Almost medium, and long term loans to insurances
Almost everyday in our lives, we do financing without even knowing. We budget our allowance for the week, our parents buy and invest on different things, we open a bank account where we put our savings, we use credit cards with low interest rates, and we apply on insurances that we when we are old enough. Why do we do it and what does finance have to with it? Finance is a discipline in managing money efficiently (Kolakowski, 2017). It is a study on how to budget, transact, and invest money. Included also in financing are assets and liabilities. Finance, in addition, is the allocation of resources (International Student, n.d.). Finance is broken down into different categories, two of them is agricultural finance and rural Finance. They seem alike at a first glance since agriculture is commonly attached to rural but they are not. According to Make Finance Work for Africa (n.d.), rural finance is mainly focused on offering services like loans, savings, insurance, and payment transfers to households and enterprises in rural areas. School of Oriental and African Studies (SOAS) says that rural finance is ‘credit to rural people for farming’. It is to improve the profitability of the farmers. While agricultural finance have varied financial services, from short, medium, and long term loans to insurances to leasing. It also covers input supply, processing, production, distribution, wholesaling and marketing the products. The difference between the two is rural finance helps the farmer, and agricultural finance improves the farm. Philippines is an agricultural country therefore, most of the livelihood of the people is farming. Agriculture, Hunting, Forestry, Fishing (AHFF) has a share of 10.4% in the Gross Domestic Product (GDP) of the country in the third quarter of 2017 and 85.2% of this comes from the agricultural sector. Yet, many of the farmers based on the rural side, cannot reach the maximum level of output due to limited access to loans which leads to inability to improve their technology. Llanto (2005), said that between 1998-2002, the number of loans in the AFF sector does not exceed five percent. One of the reasons why farmers cannot get loans is because of poor infrastructure like roads that further increases the money needed to arrive at the area where the loan banks are situated. Mylenko (n.d.) also stated that one of the constraints is land tenure, since it limits the investment that small and medium farmers can get. Another is failure to extend services in rural areas to provide farmers with new tools, information, and help them adapt to new climate-smart production systems. Though as the years went by, many developments have been made to address these problems. Integrated Rural Financing (IRF) was implemented through the support of the Land Bank of the Philippines (LBP), Department of Agriculture (DA), and Agricultural Credit and Policy Council (ACPC), which financing is provided by rural banks and cooperatives to enhance the production income. Another development made was the Agriculture and Fisheries Modernization Act (AFMA) or Republic Act 8435, which invests on rural infrastructures, irrigation systems, and the reform of government’s agricultural credit programs. In terms of Agricultural Financing, LBP provides formal credit to small farmers and fishers through the Agricultural and Fisheries Financing Program (AFFP). It offer financial services like loans to support the economic activities of the small scale farmers and fishers. It is eligible in the processing, production and trading of top commodities. Limited to palay and corn is the Sikat Saka Program (SSP), which aims to help farmers access credit to improve their production by providing irrigation systems, extensions, etc. The DA have more agricultural credit and financing programs accessible to small and medium farmers. Financing is more than what you can do with what you have, it is about how the money of others can go to yours and back to them again. Rural and agricultural financing helps the country in developing its products and improving the lives of the small farmers.