By Peter Egwuatu
The sustainable banking initiative in the financial sector has received a boost from First City Monument Bank, FCMB Limited with a $ 70 million (N14 billion) facility created for agric sector in collaboration with International Finance Corporation, IFC. The package, made up of a long term loan of $50 million and a convertible loan of $20 million, was targeted at supporting the bank’s growth strategy and helping it increase financing of small and medium enterprises in the sector.
Mr. Ladi Balogun, Group Managing Director/Chief Executive, FCMB, who had viewed IFC’s investment as a stamp-of-approval on the bank’s strategy and commitment to good corporate governance and risk management, said “this partnership with IFC would help First City Monument Bank achieve its strategic growth objectives.”
FCMB’s Divisional Head, Agricultural Business Finance, First City Monument Bank (FCMB), while elaborating the bank’s interest in agric financing “that since agriculture has the potential to stimulate economic growth it follows that agricultural financing becomes an important instrument of economic policy for Nigeria, in her effort to stimulate development in all directions.
He further noted that agriculture is the biggest employer in Nigeria and other developing economies even as it has been demonstrated that economies that are self-sustaining in agriculture have relatively lower inflation rates.
Gumunyu said that FCMB intends to partner with players in the agric space with a view to taking advantage of the many opportunities it presents and ultimately contribute positively towards economic growth, employment creation, import substitution and economic sustainability.
With regards to the fears by farmers that the turn-around time and conditions attached to some credit facilities could be prohibitive, he allayed their fears, saying that the experience with the FCMB facility will be different. In his words: “Farmers have a point in complaining about slow approval processes as their businesses are season bound and need reasonable time to access finance.
Most complaints stem from some Nigerian banks not understanding the farmer’s businesses. Fortunately they will not experience this at FCMB as we have a team of experienced and qualified Agric bankers who do not only have a holistic knowledge about agriculture, but its associated businesses, especially the fact that they are time and season bound”.
Gumunyu added “We are committed to providing feedback to clients on the status of their requests within competitive timelines provided we are in possession of all the requisite information which can enable us make decision. However, farmers have to realize that they also can help by providing the requisite information and that not all credit can be approved as the bank has to be satisfied with the risk and return of such transactions”.
FCMB, he said, has put in place systems and processes to improve its credit turnaround time, including the recruitment of Agric Credit Analysts who are dedicated to working on agric transactions and a Structured Trade and Commodity Finance team which assists in several structured commodity finance deals that ensured prompt service delivery to customers. ‘’Every loan request is treated on a case by case basis. Requests for intervention funds from the CBN are dealt with using the attendant guidelines governing such scheme, Gumunyu explained.
FCMB’s agric financing portfolio was 0.8 per cent of the bank’s total assets in January 2012 but it has grown to 6.64 per cent by 31 July 2015. The bank’s interventions cut across various enterprises and activities in the agric value chain. These include poultry, fisheries, oil palm production and processing, cassava, maize production and commodities trading, among others. The bank is also active in other value chain sections such as agrochemicals, fertilisers, seed and mechanization, and has been deploying unique solutions for inclusive banking as well as asset financing.
FCMB’s sustainability principle in agriculture and empowerment of farmers will go a long way to reducing the level of poverty in Nigeria as the bank continues to play its financial intermediation role for national development. This can be buttressed by the fact that the bank’s intervention has resulted in better access to financial resources by needy individuals, organisations and companies. It has also led to improved processes, better output and profitability. Much more, it has enhanced confidence in the ability of the financial services sector to drive economic growth.
From available statistics, 150 million Nigerians live on less than $1 per day, and the bulk of this poor population, ironically, are the small-scale farmers who do not have access to finance in addition to other associated challenges, that are saddled with cultivating the nation’s vast land for food production.
The former Governor of the Central Bank of Nigeria (CBN), Mallam Lamido Sanusi, had alluded to this while speaking on the nation’s agricultural sector, but stressed that of all challenges, key is the lack of access to finance and the resultant inability to invest in basic farming inputs such as seedlings, fertilizers, implements and irrigation. He said these had led to a situation where yields have remained largely stagnant, leading to pervasive hunger and poverty.
According to him, the nation’s banking sector reform has direct bearing on the development of the real sector as it seeks to position the system to contribute to the growth and development of the various sectors of the economy.
Sanusi further put the annual demand for agribusiness financing over the next 40 years to about $6.5 billion per annum, compared to the current annual fund supply of $1.5-$5 billion. “This presents a huge financing gap which a forum such as this should be able to critically examine and develop policies and implementation frameworks to minimize the gap in the interest of agricultural development in the region” he added.