Rural Development Beyond Microfinance: A Summary

Rural Development Beyond Microfinance: A Summary

by Jennifer Viloria

Halfway through the preparation for this month’s IISLA Forum, the Philippines was struck with a catastrophic storm, Typhoon Ulysses, internationally known as Typhoon Vamco. The flood caused 46,000 families to be displaced in my home province of Isabela and the adjoining province of Cagayan Valley. Because of this, we thought of delaying the forum altogether to give farmers and cooperatives a chance to participate as soon as they have recovered.

However, we decided to push through because ironically, funding is the most important component when it comes to rehabilitation and full recovery particularly in the agricultural sector which was badly affected. We pushed through with the event because we have to design better sources of funding needed to make farming more sustainable and inclusive than what it currently is. It is now more pressing to produce enough food for our people.

Last November 17, 2020, IISLA was joined by friends and panelists Carlomagno Aguilar of Organic Growth, Ericson Atanacio of Terra Verde Ecofarm and Resort and DTI GoNegosyo, Louie de Paula of Negros Women for Tomorrow Foundation, Inc., and Christine Violago of Grameen Foundation.

Imelda Canuel, Development Consultant, served as moderator. She starts by showing the results of an online poll which included relevant questions such as whether the audience has engaged in microfinancing before, in what capacity, and what the biggest challenges for funding farmers currently are.

Imelda proceeds to introduce me as the Founder and CEO of IISLA. I share with the panelists and with the audience the key points of the desk research recently conducted by IISLA about microfinancing. 

Here are some of the key insights in my presentation:

  • there is no shortage of capital in the financial system. Capital just doesn’t flow to rural areas, especially to smallholder farmers
  • the framework of the world’s global capital flow is multi-layered, and 
  • the framework of the flow of credit in agriculture in the Philippines is also multi-layered and very complex, barring farmers direct access to it

The panelists all agreed that along with the inaccessibility of capital are many on-the-ground challenges including lack of sufficient information to assess the risk profiles of farmers, their weak credit absorption capacity, and most of all, their limited cash flow to pay the loans given their high level of indebtedness. There was a call for a debt moratorium for farmers from one of the panelists.  Education beyond farming techniques is also needed to help farmers understand these challenges and equip them with financial skills beyond basic financial literacy to include better understanding of other sources of capital . They also need to adapt to new technologies for better yield, and a stronger policy framework with proper implementation has to be designed in order for them to have access to capital which they need to sustainably feed not just their families but all of us.

Carlomagno Aguilar, Founder and CEO of Organic Growth, agrees with this assessment. He says, financing in the Philippines has “a lot of layers, and with all those layers, there’s nothing left for the farmers.” He also cites that some cooperatives and foundations who receive funding for farmers just keep it for themselves. Carlo says even he wasn’t aware that there are global funds for farmers. Education and access to information has to be strengthened for information to reach them.

Ericson Atanacio of Terra Verde Ecofarm and Resort and ambassador of DTI Go-Negosyo’s Kapatid Agri-Mentor Program agrees with Carlo. He jokes that farmers have to be eliminated, and replaced with agripreneurs because “they don’t know what they need and they don’t know what is very accessible to them.” His own efforts include educating farmers in accessing finance. While he thinks that farmer loans should be non-collateralized, he also recognizes that farmers are considered high risk and will pose a problem when it comes to investor interest. He also keys in on one simple problem overlooked: the lack of acceptable government IDs. Loans usually require at least one ID.

Louie de Paula, Head of MSME Community Loans and Micro-Agri Loans for the Negros Women for Tomorrow Foundation, Inc. says that the discussion highlights what is happening in the credit framework right now. He cites, “most of the time, farmers are dedicated to farming activities. They don’t have much time to spend outside labour. That’s why we need to innovate our approach,” he says. On his part, he handles micro entrepreneurs who want to acquire assets for their business. The foundation offers them low interest rates.

Christine Violago, Country Director for Grameen Foundation, takes care of programs particularly in mobile agriculture and financial services, including women-linked initiatives. She is aware of the struggles, particularly of women in farming households. Christine says, “I think one of the things we realised is that our farmers are also ageing…and because these farmers are elderly, they’re not fast learners of the digital trends that are happening.”

All of the panelists answer questions raised by the audience.

The event ended with my call to action to help relief operations in Isabela and the Cagayan Valley.