"Agricultural Rental Machine for Livelihood Enhancement and Development" (ARMLED)
In ARMLED, we lend farm machinery at low interest rates to smallholder rice farmers in the province of Nueva Vizcaya, the Philippines. ARMLED is an attempt to establish a social business - it aims to become a sustainable rental business while enhancing productivity of the rice farmers as well as increasing the country's self-sufficiency in rice.
The Philippines is one of the world's top rice consumers, while its rice productivity and self-sufficiency are low due in part to delayed mechanization of agriculture. Furthermore, micro-scale rice farmers are considered high-risk by lenders, and they cannot acquire enough capital even if they wanted to increase their productivity.
Issues of the agriculture sector in the Philippines
The amount of rice production of the Philippines has been unable to catch up with its amount of rice consumption, which is twice as much as that of Japan. The amount of import has now reached 2 million tons per year. The productivity is at 3.8tons/ha, which is a figure lower than that of Vietnam or Indonesia at 4.9tons/ha. The main underlying reason seems to be the decline in the absolute number of farmers, especially the youngsters, who are necessary to help accelerate the mechanization progress.
The level of mechanization of agriculture can be measured as horse power (hp) by hector (ha), and for the Philippines it is 0.57hp/ha, while Thailand is at 1.0hp/ha and China at 4.0/ha. The Ministry of Agriculture of the Philippines promotes the mechanization by implementing several programs, but the progress for these project has been slow.
Even if the farmers attempted to increase productivity, they cannot access farm machinery as they are considered high-risk, low-return customers from the existing rental service providers. The same reason also keeps the farmers away from insurance coverage and other loan services. The farmers then become even poorer and labelled as even higher risk customers over time, entrenching them deeper into the poverty cycle.
Summary of Activities
In 2012, GLMi, with the cooperation of the Japan International Cooperation Foundation (JICF) and NOVOLED, a Filipino micro-finance agency, launched the Agricultural Rental Machine for Livelihood Enhancement and Development project (ARMLED) in the province of Nueva Vizcaya, the Philippines. ARMLED provides comprehensive support for farmers throughout the cultivation cycle from planting to harvesting. To continue providing the services sustainably even after the end of the project, ARMLED aims to become a sustainable social business model that contributes to self-sufficiency and poverty reduction of the Philippines.
Low-interest rental of farm machinery
Through ARMLED, we help farmers increase their productivity by renting tractors during the rice-planting season and threshing machines and movable rice polishers during the harvest season. As we send a certified farm machinery operator together with the machinery, we are able to maintain and repair the machines after renting them out to ensure high quality performance of the machinery at all times.
Low-interest loans for purchasing farming materials and paying farm laborers
ARMLED not only rents farm machinery, but also other necessary materials such as seeds and fertilizers. Furthermore, we also provide loans to hire seasonal workers, who are important labor force in rural Philippines nowadays since more and more people are moving out to urban areas.
Pay upon Harvest
Farmers who utilize ARMLED loan and rental services can make payment upon harvest with cash or rice. Through this Pay upon Harvest system, the farmers can rent machinery safely since they do not have to incur debt to make payment.
Agriculture is highly dependent on natural conditions, including weather, and thus farmers carry risks such as crop failures in times of bad weather. Regardless, the existing crop insurance does not cover smallholder farmers due to the small size of their farms. We have thus developed a crop insurance in which even micro-scale farmers can be covered as long as their farming area meets the criteria as a group.
Training and hiring farm machinery operators
Several machine operators are needed to run tractors and threshing machines. In ARMLED, we certify the operators who have received necessary training, buy them accident insurance and pay them more than other rental service providers to create jobs in the area. We aim to give training to more people since there sometimes are not enough operators during the peak season.