Eat Local Food, Save Local Farmer: The Critical Role of Rural Banks
Figure 1–1 Selected Philippines Agricultural Imports 2017[1]
As in most Asian countries, the staple food in the Philippines is rice. In 2017, rice importation stood at 0.89 million metric tons increased by 45.74%. Its import value amounting to Php 18.03 billion was up by 36.14%. Mongo beans importation was about 36,475 metric tons valued at Php 1.26 billion. Its volume grew by 16.79% while value increased by 27.30%. Garlic importation reached 68,164 metric tons in 2017, higher by 15.56%, its import value at Php 906.21 million.
Today, we are a net importer of food, making us susceptible to price hike due to sudden fluctuations in the foreign exchange market. Rice importation may be deemed necessary to ameliorate the rice shortage in our country. However, rice importation is a band-aid solution, wherein the long run, it will do more harm than good. I quote the Department of Secretary Emmanuel Piñol, “The sad truth is that we are not the only country with a growing population. Thailand, Vietnam, Cambodia, Myanmar, Pakistan, and India, which are all rice exporting countries now, also have a growing population. Just like us, their farming areas are not expanding and will, in fact, shrink because of the sprouting of human settlements.”
“It is as certain as the sun will rise tomorrow that 10 years from now, Vietnam, Thailand, Cambodia, Myanmar, Pakistan, and India will no longer be able to export the same volume of rice that they ship out today.”
How can we achieve rice self-sufficiency?
How can we achieve rice self-sufficiency? I am not an economist. So, I will be approaching this as an engineer. Let’s look at the numbers, as Peter Drucker said, “If you can’t measure it, you can’t improve it.”
Figure 1–2 Comparison: Philippines and Vietnam[3]
Currently, the Philippines lags behind other ASEAN rice producing countries as local production only averages 3.87 metric tons per hectare at a seemingly high cost of P12 per kg[4]. Compare to Vietnam’s average yield of 5.41 metric tons per hectare[5] at Php 6 per kilo.
As shown in Figure 1–2, the closed to 30% yield advantage of Vietnam can be attributed to the following.
- Employment in agriculture (%)
- Fertilizer /arable land (kg/ha)
- Tractors per 100 sq km of arable land (Mechanization)
- Rural land below 5 meters (M ha) (Terrain)
- Irrigated land (M ha)
Arguably, the big difference in the irrigated land was due to large areas of low elevation that makes irrigation feasible, especially in the Mekong River delta. However, we can improve the first three attributes mentioned above through capital formation from the Republic Act №10000: Providing Agricultural and Agrarian Reform Credit.
In essence, Republic Act 10000 or the Agri-Agra Reform Credit Act mandates banks to allot 25 percent of banks’ total loanable funds are to be set aside for agriculture and fisheries in general, of which at least 10 percent should be made available for agrarian reform beneficiaries and 15% for farmers and fisherfolk.
Figure 1–3 Only rural and cooperative banks comply with the AGRI-AGRA law[6]
Only rural and cooperative banks comply with the AGRI-AGRA law. Sadly, many of the big banks prefer to pay the penalty rather than lend to farmers. The big banks pay Php 6 billion in penalties for failure to meet the Agri-Agra thresholds[7].
Figure 1–4 Banks in the Philippines[8]
Unfortunately, 94% of rural banks do not participate in the e-money landscape. The foremost concern is, of course, cost. That is why we created Pearl Pay! An end-to-end solutions (E2ES) provider for financial institutions. End-to-end solutions mean providing application, software, system, and hardware requirements of the customer, such that the customer won’t need to source out other providers to achieve his or her requirements.
We’re committed to empowering the rural banks with world-class yet affordable banking applications and help them participate and thrive in the digital economy.
Only technology, with its ability to provide orders of magnitude of improvement in capability and affordability, has the scale to confront problems such as poverty and the other overriding concerns of society today. But technology alone can never replace relationships. Rural banks have close ties to the communities based on a relationship of trust. Thus, Rural banks are in the best position to be effective purveyors of innovative technology, better financial inclusion, and more regional economic development.
If we want to bring down the cost of our food, then let’s support the rural banks!
Endnotes
- Republic of the Philippines. Philippine Statistics Authority. Agricultural Indicators System (AIS) Agricultural Exports and Imports (Report №2018–4). 2–3.
- “PHL Meat Imports up 22.73% in 2018–BAI.” BusinessMirror. February 14, 2019. Accessed May 25, 2019. https://businessmirror.com.ph/2019/02/14/phl-meat-imports-up-22-73-in-2018-bai/.
- Bw_mark. “A Tale of Two Agricultures: The Philippines and Vietnam.” BusinessWorld. Accessed May 25, 2019. https://www.bworldonline.com/a-tale-of-two-agricultures-the-philippines-and-vietnam/.
- “PhilRice Seeks Competitive Rice Yield.” Philstar.com. Accessed May 25, 2019. https://www.philstar.com/business/agriculture/2017/09/23/1741923/philrice-seeks-competitive-rice-yield.
- “Vietnam’s Rice Caught Between Two Models of Development.” Gro Intelligence. Accessed May 25, 2019. https://gro-intelligence.com/insights/vietnam-rice-caught-between-two-models-development.
- Republic of the Philippines. Bangko Sentral Ng Pilipinas. A Report on the Philippine Financial System (Second Semester of 2018). 8.
- Agcaoili, Lawrence. “Banks Pay P6 B Penalties for Failure to Meet Agri-agra Thresholds.” Philstar.com. December 02, 2018. Accessed May 25, 2019. https://www.philstar.com/business/2018/12/03/1873635/banks-pay-p6-b-penalties-failure-meet-agri-agra-thresholds.
- Perreras, Spark. “Bangko Sentral ng Pilipinas (BSP) National Retail Payment System (NRPS) Framework: The Rising Imperative of Implementing E-Wallet Technology” December 26, 2018. Accessed May 25, 2019. https://www.linkedin.com/pulse/bangko-sentral-ng-pilipinas-bsp-national-retail-payment-perreras/
