Zowasel, a sustainable commodity marketplace dedicated to developing the country’s supply chain, people, and the planet has partnered with VBank, a leading digital bank in Nigeria to provide agribusinesses access to working capital financing in a bid to boost trade.
Although agriculture contributes a third of Nigeria’s economic output, it attracts less than five percent of traditional bank loans. Banks generally see farming as a high-risk venture.
Agribusinesses are often underserved by traditional banks because crops are not acceptable as adequate collateral. Banks normally do not accept future harvests or even readily harvested crops as collateral, and farmers rarely have other hard assets to provide as collateral to back their loan applications.
To change this narrative, Zowasel has partnered with VBank to support farmers struggling to get adequate working capital.
The partnership aims to provide access to instant and affordable credit for agribusinesses and provides huge opportunities for a value-added relationship through referrals, due diligence, utilization of existing transactional records, and physical or behavioral characteristics to boost loan approvals and reduce the incidence of non-performing loans that exist today
“For farmers, the toughest row to hoe is securing a loan against their crops. However, farmers need working capital to take stuff out of the ground to grow their agribusinesses. Our partnership with VBank is to make cash flow just a click away for qualified customers,” said Jerry OCHE, Founder and CEO of Zowasel in a statement.
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“The marketplace problem is solving what a loan offers. The mechanics are only built around the platform taking actual ownership of the commodities that it finances”, he further stated.
He added that Zowasel is not a lender; and does not have a lending license.
In Nigeria and across Africa, commercial banks are not able to lend against crops and farmlands assets.
They can’t and haven’t been able to provide financing to the most valuable asset, which is the crop itself. The Zowasel platform simply enables crops to be a financeable asset to crop sellers who trade on its platform to be financed by the digital bank.
Typically, Zowasel makes payments to crop sellers after every successful commodity delivery to buyers on its marketplace platform.
The crop seller ships the commodity to buyers’ preferred locations and the buyer checks for both quality and quantity, then uses the Zowasel platform to transmit the fact that they’ve confirmed, received, and checked all parameters before payments are released to crop sellers.
Zowasel would be utilising its Crop Centres across the selected regions for profiling smallholder farmers and data collection, developing the credit scoring model, and verifying the accuracy of the model while providing agricultural loans to smallholder farmers through its local financial institution partners.
These processes slow down some crop sellers with little or no working capital to sell on the Zowasel platform, while others have huge potential to increase their capacity but lack access to the required trade financing to grow their agribusiness.
Zowasel and Vbank, powered by VFD Microfinance Bank, are seeking to explore these opportunities to support current and prospective crop sellers on the Zowasel Marketplace struggling with working capital to grow their agribusinesses.
VBank would provide access to working capital and trade financing to qualified current and prospective crop sellers on the Zowasel platform.
Crop sellers who meet the lending requirements of the digital bank are required to provide a signed crop seller agreement with Zowasel as part of the loan application for consideration.
Gbenga Omolokun, managing director of VBank said, “Zowasel’s offerings perfectly align with our drive for financial inclusion. Their service addresses a significant pain point in the agricultural value chains. It’s an interesting opportunity to provide an additional layer of agribusiness financing which traditional banks can’t provide”.
“VBank will undoubtedly provide access to working capital loans to qualified crop sellers on the Zowasel platform to foster economic development across Nigeria and eliminate disruptive barriers to trade financing.”
“We are looking forward to increasing access to crucial working capital needs and engaging deeply with our potential agribusiness through Zowasel. This partnership will open a new level of opportunities for the agribusinesses on the platform,” Gbenga added.
