Financing has been identified as a major challenge facing agricultural development in the country today, with many arguing that once farmers and other stakeholders in the sector have access to financing that the country can conveniently feed itself.
In this interview, the Head of Agricfinance at Diamond Bank Plc, Lois Sankey, talks on what the bank is doing on how to develop the Agricultural Sector through provision of finance and advisory services to Micro, Small, Medium and Large-Scale Agribusinesses.
Here is an excerpt from the interview:
On advice for start up in the agribusinesses space who require loans
We advise start-ups to find an area they are passionate about, have some knowledge or training on, have a registered business name/company. They must also have a simple well-articulated business plan supported with cash-flow projections in a simple format.
We advise them to approach the enterprise as a business not as a hobby, thus the items mentioned above need to be put in place. These do not need to be complicated; this is what our business seminars and the BET series offers SMEs including agribusinesses who do not have to be our customers to benefit.
On the bank’s package to support start-ups in agribusiness
We are participating in Micro, Small and Medium Scale Enterprises Development Fund (MSMEDF) and the newly introduced AGSMEIS which supports both existing and start-up agribusinesses and other SMEs.
We are supporting start-ups including agribusinesses under our BET platform. In 2018, agribusiness was one of the winners of the cash price while, this year an Agritech start-up (Beat Drone) was one of the winners at our TechFest event and, we will continue to support more relevant players at start up level across the sector.
On other form of support the bank provides to the agric sector outside BET
We provide significant advisory services at no fees to existing clients and non-clients in the course of our engagements with all our agribusinesses who are seeking financial support irrespective of their relationship status with the bank.
Our advisory services are one-on-one and based on the underlying business and proposal presented. Largely, it is focused on business structure, technical competence, market and marketing plans and product quality requirement, among others. We provide a feedback and suggestion on proper financial records, operations, personnel and management as well as available sources of funding and requirements for accessing such funding.
On the involvement of the bank in CBN intervention funds
We have been involved in all the intervention funds, but we have a lot of room to do more and we are working in partnership with tractor service providers, non-governmental facilitating agency and the CBN to increase the availability of fee for servicing agricultural equipment for land preparation, planting, harvesting and processing. This we hope to achieve significant mileage in 2019.
On partnership with Nigeria Incentive-Based Risk-Sharing System for Agricultural Lending, NIRSAL
We are in active collaboration with NIRSAL under the Anchor Borrower Program(ABP) window across six value chains in the north, south and west regions in specific states. The value chains include cassava, rice, sorghum, millet etc.
In addition, we are in active engagements with NIRSAL on the tractor refurbishing project as well. We would also be working with NIRSAL and Macedonia ginger producer group in Kaduna state in 2019 for end-to-end upgrade of the value chain for export of high quality dried split ginger.
On what the bank is doing for women in agriculture
The bank has a woman proposition for all SMEs, including agriculture where they can get our funds at two per cent less than non-women owned enterprises.
Collaterisation for most of the funds is required because we have to provide some collaterals also for the intervention funds available either through treasury bills deposit or direct debit or both. We recently launched a cash-based lending product which provides a certain limit of lending amounts without any collateral but simply based on the business verifiable cash flow. We have lent over N2 billion under this pilot and will scale organically through 2019.
on what the bank disbursed to agribusinesses in the past 5 years
Well, over 30 billion, out of which only 20 per cent is intervention funds. This is a significant growth, compared with the N3.5 billion total lending to the sector in 2011.
On changing perspective of agriculture as high-risk sector
If the above mentioned structural, technical, capacity, environmental and policy issues are better improved, technology and mechanisation can be improved through financing by banks especially if the government policies are tweaked to suit achievement of the mentioned requirements banks are eager to expand their portfolios profitably
Farmers have started benefiting from crowd funding schemes which appears to be successful, what message is that sending to the banks and what lessons can be garnered from this?
Recently the sector has witnessed natural disasters, attack on farmers/destruction of farmlands. How do banks structure their support for farmers putting all these into consideration?
All agric loans must be insured to provide a cushion for both lenders and borrowers in the unfortunate event of a flood or similar disasters that negatively impact yield. There is need have more insurance company’s providing this service at affordable rates and be efficient in processing claims to engender adoption and confidence.
NIRSAL has brokered the provision of Yield index based insurance where payout is triggered not by the occurrence of an actual disaster but by the failure to achieve projected minimum yield for a particular value chain in a particular location.
On processes/infrastructures that should be put in place to enhance agriculture growth
There must be partnerships with actors in the key value chains; value chain financing approach and triangulation of deals involving all actors in the cash to cash cycle.
In addition, there is need for access roads to the farming communities to enable easy access to the sources of food production baskets; irrigation facilities for small holder level use at affordable rates and provide training on utilisation of same; the use of mechanisation equipment for land preparation, planting, harvesting and processing of produce in clusters of food baskets.