LOS BANOS, Laguna, Feb 24 --Finance is a driver of growth in the agriculture sector but improving farmers’ access to financial instruments is also key to their adoption of better farm technologies for greater productivity.
The prospects of financial technology (FinTech) in linking farmers with financial services outside the traditional banking system and improving the value chain are rife. This was explored during a recent online forum on the potential of FinTech in advancing agricultural development in the Philippines jointly organized by the Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA) and SyCip Gorres Velayo & Co. (SGV).
Speaking at the webinar, Land Bank of the Philippines (LANDBANK) President and CEO Cecilia Borromeo said about 2.67 million farmers benefitted from LANDBANK lending facilities that have collectively offered P237.62 billion worth of assistance to the agriculture sector to date.
LBP lending programs to the agriculture sector using either its own funds through its regular lending window or in partnership with the Department of Agriculture (DA) or Department of Agrarian Reform (DAR) include Sulong Saka, Agriculture Credit Support Project, Agricultural and Fisheries Financing Program, Agricultural Competitiveness Enhancement Fund, ARISE-ARBs Program, DA Sikat Saka Program, and PALAY ng Lalawigan.
Borromeo noted that clearly, access to agricultural financing plays a critical role in enabling the agriculture sector, including smallholder farmers and business enterprises, to adopt productivity-enhancing technologies and practices.
However, Christian Lauron, SGV Financial Services Consulting Partner and Government & Public Sector Leader, pointed out that agricultural transformation also requires farmers to shift from traditional agricultural payment systems to using available digital money services to reduce their financial risks.
Lauron added that a number of agri-FinTech startups in Asia are offering support to smallholder farmers in accessing potential markets, affordable credit, capital for agricultural equipment, and other financial services. To maximize these, he said there is a need to increase the awareness and knowledge of farmers on these kinds of platform.
Among the FinTech startups to watch in 2020, Lauron said, are farMart and Jai Kisan, both in India; Crowde and TaniHub, both in Indonesia; Impact Terra in Myanmar; and Cropital in the Philippines. According to Cropital, it provides farmers access to scalable and sustainable farming and its development is supported by institutions in the United States, Netherlands, Malaysia, and the Philippines.
FinTech solutions are not limited to financial services; they can also be critical to creating a sustainable and transparent supply chain. In particular, blockchain technology allows digitization of processes and operations along the value chain which can improve supply chain efficiency, decrease operation costs, and increase sales and revenues, explained SGV Financial Services Consulting Senior Director Christian Edmund Chua. He said blockchain promotes transparency as it enables the agriculture sector to establish a shared environment or database between all stakeholders.
In terms of sustainability of the supply chain, Larisa Salaysay of SGV, said by applying FinTech in green financing, “we can expand the blockchain applications of tracking assets to natural resources so we can record and trace across several subsectors including forestry, fisheries, carbon accounting, and energy.”
FinTech can provide digital identity and promote financial inclusion. Salaysay said in many developing countries, many people cannot open bank accounts because they lack sufficient documents to establish their identity and credit history. She said “Blockchain can be used for economic identification.”
“If done well, FinTech could be key to increasing agricultural productivity because of its huge potential for financial inclusion by making financial services and products accessible even to the marginalized farmers and farming families,” SEARCA Director Dr. Glenn B. Gregorio affirmed.
“Ultimately, there is need to look into options to build the financial systems of the country to improve the access of farmers and enterprises to capital and financial services and to explore the use of modern financial technologies to improve cost efficiency across the supply chain,” surmised Dr. Rico C. Ancog, University of the Philippines Los Baños (UPLB) Associate Professor and SEARCA program lead for Emerging Innovation for Growth.
He said one such option is the ongoing development of a digital agricultural platform that SEARCA and its partner APPGeese, Inc. are piloting with vegetables farmers in the municipalities of Nagcarlan and Liliw in Laguna and Dolores, Quezon. (SEARCA/Leah Lyn D. Domingo)