Financing Agricultural Production and Rural Enterprises

Supporting smallholder farmers and small and medium enterprises in rural Philippines by providing client-centered and customized financing and linking them into sustainable and fair value chains

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Agronomika Finance Corporation

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Social causes

Beneficiaries

SDGs covered

Endorsed by

LGT Venture Philanthropy

LGT Impact Ventures is a global impact investor focusing on private equity investments in developing and emerging countries.

Market of Implementation

  • Philippines

Problem

The agricultural sector plays a strategic role in the economic development of most countries. In the Philippines, the agricultural sector is the 3rd biggest contributor to the GDP with 9% while in Mindanao (the most southern region) agriculture even contributes 60% to the national economic growth. 60% of the agricultural land belongs to estimated 5-7m smallholder farmers, but they only contribute a minimum to the production due to dysfunctional value chains, no access to technology, knowhow, markets and finance. Philippines is further structured by a gap to access to finance with only 20% of the adult population having accounts with financial institutions and only 22% having outstanding loans. In rural especially agricultural areas these numbers are even lower and only 1% of the total national loan portfolio flows to smallholder farmers – leaving the country with a financing gap of USD 10bn in the agricultural sector.

Solution

For agricultural dominated economies to grow, an inclusive approach which integrates smallholder farmers into effective and transparent value chains is required. Farmers need short and long term agricultural production loans to start and maintain their farms and such financial products need to be adjusted to the realities and conditions of the farmers. Along the value chain, micro, small and medium enterprises play an important role in providing consolidation, processing, logistics and other services for which customized financial services are required as well. Agronomika’s approach is to integrate financial products and services directly into the agri and rural value chains by working with strategic agri partners who provide support through technology, extension services, aggregation and off-take markets. Through this, farmers and enterprises get access to long-term opportunities to increase their incomes and become more resilient and can contribute to an inclusive economic growth.

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