LOANS AND FINANCING PROSPECTS FOR FARMERS By Dr Farouk Kurawa Director, Agricultural Finance USAID MARKETS II

PRESENTATION OUTLINE Loan and agricultural loans Sources of commercial loans Funding from Central Bank Of Nigeria Bank of Industry Important tips for prospective borrower

Loans and agricultural loans A Loan is an arrangement in which a lender gives money or money worth to a borrower, and the borrower agrees to return the money/money worth usually along with interest at some agreed future points in time. Agricultural loans are made to farmers in order to finance farming activities. In Nigeria, the loans are usually about 1% of all bank loans due to perceived risk of the lenders and opportunity cost available.

Commercial sources Commercial banks – general credit for both small, medium and large. Interest rates are usually high and unaffordable to farmers and small processors Microfinance banks -usually micro loans at the rural areas for trading, farming and other agric related businesses. Interest rate is usually high too Microfinance institutions – usually small size loans with weekly repayments. Interest rate is equally very high. Bank of Agriculture (BoA) - MSMEs, agric , trading,etc. The bank offers Concessionary interest rate of between 8% & 14%. Bank of Industry (BoI) – Usually finance purchase of equipment for either startups or expansion. They offers concessionary interest rates usually a single digit. Federal Mortgage Bank (FMBN) – Offer facilities for housing. It’s a long term facility at affordable interest for for citizens to own their own houses.

Funding support from CBN ACGSF – agricultural credit guarantee scheme fund: this was to guarantee agricultural credit and encourage banks to lend to agricultural sector due to its perceived risk. Self-help group linkage; to support groups who are into farming and other agricultural related businesses Trust fund model; is a partnership between state governments and the banks to direct credit to the preferred sectors(agric, SMEs etc) Interest draw back scheme; provides opportunity for borrowers to get back part of the interest they paid to the bank. This is to encourage prompt repayment of credits.

Funding support from CBN (cont’d) Agricultural Credit Support Scheme (ACSS) – The purpose of the scheme was to enable farmers exploit the untapped potentials of Nigeria, reduce inflation, lower cost of agricultural production and generate surplus for exports. It is operated through state implementation committees. Interest rate is 8% and banks are expected to lend at 14% and those who repaid on time gets back 6% from the interest they paid to the lending institution.

Funding support from CBN (cont’d) Commercial Agricultural Credit Scheme (CACS): The CBN in collaboration with FMA & WR established the scheme in 2009 with N200 billion, to provide financing for agricultural value chain (production, processing, storage and marketing) to; fast track development, enhance national food security and reduce cost of credit and increase output.

Funding support from CBN (cont’d) Micro Small and Medium Enterprises Development Funds (MSME DF) Launched with a share capital of N220 billion in recognition of contributions of the MSMEs in the development of the economy 10% of the fund has been devoted to development objectives such as grants, capacity building and administration cost 90% will be released to participating institutions at 12% (now 6%) for on-lending to MSMEs at maximum interest rate of 9% per annum Objectives; enhance access to financial services by MSMEs, increase productivity and output, increase employment, create wealth and gender inclusion

Funding support from CBN (cont’d) Anchor Borrowers Scheme (ABS) Designed to create economic linkages between farmers and processors of selected crops, not only to ensure increased productivity of rice and wheat (initially), but also bridge the gaps between production and consumption by ramping up capacity utilization in integrated mills. N40 billion was set aside from the N220 billion MSMEDF for farmers access at single digit interest rate of 9% (all in) Small holder farmers can access between N150,000 and N250,000 for procurement of inputs for production

Bank Of Industry (BoI) Agricultural Mechanization Product The product was designed to provide for the mechanization needs of agriculture and other agro allied industry including SMEs. It has up N20 billion to be accessed by those service providers. It has up to N10 million for micro, above N10 million and not exceeding N50 million for small and above N50 million for medium. Interest rate is 9% Moratorium between 6-12 months depending on the type of loan and business

IMPORTANT TIPS Seek for information in line with your business or business idea Work towards meeting the set criteria to access the facilities Establish relationship with the lending institution Don’t give up Go for it!

Thank you…