The Head of Agricfinance at Diamond Bank Plc, Lois Sankey, in this interview speaks about efforts by the bank to support start-ups in the agriculture value chain. Oluchi Chibuzor provides the excerpts:
What is Diamond Bank doing to support startups 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 startup agribusinesses and other SMEs. We are supporting startups including agribusinesses under our BET platform. In 2018, agribusiness was one of the winners of the cash price while, this year an Agritech startup (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.
Apart from the BET program, is there any other form of support that Diamond bank provides to the agric sector?
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.
What advice do you give startup in the agribusinesses space who require loans?
We advise startups 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.
How active is the bank in availing the CBN intervention funds such as the Commercial Agriculture Credit Scheme (CACS), the MSMEDF, etc.?
We have been involved in the 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.
Do you have any form of partnership with NIRSAL and how many farmers have this relationship impacted on?
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.
What about partnership with private organisations for capacity building and training on good agricultural practices?
SMEDAN has a mandate to provide capacity building initiatives for SMEs. Farmers need to organise themselves as a business individually and as groups to facilitate access to such services. There are trained private business service providers (BAS providers) that USAID have empowered to help startups. Aggregators of farmers provide training on good agricultural practices to farmers and we are in collaboration with Farmers online and MTN to provide financial inclusion services to farmers across 10 states under the Diamond Yellow platform, through this platform we also plan to provide basic market information to farmers on specific things like insurance, weather information, input information, etc. What we have seen however is a reluctance by small businesses to engage these service providers and an intervention is required in this aspect to make the services known, accessible and affordable
Does the bank have any special consideration for women in agriculture, in terms of pricing, tenure and collateral requirements?
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.
How much has 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.
What processes/infrastructures should be put in place to enhance growth in the sector?
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. Furthermore, there is need to make provision of more farm gate storage and handling facilities suitable to the focused Vc i.e conditioning centers for perishables like tomatoes, yams , vegetables etc; farmers must adopt improved technology such as drones to map, plant, apply fertiliser and pesticides and general improvement in the adoption of precision farming and the adoption of the use of improved varieties by farmers and good agricultural practices eg adoption of aflasafe to control and minimize aflatoxin infestation in our produce which is a carcinogen that affects acceptability of some of our produce for export. Also, the adoption of out grower schemes by the larger farmers to expand hectarage without necessarily owning the land is very important
What do you think can make banks to stop seeing the agriculture sector 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 benefitting 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?
It is a good development as the agribusiness are having more and more financing windows opened to them.
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.