Pending key modifications, the Bangko Sentral ng Pilipinas (BSP) is encouraging the use of warehouse receipts financing for agricultural commodities.
This will form part of the proposed changes to the 1912 Warehouse Receipts Law, which the BSP has been supporting. The changes will address the development needs of the agriculture and micro, small and medium enterprise (MSME) sectors, said the BSP. Warehouse receipts are used as proof of ownership of certain goods, and these are transferable and can be used as collateral.
An updated law will expand access to credit by professionalizing the warehousing activity through the accreditation of warehouses and warehouse operators and establishment of an electronic warehouse receipts registry, explained the BSP.
Primarily, an amended warehouse receipts law will pave the way for the acceptance of warehouse receipts as credible collateral for bank loans.
“Now, more than ever, we need to take a whole-of-society approach toward putting in place necessary and responsive elements that make lending to the agriculture sector viable,” said BSP Governor Felipe M. Medalla at a recent forum attended by 200 participants.
The BSP has been trying to “generate support for the passage of legislation aimed at modernizing the Philippine warehouse receipts system”.
The Financial Inclusion Steering Committee, chaired by the BSP, has endorsed the proposed bill amending the warehouse receipts century-old law in the last Congress. A revised warehouse receipts law was filed last August as Senate Bill No. 1053 by Sen. Win Gatchalian.
According to a BSP statement on Monday, Dec. 19, in other countries, a “well-functioning” warehouse receipts system will be able to support collateralization of post-harvest produce owned by farmers, traders, and processors, and held in licensed warehouses.
“Countries that have implemented such a program have seen reduced post-harvest losses, improved stability of market prices, increased food security, and a heightened level of formalization of businesses within the sector,” said the BSP.
It added that while MSMEs and agriculture account for a large part of total employment in the country, they remain among the most vulnerable segments of the population. Households headed by farmers and fisherfolk ranked among the poorest and the least banked, with only three in 10 owning formal transaction accounts, said the BSP.
“But while we fully recognize that enabling laws are necessary, they are not sufficient to develop a thriving warehouse receipts financing market that ultimately benefits MSMEs and the agriculture sector. The concerted effort of all stakeholders is needed to make warehouse receipts finance work,” said Medalla.