INTERNATIONAL Finance Corp. (IFC), a member of the World Bank Group and the world’s largest development institution, has signed a deal with Philippine thrift bank CARD SME Bank Inc. to expand credit access to small farmers and entrepreneurs in rural areas.
The advisory agreement between the two financial institutions aims to expand smallholder farmers’ and rural entrepreneurs’ access to credit and create more jobs to help people in the agriculture sector lift themselves out of poverty.
“We are working with banks and agribusinesses to support more than 100,000 farmers on improving their cultivation and business skills. We also want to provide greater access to resources for women who make up 27 percent of farm workers and 10 percent of those in the agribusiness value chain,” said Jane Xu, new country manager of IFC Philippines.
The IFC said the farming sector has been declining for the past decade and most farmers have to get by on about $1.20 (P53) per day, despite the fact agribusiness contributes as much as 35 percent to the Philippine gross domestic product and provides jobs for nearly half of more than 40 million working Filipinos.
“In the places where CARD SME Bank has branches, we can help address the demand for credit from farmers, agri-traders, and agro-processors,” said Jaime Aristotle Alip, founder and managing director of CARD MRI, the largest microfinance institution in the Philippines and the parent company of CARD SME Bank.
Under the agreement, IFC will advise four branches of CARD SME Bank on expanding agricultural loans to farmers.
IFC supported the pilot agri-lending operations of the bank’s branch in Lipa City in Batangas Province, about 80 kilometers south of Manila.
Despite stricter amendments to the Philippines’ Agri-Agra Law, which requires banks to set aside 25 percent of their total lending for agricultural loans, local banks have only been lending 9 percent of their loan portfolios to agribusiness.
Lending to farmers is considered a high risk because of the farms’ vulnerability to weather conditions. Many farmers cannot borrow from banks because they lack business skills and rarely keep financial records that the banks require.
IFC said its continuing work with CARD SME Bank is part of its long-term effort to improve farmer incomes in the Philippines.