Disenfranchising farmers, fishermen

Drawn from the ranks of local politics and broadcast media although he claims a background in agriculture, Secretary Emmanuel Piñol of the Department of Agriculture (DA) seems to be a better fit among the Cabinet of former President Benigno Aquino III than the current no-nonsense team of President Rodrigo Duterte. Among an economic team where experience, productivity and a clear sense of purpose and direction are concerned, he’s failed to keep up.

In an economy such as ours, food security and sufficiency are vital where these comprise a good part of our basket of goods that determines aggregate prices and costs of living. We cannot afford an incompetent handling of such a vital sector much less a whole cabal of incompetents as Aquino and his alter egos did.

Already we’ve seen in 2018 how gross agricultural mismanagement inherited from the previous administration can cross the great electoral divide between an inept and bungling administration under Aquino, perpetuating — and heaven forbid, worsening among a driven and determined dispensation under Duterte. It is noteworthy where the latter’s single-minded drive to uplift the public from the desolation Aquino’s team had inflicted on the agricultural sector should now be Piñol’s priority. Unfortunately, from the DA, all we’ve seen so far is a lot of running in place with little productivity other than press conferences and Kodak moments.

Indulge us an investment banker’s perspective. Let’s simplify the analysis of why agriculture seems to have remained unproductive under Piñol. Allow us to focus on a perennial and persistently recurring problem specifically inflicted on vulnerable small-scale farmers and fishermen who seem to have been all but ignored.

While the problems that persist in the sector have cursed domestic agriculture as the least productive among economic sectors, at least in every other administration token effort had been expended to at least address the problem of providing critical credit where debtors are characteristically not deemed as even marginally creditworthy.

While banks are statutorily mandated to provide agricultural credit to medium to small-scale farmers and fishermen, rural-based creditors reluctant to follow the law to the letter have either devised the most disingenuous ways to skirt the rules through innovative schemes that substitute for real agricultural credit or have actually chosen to divert loanable funds to more creditworthy debtors with substantially less default risks. While skirting strategies entail penalties, risk analyses show that paying fines is far better than incurring either non-performing loans, or worse, critical asset write-offs.

Under Bangko Sentral ng Pilipinas (BSP) circular 885 issued under Aquino, there are specific instructions given to banks who lend to farmers and fishermen that effectively disenfranchise these debtors and effectively deny financial inclusivity. Had the DA been more holistically attuned, Piñol should be addressing these and negotiating more financially inclusive terms with the monetary authorities.

On BSP’s requisite credit and loan evaluation, farmers and fishermen debtors are required a credit rating score. Some savings banks don’t even have those for commercial loans. Moreover, the BSP rules require cash flow projections under Modigliani-Miller scenarios and a study on the borrower’s economic sectors, including peer-to-peer analyses. Are such data on small-to medium-scale farmers and fishermen available and can rural bankers even assess the data at all?

Banks, while compelled to review, track and tailor-fit credit risk criteria and management systems for all debtors, including farmers and fishermen, don’t do this. It isn’t just a question of low interest rates. They would prefer not to lend.

These BSP requisites are not sophisticated. Just tedious. But they must be attuned with those of farmers and fishermen lest the latter end up being disenfranchised and denied critical funding — something Piñol, if he truly cared, must address posthaste.