THE ongoing El Niño phenomenon has truly taken a toll on our local farmers. Television newscasts and the banner stories of newspapers describe in vivid detail how the extreme heat brought about by the warmer-than-normal sea surface temperature in the Pacific Ocean has dried up farmlands, reservoirs and waterways in the country.

The lack of rainfall and irrigation water has narrowed the options for Filipino farmers, who now use whatever water they have as wisely as possible.

The recent issuance of a Bangko Sentral ng Pilipinas circular allowing all banks in the country to offer micro-agri loans for farmers could not have come at a much better time.

Circular No. 680, which lists the rules and regulations for the provision of micro-agri loans, will provide an opening for small farmers to tap any bank for their financial needs without having to go through complicated loan application procedures.

The significance of such a circular can not be discounted. The Philippines is primarily an agricultural country with a land area of 30 million hectares, 47 percent of which is agricultural land.

According to the Department of Agriculture (DA), the country’s population is predominantly rural (70 percent of the total) and two-thirds of this population depends on farming for their livelihood.

In terms of employment, about one-half of the labor force is engaged in agricultural activities.

The DA also noted that majority of the farms in the country are small ones, averaging two hectares in size. These small farms are owned and managed by single families involved in agricultural activities ranging from subsistence to commercial production.

A typical farming system consists of major crops, with rice, corn and coconut as common base crops, and a few heads of livestock and poultry.

Sadly, small farmers often find it difficult to borrow money from banks. To be able to access bank credit, farmers usually undergo complex application procedures which require the submission of financial statements and proof of tax returns.

They are also required to provide traditional collateral such as land titles, which many small farmers do not have.

Micro-agri loans can provide farmers the needed relief. Micro-agri loans will not require the usual collaterals that banks ask of their clients. Depending on the bank, farmers could present unconventional collateral substitutes such as their farm animals or crops.

Farmers who apply for loans as a group can use “peer pressure or peer support” as their collateral, or they could ask their colleagues to be their co-makers.

To be eligible for a loan, farmers should have a good track record and multiple income generation activities (aside from farming) to mitigate the risks of non-payment.

Their farm activities should also have been at least two years in operation at the time of the loan.

The farmers would be allowed to borrow up to P150,000, with the bank requiring them to pay their loan on a regular (weekly, semi-monthly or monthly) basis.

Farming in itself is risky: a good harvest depends on the weather, the climate, and the absence of pests. With the looming El Niño phenomenon, our farmers now need all the help they can get.

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