The Federation of Free Farmers (FFF) said Congress should consider allocating credit funds under the Rice Competitiveness Enhancement Fund (RCEF) for risk mitigation measures instead of appropriating funds for direct lending to farmers.
Under the Rice Tariffication Law (RTL), P1 billion out of the P10 billion allocated annually for RCEF has been used for direct lending programs of the Land Bank of the Philippines (Landbank) and the Development Bank of the Philippines (DBP), the group noted.
FFF said as of the first half of the year, Landbank has lent nearly P2.7 billion to about 16,000 individual farmers and 281 cooperatives, while DBP extended P2.2 billion to 42 farmer groups and 32 rice farmers.
“The loan amount is actually small and just a drop in the bucket in the lending programs of Landbank and DBP, which together lent out almost P750 billion to agriculture during the first half of 2023 alone. These banks are awash in money and do not need additional funds to lend. What they need is some guarantee that they will get paid in case the farmer-borrowers default on their loans,” said Raul Montemayor, FFF national manager, in a statement.
The group said a credit fund allocation can instead be used to provide crop insurance and/or loan guarantee coverage for loans extended by banks to rice farmers.
“If you lend P50,000 to each farmer, the P1 billion fund will benefit only 20,000 farmers in one year. But if you use that for risk reduction measures, you can benefit at least 200,000 or 10 times more farmers, aside from encouraging banks to lend more money,” Montemayor said.
FFF said part of the funds can also be used to subsidize interest rates so that banks can recover their operating costs even if they lend to farmers at lower rates.
The group said loan delinquency rates have reportedly increased in recent years as a result of calamities and lower palay prices, with some farmers consciously defaulting on their loans upon learning that reloaning was not assured.
The current version of the RTL also forces Landbank and DBP to return all loan collections to the National Treasury instead of relending them to farmers, FFF added.
The Congressional Oversight Committee on Agricultural and Fisheries Modernization jointly chaired by Senator Cynthia Villar and Rep. Mark Enverga is currently studying proposals to amend the RTL and increase the scope and funding of RCEF.
Earlier, FFF also appealed for changes in training programs being funded with P1 billion yearly by RCEF as P700 million from the said amount goes to the Technical Education and Skills Development Authority.
The group said agencies under the Department of Agriculture, particularly the Agricultural Training Institute, Philippine Rice Research Institute and the Philippine Center for Postharvest Development and Mechanization, should have a bigger chunk of the budget as these are more capable in providing trainings related to agriculture.
It also urged Congress to develop the whole rice seed system instead of only distributing free planting materials to farmers.
The group said P3 billion is annually spent just to propagate and distribute inbred rice seeds for selected rice farmers which could better be utilized for the development of seed varieties; production of breeder, foundation and registered seeds; mobilization and strengthening of seed growers’ associations; operation of a seed quality certification system; maintenance of seed buffer stocks; and seed handling and distribution, among others.
It also noted the need for farmers to be given a choice in the acquisition of equipment for the P5 billion annual RCEF allocation for farm mechanization.
Despite the program being helpful in reducing farmers’ production costs, it can further be improved, FFF added.
The group noted complaints from many farmer-recipients that the machines are of poor quality or not their preferred brands and capacities, apart from the issue of availability of spare parts and mechanics for repair and maintenance.
FFF said at present, the government pools approved requests for machinery and then conducts a public bidding among interested suppliers but since there is a single winning bidder, only one type or brand of equipment is granted to farmers.
With the current system, winning brands will be the lowest priced but may turn out to be poor in quality or prone to early breakdowns, it added.
