The Bangko Sentral ng Pilipinas (BSP) held a virtual forum earlier this month to promote warehouse receipts financing as an innovation in providing much-needed loans for Filipino farmers and agriculture-based micro, small, and medium enterprises (MSMEs).
“Now, more than ever, we need to take a whole-of-society approach toward putting in place necessary and responsive elements that make lending to the agriculture sector viable,” said BSP Governor Felipe M. Medalla at a forum intended to generate support for the passage of legislation aimed at modernizing the Philippine warehouse receipts system last November 08.
The proposed updates to the century-old Warehouse Receipts Law of 1912 intends to address the development needs of the agriculture and micro, small and medium enterprise (MSME) sectors, particularly by expanding access to credit, by professionalizing the warehousing activity through the accreditation of warehouses and warehouse operators and establishment of an electronic warehouse receipts registry.
International experience suggests that a well-functioning warehouse receipts system can support collateralization of post-harvest produce owned by farmers, traders, and processors, and held in licensed warehouses.
Countries that have implemented such a program have seen reduced post-harvest losses, improved stability of market prices, increased food security, and a heightened level of formalization of businesses within the sector.
Attended by 200 participants from various financial institutions, the forum also served as an avenue to generate support for the passage of legislation modernizing the country’s warehouse receipts system.
The forum featured presentations on the elements of a dynamic warehouse receipts financing market and features of the proposed warehouse receipts bill from the International Finance Corporation and trade consulting firm, TradeAdvisors, respectively. Representatives from CARD Bank, LandBank of the Philippines, and Rizal Commercial Banking Corporation also provided their perspectives on the discussions.
The forum participants also expressed their support for the needed reforms to fully realize the potential of warehouse receipts financing for the benefit of the MSMEs and agriculture sectors.
While MSMEs and agriculture account for a large part of total employment in the country, they remain among the most vulnerable segments of the population. Households headed by farmers and fisherfolk ranked among the poorest and the least banked, with only three in 10 owning formal transaction accounts.
By bringing the Warehouse Receipts Law of 1912 up to the times, it can help promote wider acceptance of warehouse receipts as credible collateral for bank loans.
The Financial Inclusion Steering Committee, chaired by the BSP, endorsed in the last Congress the passage of the bill.
“But while we fully recognize that enabling laws are necessary, they are not sufficient to develop a thriving warehouse receipts financing market that ultimately benefits MSMEs and the agriculture sector. The concerted effort of all stakeholders is needed to make warehouse receipts finance work,” the Governor concluded.
