INSUFFICIENT

ACCESS TO
FINANCE FOR
FARMERS
Introduction
Insufficient access to finance for farmers is a critical challenge
that the Philippines' agricultural sector, a vital contributor to the
national economy, faces. Despite agriculture's substantial
contribution, accounting for approximately 11% of the country's
GDP and employing nearly a quarter of the workforce, Filipino
farmers grapple with severe financial constraints. This
multifaceted problem significantly impacts agricultural
productivity and the livelihoods of millions of rural families.

The lack of adequate financial resources hinders

farmers' ability to invest in essential inputs, adopt
modern technologies, and implement sustainable
Page 01
practices, ultimately perpetuating a cycle of
poverty and hindering the sector's overall growth.
FACTS
[Link] ACCESS TO
FORMAL CREDIT
A significant proportion of Filipino farmers, exceeding
70%, lack access to formal financial services,
including savings accounts and credit facilities. This
disparity is underscored by the meager allocation of
bank credit to the agricultural sector, which received
only 2.6% of total outstanding loans in 2022, despite
its substantial contribution to the national economy.
This limited access compels farmers to rely on
informal lending sources, often characterized by
exorbitant interest rates, which perpetuates a cycle
of indebtedness and hinders their ability to achieve
economic stability and improve their livelihoods
(Lubang, 2020).
FACTS
2. HIGH PRODUCTION COSTS
AND LOW RETURNS

Filipino farmers struggle to make a profit

because of several problems: they don't
produce enough, they don't grow many
different kinds of crops, and they are
often hurt by bad weather. When storms
hit, it makes their financial problems
even worse because they lose their
crops and end up owing more money
(PearlPay. 2021).
FACTS
3. INEFFECTIVE
AGRICULTURAL INSURANCE

The government's crop insurance

program hasn't been able to properly
protect Filipino farmers. Many of the
insurance plans don't work well for small
farmers who own a little bit of land. When
disasters happen, the money farmers get
from insurance is often not enough to
even buy new seeds and fertilizer, so
they are left with no help to recover
(Lagua, 2024).
FACTS
3. INEFFECTIVE
AGRICULTURAL INSURANCE

The government's crop insurance

program hasn't been able to properly
protect Filipino farmers. Many of the
insurance plans don't work well for small
farmers who own a little bit of land. When
disasters happen, the money farmers get
from insurance is often not enough to
even buy new seeds and fertilizer, so
they are left with no help to recover
(Lagua, 2024).
CAUSES
[Link]
BARRIERS
Risk Perception by Lack of Physical
Financial Presence
Institutions
Banks in the Philippines ·Banks often lack branches
are hesitant to lend to in rural areas, making it
farmers, seeing it as too difficult for farmers to
risky due to access financial services
unpredictable weather like loans, savings, and
and market changes. insurance. This
This limits farmers' geographical gap
access to loans and contributes to financial
specialized financial exclusion in rural
products. communities.
CAUSES
2. FINANCIAL PRODUCT MISMATCH
Inadequate High Collateral
Financial Products Requirements

Existing financial products

·Many farmers,
often don't meet farmers'
needs. Farmers need long- especially
term loans for smallholders,
investments, but struggle
struggle to get loans
to find loans beyond
seven years. The lack of because they don't
tools to manage risks also have enough assets
discourages farmers from
to use as collateral.
investing in better
technology and farming
methods.
CAUSES
3. ECONOMIC FACTORS
High Costs and Limited Financial
Interest Rate Literacy

Borrowing money can

be very expensive for ·Many farmers don't
farmers, especially in understand financial
developing areas.
products or how to
Informal loans often
have extremely high manage debt well,
interest rates, making it which makes them
hard for farmers to hesitant to borrow
invest in their farms or
money from banks.
pay back what they
owe.
CAUSES
4. DEMOGRAPHIC CHALLENGES
Youth and Small
Farms
Disadvantages
·: Young farmers and small farms
are hit hardest by the lack of
financial [Link] than half
of young farmers' loan
applications are rejected
because of strict bank rules.
These young farmers often lack
the experience and credit history
that banks want to see.
CAUSES
5. CULTURAL ATTITUDES
Reluctance to
Borrow

·Some farmers are hesitant to

take on debt because of their
beliefs or past experiences with
loans. This can stop them from
getting the money they need,
even if it's available.
CAUSES
6. STRUCTURAL ISSUES IN AGRICULTURAL
FINANCING
Poor Political and
Infraststructure Economic
Instability
The financial systems in
·Many farmers don't
rural areas are often
weak, making it hard to understand financial
track how well products or how to
borrowers are doing and manage debt well,
to enforce loan
which makes them
agreements. This makes
banks nervous about hesitant to borrow
lending to farmers. money from banks.
REFERENCES
Access to finance remains insufficient for farmers and agri-food SMEs. (2023, October
12). Agriculture and Rural Development. [Link]
finance-remains-insufficient-farmers-and-agri-food-smes-2023-10-12_en

IBON Foundation. (2020, November 24). Swept away - Philippine agriculture bears wrath
from government neglect. [Link]
wrath-from-government-neglect/

Katabaro, J., & Magasi, C. (2024, May 4). Promoting Sustainable Livelihoods: Effect of
Credit Access from Financial Institutions on Small-Scale Rice Farming.
[Link]

Lubang, S. a. A. (2020, July 16). Towards Liberation from Debts of Filipino Farmers. FFTC
Agricultural Policy Platform (FFTC-AP). [Link]

PearlPay. (2021a, June 10). Helping Farmers in the Philippines with Accessible Financial
Help.

Responding to the access to finance concerns of SMEs – Financial Executives Institute of

the Philippines. (2024a, February 8). [Link]
access-to-finance-concerns-of smes/#:~:text=The%20obstacles%20in%20lending
%20to,family%20ownership%20structure%20characterize%20SMEs. Responding to the
access to finance concerns of SMEs – Financial Executives Institute of the Philippines.
(2024b, February 8).

Ruiz, C. (2024, March 16). How can finance influence productivity of agricultural firms?
World Bank Blogs. [Link]
influence-productivity-agricultural-firms
 IMPACTS
[Link] AGRICULTURAL
PRODUCTIVITY
Inability to Invest in Delayed Adoption
Inputs of Technology

·Farmers who can't get ·Without money, farmers

loans can't buy things are less likely to use
like seeds, fertilizer, and new farming methods or
tools. This hurts their technology that could
crop production and help them produce more
keeps them stuck in a food. This makes it
cycle of low income and harder for them to farm
small-scale farming. in a way that's good for
the environment.
IMPACTS
2. ECONOMIC VULNERABILITY

Increased Risk of Reliance on

Poverty Informal Financing

When farmers can't ·Many farmers have to

invest in their farms, borrow money from
they earn less money informal lenders, who
and are more charge very high
vulnerable to economic interest rates and have
problems. This is unfair terms. This can
especially bad in trap them in a cycle of
developing countries debt and poverty.
where farming is a
main source of income.
IMPACTS
3. FOOD SECURITY CHALLENGES

Impact on Food Post-Harvest

Supply Chains Losses

When farmers don't ·Farmers who can't

have enough money, afford good storage
they produce less food. facilities lose a lot of
This can lead to their crops after harvest.
shortages and higher This hurts their income
prices in local markets, and wastes food,
which makes it harder making it harder for
for everyone, including local food systems to
farmers and work well.
consumers, to get
enough food.
 IMPACTS
4. LIMITED ECONOMIC GROWTH

Stagnation of the Inequality Among

Agricultural Sector Farmers

·When there's not enough ·Smallholder and young

money going into farming, farmers are
it holds back new ideas disproportionately affected
and growth in the by financing gaps, leading
agricultural industry. This to increased inequality
limits job opportunities within the agricultural
and economic community. Larger farms
development in rural may have better access to
areas, where farming is credit, widening the gap
often the biggest part of between different types of
the economy. agricultural producers.
IMPACTS
5. ENVIRONMENTAL IMPLICATIONS

Inability to Invest in
Sustainable
Practices
·Farmers lack the resources
to invest in environmentally
friendly practices and
technologies that could
combat climate change.
This lack of investment
harms the environment by
degrading natural
resources and causing long-
term damage.
IMPACTS
6. SOCIAL CONSEQUENCES

Impact on Youth Community

Engagement in Disengagement
Agriculture

·Young farmers are ·When financial hardship

often denied loans intensifies, rural
more often than older communities may
farmers, making it experience social unrest
harder for them to or disengagement as
become farmers and people struggle to make
contributing to a cycle a living due to
of poverty in farming insufficient financial
communities. support.
REFERENCES
Access to finance remains insufficient for farmers and agri-food SMEs. (2023, October
12). Agriculture and Rural Development. [Link]
finance-remains-insufficient-farmers-and-agri-food-smes-2023-10-12_en

IBON Foundation. (2020, November 24). Swept away - Philippine agriculture bears wrath
from government neglect. [Link]
wrath-from-government-neglect/

Katabaro, J., & Magasi, C. (2024, May 4). Promoting Sustainable Livelihoods: Effect of
Credit Access from Financial Institutions on Small-Scale Rice Farming.
[Link]

Lubang, S. a. A. (2020, July 16). Towards Liberation from Debts of Filipino Farmers. FFTC
Agricultural Policy Platform (FFTC-AP). [Link]

PearlPay. (2021a, June 10). Helping Farmers in the Philippines with Accessible Financial
Help.

Responding to the access to finance concerns of SMEs – Financial Executives Institute of

the Philippines. (2024a, February 8). [Link]
access-to-finance-concerns-of smes/#:~:text=The%20obstacles%20in%20lending
%20to,family%20ownership%20structure%20characterize%20SMEs. Responding to the
access to finance concerns of SMEs – Financial Executives Institute of the Philippines.
(2024b, February 8).

Ruiz, C. (2024, March 16). How can finance influence productivity of agricultural firms?
World Bank Blogs. [Link]
influence-productivity-agricultural-firms
POSSIBLE
SOLUTIONS
[Link] OF
TAILORED FINANCIAL
PRODUCTS

Microfinance and Value Chain

Cooperative Models Financing

·Microfinance institutions (MFIs) and ·By integrating financing into agricultural

cooperatives can help farmers by supply chains, farmers can access loans
providing small loans that fit their based on their agreements with buyers.
specific needs. These organizations This approach reduces risk for lenders, as
often understand local farming better loan repayments are tied to the income
and can offer flexible repayment farmers expect to earn from their sales.
schedules.
 POSSIBLE
SOLUTIONS
2. GOVERNMENT AND
INSTITUTIONAL SUPPORT

Guarantee Public Policies and

Schemes Regulations

·Government guarantee schemes can ·Policies like interest rate caps, lending
encourage banks to lend to farmers by quotas for agriculture, and regulations
covering a portion of loan defaults, supporting rural banks can improve access
reducing risk for lenders and providing to finance for farmers, creating a more
security against potential losses. favorable environment for agricultural
lending.
 POSSIBLE
SOLUTIONS
3. CAPACITY BUILDING
AND FINANCIAL LITERACY

Training Technical
Programs Assistance

·Providing training for farmers on ·Providing technical assistance to both

financial literacy, business farmers and financial institutions can help
management, and the use of financial create bankable projects that meet lenders'
products can empower them to make requirements while aligning with farmers'
informed decisions regarding loans needs.
and investments
 POSSIBLE
SOLUTIONS
5. COLLABORATION WITH
DEVELOPMENT FINANCE
INSTITUTIONS (DIFs)

Partnership with Innovative Risk

DFIs Management Tools
·Engaging development finance institutions
(DFIs) can provide funding and technical
support to local financial institutions willing
to lend to farmers. DFIs can also help
design innovative financing solutions
tailored to the agricultural sector's specific
challenges.
 POSSIBLE
SOLUTIONS
6. IMPROVED
INFRASTRUCTURE

Enhancing Rural Data Collection and

Financial Infrastructure Analysis

·: Expanding rural banking branches ·Collecting agricultural data, such as yield

and improving transportation forecasts and market prices, helps lenders
networks can make financial services assess risk more accurately and tailor their
more accessible to farmers. Enhanced products to meet farmers' needs.
infrastructure reduces the costs of
reaching rural clients.
REFERENCES
Access to finance remains insufficient for farmers and agri-food SMEs. (2023, October
12). Agriculture and Rural Development. [Link]
finance-remains-insufficient-farmers-and-agri-food-smes-2023-10-12_en

IBON Foundation. (2020, November 24). Swept away - Philippine agriculture bears wrath
from government neglect. [Link]
wrath-from-government-neglect/

Katabaro, J., & Magasi, C. (2024, May 4). Promoting Sustainable Livelihoods: Effect of
Credit Access from Financial Institutions on Small-Scale Rice Farming.
[Link]

Lubang, S. a. A. (2020, July 16). Towards Liberation from Debts of Filipino Farmers. FFTC
Agricultural Policy Platform (FFTC-AP). [Link]

PearlPay. (2021a, June 10). Helping Farmers in the Philippines with Accessible Financial
Help.

Responding to the access to finance concerns of SMEs – Financial Executives Institute of

the Philippines. (2024a, February 8). [Link]
access-to-finance-concerns-of smes/#:~:text=The%20obstacles%20in%20lending
%20to,family%20ownership%20structure%20characterize%20SMEs. Responding to the
access to finance concerns of SMEs – Financial Executives Institute of the Philippines.
(2024b, February 8).

Ruiz, C. (2024, March 16). How can finance influence productivity of agricultural firms?
World Bank Blogs. [Link]
influence-productivity-agricultural-firms