Organized private sector approach to make funding agriculture easier

Aggregation of players in different spheres of the agricultural value chain has been described as the most efficient way of getting the commitment of financial service providers, particularly banks. It makes verification, and invariably trust, easier to achieve when agribusinesses seek financing.

Even as discourse on financing agriculture continues to gain traction, a fragmented approach by different players in the agriculture value chain, will make it difficult for financial institutions to commit funds required to spur agricultural productivity, experts say.

Tunji Falade, chairman, Agriculture and Agro-allied group, LCCI, noted at the group’s symposium on ‘Bridging the funding gap and de-risking agricultural finance’, that working collectively as an organized private sector makes it easier to put strong proposals forward to financial institutions.

As Falade noted, dealing with individuals is perceived to be more risky by banks, who are unsure the funds disbursed will either be utilized for purposes claimed, or even repaid as and at when due.

Falade also advised that those who wish to apply for loans from the Central Bank of Nigeria obtain an enterprise development certification. According to him, this shows that an intending borrower has been adequately guided on the rudiments of managing a proper agricultural business, and not just planning to run the venture as a hobby; an attribute which would make agriculture subsistent, and less of a business venture.

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Generally, speakers at the symposium advocated a change of perceptions in how individuals approach agriculture, assuring the audience that, by doing away with the old ways, agricultural financing will become easier to achieve.

Olanrewaju Olawale, head, Commercial Agribusiness, Union Bank, noted that even when banks are willing to lend to agriculture, the inability of many farmers to show records to convince the bank, either of existing operations, or ability to execute the proposed project, often discourages lending. Without showing the bank their books, farmers are unable to convince them that they are able to utilize the funds being requested, and repay. Like other speakers, he noted that, the need for fast and complete implementation of a de-risking mechanism in the sector, will spur disbursement of more funds.

“Investments in agriculture, unlike many other business ventures, are exposed to a wide range of risks and uncertainties. There are risks associated with input and prices, agricultural yield, post-harvest losses, product prices fluctuation, and vagaries of nature such as inclement weather conditions; flood, drought, fire, outbreak of pests and diseases,” noted Folashade Joseph, MD, Nigerian Agricultural Insurance Corporation (NAIC), in an addressed presented on her behalf by Dayo Mobayo, NAIC’s head of its Lagos office.

Joseph emphasised that the application of insurance to agriculture could provide risk management, income stabilization and reduction of economic wastage. This will to some extent address challenges of risk, which financial institutions cite when they develop cold feet in lending to the sector.

Antti Ritvonen, CEO, Dizengoff; Tunji Falade, chairman, LCCI Agric. & Agro- Allied group; Babatunde Ruwase, LCCI president, Major General MS Yusuff, representative, Chief of Army Staff (COAS), Babatunde Obrimah, Senior Manager CPDS (NIRSAL), Lanre Olawale, head of Agribusiness, Union Bank.