Inclusive business models boost farmers’ productivity

Inclusive businesses in the agribusiness sector are helping farmers increase their profitability and productivity so they can lead better lives beyond subsistence, a report by the United Nations Development Programme-Business Call to Action (UNDP-CtA) and the Philippine Business for Social Progress (PBSP) revealed.

The report furnished to media revealed that when agribusiness firms adopted inclusive business (IB) models and integrated farming communities in their supply chains, smallholder farmers improved their skills, improved the quality of their produce, and raised their incomes.

In the Philippines, agribusiness serves as source of income for 55 percent of Filipinos, but the communities who belong in this sector remain the Philippines’ most vulnerable.

Data from the Philippine Statistics Authority show that poverty incidence among farmers is at 34.3 percent, making them the country’s poorest sector.

On a global level, data from the International Labour Organization shows that agriculture continues to top the other sectors such as manufacturing, and wholesale and retail trade in terms of the global market share of jobs.

“Investing in agriculture is important for us in terms of food security and improving lives for a majority of working Filipinos,” said Trade Undersecretary and Board of Investments (BOI) Managing Head Ceferino Rodolfo. “If more agribusiness companies in the Philippines adopt IB models, we will be creating an inclusive economy that creates equitable opportunities and better livelihood sources for the most vulnerable communities in the Philippines.”

BUILDING ON FARMERS’ CAPACITY

In implementing their IB models, one of the first steps that agribusiness firms took is to build on the capacity of the smallholder farmers they engaged.

After building on the capacity of farmers, the agribusiness models that implemented their IB models improved their product quality and increased their profits.

The Philippines, which has been advocating for IB in the region, pioneered an effort to provide incentives to agribusiness companies that implement IB models.

Under the 2017-2019 Investment Priorities Plan, the BOI is granting a five-year tax holiday to medium and large agribusiness firms that integrate micro and small enterprises (MSEs) to their supply chain.

To avail these incentives, agribusiness enterprises should source at least 25 percent of the cost of goods sold from registered MSEs within three years of operation. They should engage at least 300 farmers, suppliers, or individual beneficiaries, 30 percent of which should be women. The beneficiaries should also have at least 20 percent increase in average income within three years.

According to Rodolfo, these tax breaks should help agribusiness firms with IB models increase the capacity of the MSMEs so they can later add more value to economic growth.

He noted that while large firms make up only one to two percent of the private sector, they add 64 percent to the country’s economic value.

“A closer look at the IB models in the country and the ASEAN show that empowering the small players deliver both social impact and generate sound investment returns. We hope more companies would apply for the tax incentives so we can finally build an agribusiness sector and an inclusive economy that creates opportunities for everyone in our country,” Rodolfo said.