current law can be updated. I was privileged to attend the forum on warehouse receipts financing that the Bangko Sentral ng Pilipinas organized last week. I welcome the proposed establishment of a warehousing and registration system that promotes financial inclusion. Provided that the system is secure, transparent, and reliable, this could make a lot of difference to our farmers, agri-preneurs, and MSMEs. Proposals to modernize our warehouse receipts system involve the establishment of a central electronic Registry for Warehouse Receipts, to be managed by the Securities and Exchange Commission. It also includes warehouse accreditation, bond and insurance for warehouse operators, and a guarantee mechanism for loans. Benefits for farmers The proposed Registry of Warehouse Receipts complements the banks’ risk management system. The safeguards envisioned assure banks and financial institutions of the integrity and reliability of warehouse receipts as collateral for loans. The system will give farmers easy access to credit, allowing them to sell crops only when they can maximize profits. The Registry will also provide market information needed for strategic policy decisions concerning food security. Modernizing our warehouse receipts system is in line with the National Strategy for Financial Inclusion, and would benefit the rural poor, especially farmers, MSMEs, and others with limited access to finance. Small-scale farmers usually do not have the assets and credit history that banks require, leaving them vulnerable to usurers and informal lenders. They often sell-off their goods when harvest season begins so they can hold onto their crops until the lean season, when the price and potential for profits are at their highest. However, lack of post-harvest facilities, improper preservation or drying techniques, coupled with inadequate storage facilities, usually forces them to let traders reap the rewards of seasonal price swings. With warehouse receipt financing, farmers can gain access to credit and maximize the benefits from their hard-earned labors. Some recommendations To really benefit farmers, we should:

1. Improve warehousing facilities. There should be adequate, affordable and accessible warehouses, otherwise, farmers will still be at the mercy of middlemen. Warehouses should be spacious to accommodate produce during harvest season, complete with the necessary tools, equipment, and other facilities. They should also be within reach; otherwise, farmers cannot afford transport costs on top of storage fees. Most importantly, the government should provide basic infrastructure, like farm-to-market roads, irrigation, and post-harvest facilities.
2. Assist Farmers. Farmers’ organizations/cooperatives/association should, ideally, own warehouses, with the government supporting their capacity-building. The government could help them hire professional managers (e.g., give grants for salaries during the formative stage) to ensure their financial sustainability. This will level the playing field, with warehouse facilities not only owned by traders, middlemen, and private financiers but also farmers.
3. Provide insurance. Insurance is important, but from a practitioner point of view, the crux of the matter is the speed of claims payment. Many insurance companies take months to process claims. We need to change this. Claims should be paid as soon as possible, because farmers urgently need the funds for daily consumption and farm inputs. Also, since insurance can only cover so much, there should be an indemnity fund pooled from government and warehouse facility owners’ contributions.
4. Ensure negotiability. The warehouse receipt is a negotiable instrument and good as cash, negating the need for complicated due diligence requirements. Thus, when a farmer goes to the banks, he should be able to immediately get a loan using that as collateral. Fast resolution of cases, whenever there are disputes, would also promote trust and confidence in warehouse financing.

Lastly, we need to promote understanding of warehouse receipt financing, to enable stakeholders, especially farmers, to benefit from the system. Let us support our farmers.    Author Amit Kalantri is correct when he said: “If the farmer is rich, then so is the nation.”