Banking on inclusive rural enterprise development
To set the context, despite an Agri-Agra law mandating banks to commit 25% of their loanable funds to agriculture and agrarian credit, the compliance ratio of the banking sector stands at approximately 15%, with banks choosing to pay the penalties rather than lend. Often this is because banks are located away from the rural areas, which are not their target markets, and the 0.5% penalty rate is preferable to a potentially higher default rate.
Against this backdrop, the AgriFinancing Summit provided a forum for animated and often passionate conversations between the participants and presenters. More than that, the meeting of minds encouraged attendees to look beyond their role or sector and see the bigger picture. Two things particularly struck me from the keynote speakers:
1. The need to change how we view agriculture. China’s approach to food security as national security, and Thailand’s view of the farmer as the “backbone of the nation” are in stark contrast to the low opinion we often may have of the farming profession. Priorities must be redefined if the allocation of productive resources is to change.
2. Whether the demographic trends of tomorrow will be an opportunity or a crisis depends on how we respond today. The Philippines is expected to enter a demographic sweet spot by 2050 when the majority of the population will be of workforce age, contributing to the economy through both consumption and production. However, sadly, one third of Filipino children under five currently suffer from stunted growth due to malnutrition, which, if not addressed through improved food security, could turn this demographic sweet spot into a demographic time bomb.
Attendees at the Summit brainstormed potential solutions and developed prototypes of interventions that would serve the needs of the sector, culminating in an elevator pitch to the audience. We voted on more than fifteen ideas, which ranged from a national Farmer ID system to mobile or web applications that link farmers to information, markets, and government services.
Where do we go from here?
Together with the organizers, Grow Asia will be joining a technical consortium to discuss takeaways from the conference and a strategy for next steps. A mapping of various interventions in the Philippines by key stakeholders and value chains is also planned, which will build upon Grow Asia’s earlier study of financial interventions across the five countries we are active in. Lastly, we will explore ways in which we can potentially turn some of the prototypes into reality. Grow Asia is currently collaborating with partners in the region to pilot digital solutions in selected countries and we hope to extend this work to the Philippines. The AgriFinancing Summit 2016 was an important first step towards initiating these dialogues and Grow Asia will look to deepen its engagements in the country in the coming year. Stay tuned!
Manager, Country Partnerships (Indonesia and Philippines), Grow Asia