• Creating future employers

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    Among the notable gains of President Benigno Aquino 3rd’s administration as highlighted in his recent State of the Nation Address (SONA) include the approval of the Sin Tax Reform Law, the allocation of P6.2 billion for flood control in Metro Manila and the 7.8-percent growth of the gross domestic product (GDP) for the first quarter of the year.

    Although GDP growth hit an impressive figure, the SONA failed to discuss the high unemployment rate in the country and how this could be addressed. In April, the National Statistics Office reported that the unemployment rate increased to 7.5 percent from 6.9 percent during the same period last year, while the employment rate decreased slightly to 37.82 million from 37.84 million.

    The issue on unemployment is something rural banks can help solve.

    By providing farmers, fisher folk, and small and micro enterprises access to credit and other financial products to improve their respective livelihood, the rural banking system has proven that economically empowering individuals and communities is an effective counter to the unemployment problem.

    The financial services rural banks provide to the traditionally unbanked and underbanked will go a long way in creating an economic cycle, wherein the loanee can use the funds to start or grow his own small business. As this business prospers, it releases goods and money to the system, as well as create employment opportunities for others. With this, rural banks become an important catalyst in the creation of jobs and livelihoods in poor communities through agriculture and rural development.

    For instance, the rural banking sector and the Department of Agriculture (DA) has a long-standing partnership that directly benefit small farmers and fisher folk through the latter’s financing programs. By gaining access to loans from rural banks at affordable rates, farmers and fisher folk can engage in agri-related undertakings.

    One such program is the Agro-Industry Modernization Credit and Financing Program (AMCFP), which is mandated under the Agriculture and Fisheries Modernization Act of 1997. In 2012, loan releases under the AMCFP increased by 146 percent year-on-year to P1.12 billion. This year, an additional P1 billion has been provided for the implementation in a new program under the AMCFP.

    Another undertaking that the rural banks and the DA have been working on together is through the Agriculture Guarantee Fund Pool (AGFP), which was created in 2006 to encourage banks to lend to the agriculture sector. The AGFP provides guarantee coverage to unsecured loans extended by financial institutions and other lending conduits to small farmers engaged in rice and/or food production projects. To date, 118 rural banks have participated in the program, or 21 percent of the entire membership of the Rural Bankers Association of the Philippines (RBAP).

    RBAP and the AGFP are also currently forming a Guarantee Partner Support Program that will help members of RBAP in creating affordable agri-loan products for small farmers and fisher folk.

    In addition, through the Microenterprise Access to Banking Services program, rural banks have disbursed more than P41 billion to micro-entrepreneurs through the years.

    Microfinance has proven to be an effective poverty alleviation tool as it made beneficiaries engaged with their enterprises, and also resulted in employment in these enterprises.

    So, instead of just helping create future employees, the rural banking sector can help create future employers. As an old Chinese proverb says, “give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.”

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