HOW CAN WE OFFER CREATIVE FINANCING FOR OUR LOW INCOME FARMERS?

HOW CAN WE OFFER CREATIVE FINANCING FOR OUR LOW INCOME FARMERS?

For decades, we have been hearing about government loan programs intended to help low-income farmers buy seeds, fertilizers, farm machinery and other production inputs. Yet despite all these announcements, many of our small farmers still cannot access the capital that they desperately need.

Why is that?

Is it because they cannot comply with the documentary requirements? Is the approval rate so low that the programs fail to reach those who need them most? If so, perhaps the problem is not the farmers but the design of the lending programs themselves.

There is certainly no shortage of demand. What appears to be lacking is a financial product that truly matches the realities of farming. Banks still operate with what I call a "pawnshop mentality"—no collateral, no loan. Unfortunately, many low-income farmers till land they do not own and therefore have little or nothing to pledge.

Fortunately, innovative ideas are beginning to emerge.

One of the most interesting examples comes from Bacolod City, where RU Foundry and Machinery, Inc. (RUFMI), under the leadership of its President, Ramon Uy, Sr., has developed a creative financing program for farm machinery. Instead of requiring hefty down payments, the company allows qualified farmers to acquire shredders, harvesters and other equipment under flexible terms.

What caught my attention is that farmers may pay either in cash or in kind. If they pay in cash, they begin amortizing only after selling their harvest. If they choose to pay in kind, they may settle their obligations using palay, fruits or vegetables.

That reminds me of the old barrio doctors who accepted chickens, eggs or vegetables as professional fees. It worked then because everyone understood the realities of rural life. Why can't agricultural financing follow the same principle today?

The shredders supplied by RUFMI are also noteworthy because they convert farm and kitchen wastes into compost, which can be applied directly as organic fertilizer or fed to African Night Crawler earthworms to produce high-value vermicast. In effect, farmers improve soil health while generating additional income.

Globally, agricultural finance has evolved beyond ordinary bank loans. Value-chain financing allows banks to lend against guaranteed purchase agreements with buyers. Lease-to-own equipment financing lets the machinery itself serve as collateral. Warehouse receipt systems enable stored harvests to become bankable assets. Crop-aligned repayment schedules recognize that farmers earn after harvest—not every month. Digital credit scoring is beginning to use delivery records and mobile payment histories instead of traditional collateral.

These ideas deserve serious attention in the Philippines.

Since the government is already purchasing palay from farmers through various procurement programs, why not expand the concept? Government could distribute farm machinery to qualified low-income farmers under lease-to-own arrangements and accept payment in the form of harvested palay. Such an approach would reduce dependence on collateral while improving farm productivity.

As Ramon Uy shared during my interview with him, there is really nothing complicated about this model. More importantly, he is willing to share it with others and even demonstrate his machines free of charge.

Perhaps that is the lesson for government. Instead of asking why farmers cannot qualify for loans, we should ask a different question: How can we redesign financing so that farmers no longer have to qualify for poverty, but instead qualify for productivity?

After all, the golden rule of agricultural financing may simply be this: Whenever possible, lend productive assets instead of cash, and whenever practical, collect repayment from the harvest instead of demanding collateral.

RAMON IKE V. SENERES

www.facebook.com/ike.seneres  iseneres@yahoo.com  senseneres.blogspot.com  09088877282/08-07-2027

Comments

Post a Comment

Popular posts from this blog

HOW IS THE CRIME RATE COMPUTED IN THE PHILIPPINES?

HOW IS THE CRIME RATE COMPUTED IN THE PHILIPPINES? When we talk about the crime rate in the Philippines, we often assume that the figures we see are accurate reflections of reality. But have we ever paused to ask—how exactly is the crime rate computed? Where does this data come from, and how reliable is it? The computation of the crime rate in the Philippines is officially handled by the Philippine National Police (PNP). The formula itself is straightforward: Crime Rate = (Total Reported Crimes / Total Population) x 100,000 This simple equation gives us the number of crimes per 100,000 people, allowing for fair comparison across regions and time periods. However, the reality behind these numbers is more complex than it appears. Data from the Ground The foundation of our national crime rate is empirical data collected at the grassroots level—from individual police stations scattered across the country. Every reported crime is logged in local police blotters, forming the buil...
Read more

SOME IDEAS ABOUT HOW TO MAKE USE OF WASTE GLASS COLLECTED FROM OUR WATERWAYS

SOME IDEAS ABOUT HOW TO MAKE USE OF WASTE GLASS COLLECTED FROM OUR WATERWAYS It seems that wherever we go these days—rivers, creeks, esteros, even along our coastlines—we see not just plastic waste but also a good deal of glass bottles, jars, and broken fragments. While plastics usually get the headlines, glass is just as problematic. Unlike organic matter, it does not decompose; it just sits there, often breaking into sharp pieces that pose dangers to humans, animals, and the environment. So, what can we do about it? Collecting it is the first logical step, and in fact, collecting glass is easier than collecting plastic because glass is just one category. Plastics, by contrast, have about seven categories, and these require separate processing streams. That makes glass, in a way, less complicated to deal with. But what happens after collection? That’s where we need to get creative. In Bali, for example, they have the “Sungai Carafe”—a beautifully designed water container made fr...
Read more

Recommendation to Consolidate Key Disease Control Agencies

Recommendation to Consolidate Key Disease Control Agencies  His Excellency Ferdinand E. Marcos, Jr. President of the Republic of the Philippines Malacañang Palace Manila Subject: Recommendation to Consolidate Key Disease Control Agencies into a Unified Entity Under a DOH Undersecretary Dear Mr. President, In view of the possibilities that new pandemics could again break out in the future, I am writing to recommend the consolidation of the Disease Prevention and Control Bureau (DPCB), the Epidemiology Bureau (EB), and the Research Institute for Tropical Medicine (RITM) into a single, unified entity under the Department of Health (DOH), led by an Undersecretary who will report directly to the Secretary of Health. This recommendation is aimed at enhancing the efficiency and effectiveness of the Philippines’ public health and disease control efforts, aligning with global best practices such as the structure and powers of the U.S. Centers for Disease Control and Prevention (C...
Read more