With the outbreak of the novel coronavirus disrupting agricultural links to consumers, the Philippine government bolsters food security by providing farmers with financial support and forming new localized supply chains. While these reforms have helped, a number of technological solutions also have the potential to strengthen the industry through greater access to finance.
Although agricultural activities have been permitted to continue during the enhanced community quarantine imposed by the government on much of the country, some farmers have nevertheless seen their activities limited by various provincial restrictions. In Quezon province, for example, stricter measures were implemented on April 9, permitting residents in some barangays (wards) to leave their homes only once per week – placing the harvest at risk of spoilage during the dry season.
Given the disruptions to global supply chains affecting the importation of food, agriculture – which employs about 30 percent of the workforce – has grown in importance during the pandemic. In fact, the sector had already been identified under the Philippine Development Plan 2017-22 as a key focus area for reducing the country’s reliance on imports and boosting self-sufficiency.
To aid food security in the areas most affected by movement restrictions, in mid-April William Dar, the secretary for agriculture, announced the rollout of a new ‘Plant, Plant, Plant’ program.
The P31 billion ($615.4 million) funding will be used to enhance inputs, provide seeds and boost production in the main island groups of Luzon, the Visayas and Mindanao. Of this, P8.5 billion ($168.8 million) will be allocated to the Rice Resiliency Project, which seeks to increase domestic rice production from 87 percent of consumption to 93 percent.
Linking farmers to markets
In addition to some of the hurdles to production, many farmers who have harvested their crops have faced challenges selling their produce, with restrictions on the movement of people disrupting many global and local supply chains.
According to local media, some farmers have turned to social media to search for buyers – and in some cases have resorted to giving away vegetables for free rather than allowing them to rot.
In an effort to strengthen linkages between food producers and the market, the Department of Agriculture created four food supply chain clusters around the country: two in Luzon, one in the Visayas and one in Mindanao.
Through collaboration with government agencies and local government units (LGUs), these clusters were tasked with identifying prime agricultural products and potential markets to develop localized supply chains. For example, farmers in Eastern Visayas have been connected with public sector organizations that include the region’s medical center, which is the designated referral hospital for Covid-19 patients; LGUs themselves, responsible for disbursing food support packages; and the body responsible for the oversight of the country’s jails.
Meanwhile, the administration of Iriga City, located in Luzon’s Caramines Sur province, launched a ‘Vegetables on Wheels’ scheme, which consists of a truck selling fresh local produce across the city’s 36 barangays.
In a sign of the success of the initiatives, LGUs had purchased P1.6 billion ($31.8 million) in agricultural goods directly from farmers over the two-month period to May 7.
Elsewhere, nongovernmental initiatives to form localized supply chains include agriculture social enterprise Agrea, which in March launched a ‘Move Food Initiative’ to enable consumers in some areas of Metro Manila to order produce from local farmers via an online form.
While government support and initiatives are working to maintain agricultural production and linkages during the pandemic, a series of tech solutions is also helping to improve farmers’ access to financing.
In a country where about 75 percent of the population is unbanked, it can be particularly challenging to finance rural businesses with limited access to financial infrastructure. As a result of this low rate of financial inclusion, the market is characterized by a tradition of seeking financial support from within the family rather than from financial institutions.
Informal lending channels are not only absent of bureaucratic hurdles but also avoid high interest rates and are accessible to those with limited financial literacy.
In recent years, peer-to-peer lending via crowdfunding start-ups has emerged as an alternative form of financing for farmers or companies looking to enhance productivity through investment in improved farmer education, enhanced inputs and increased mechanization. One example is the Cropital crowdfunding platform, through which investors choose a Philippine farm for investment and then receive a fixed-rate return on that investment dependent upon the success of the harvest.
Beyond simply providing access to credit, the enterprise also links farmers with insurance providers and agricultural training resources – and has received support from institutions in the US, the Netherlands and Malaysia.
Meanwhile, local start-up FarmOn offers an alternative lending model whereby investors select a crop – rather than a farm – for investment. The financing is then used by various farmers to purchase the necessary inputs and/or technologies from FarmOn, which is the start-up’s source of revenue.
After the farmer cultivates and sells the crop, they share the profits 50-50 with the investor. This solution also focuses on sustainable agriculture through increased mechanisation and productivity.
Seeds of hope
Building on these initiatives, there is scope for the agriculture industry in the Philippines to benefit from the end-to-end agritech solutions already employed in other markets.
Nigerian start-up Farmcrowdy is a case in point. Launched as a crowdfunding platform connecting small- scale farmers to finance in 2016, it raised $1 million in seed funding the following year and an additional $1 million in 2019. The company then expanded its offering to connect local farmers with major processors and international buyers, before announcing in April, in the midst of the pandemic, the launch of an e-commerce arm to link its network of local farmers directly with consumers via a web platform and mobile app.
It remains to be seen whether the COVID-19 pandemic will provide a stimulus for agritech start-ups to expand their offering and their reach in the Philippines, and whether localized supply chains and supply chain clusters will continue to provide more efficient, sustainable market access once lockdown restrictions are eased. The capital Manila and various other population centers across the country have remained under enhanced community quarantine since March in an effort to contain the COVID-19 outbreak, which had resulted in 11,087 cases and 726 deaths nationwide as of May 11.
These solutions to problems faced during the health crisis have the potential to improve farmers’ access to credit, increase efficiency in the segment and can therefore aid the Philippines in its medium-term objective of agricultural self-sufficiency.