ACCESS TO FINANCE IN RUAL COMMUNITIES Diamond Bank · 2019-12-20 · How to improve access to...
Transcript of ACCESS TO FINANCE IN RUAL COMMUNITIES Diamond Bank · 2019-12-20 · How to improve access to...
IMPROVING ACCESS TOIMPROVING ACCESS TO FINANCE IN RURAL COMMUNITIES
ByVictor EzenwokoVictor EzenwokoExecutive Director, Diamond Bank Plc.
INTRODUCTION:INTRODUCTION:
Nigeria with a population of about 170 million people (40 45% f hi h i th d ti th )(40-45% of which are in the productive ages – youths)
Agriculture contributes about 43% of GDP and about 72% employment in Nigeria72% employment in Nigeria
Cocoa Producing States:Abia Akwa Ibom Cross River Delta Edo Ekiti KwaraAbia, Akwa Ibom, Cross River, Delta, Edo, Ekiti, Kwara, Kogi, Ogun, Ondo, Osun and Oyo
Characteristics of Rural Communities in NigeriaCharacteristics of Rural Communities in Nigeria
Often remote and difficult to reach Often remote and difficult to reach
Infrastructurally deficient (transportation, communication, electricity, water etc)water etc)
Low income level
Ageing population (young and productive age lost to rural – urban drift)
Characteristics of Rural Communities in Nigeria Cont’d
Prevalence of informal business and economic activities
Prevalence of smallholder, subsistence farming businesses
Prevalence of informal credit facility arrangements (money-lenders etc)
Dearth of formal microfinance institutions and commercial banks.
Challenges of Providing Finance to Rural Communities in Nigeria
O ti l t f idi ff d bl dit f ilit i Operational cost of providing affordable credit facility in an infrastructurally and economically challenged rural sector in Nigeria
High cost of funds to provide rural credit especially as the credits are uncollateralized
Challenges of verifying cash-flow records, credit history or financial capacity of rural businesses for banks to evaluate and mitigate lending risks
Challenges of Providing Finance to Rural Communities in Nigeria Cont’d Nil or negligible cost/benefit appeal to fund fragmented, small-holder
and widely dispersed farming businesses instead of other formaland widely dispersed farming businesses instead of other formal, well organized and more profitable businesses.
Hi h l l f d f lt l t b i l dit High level of default on loan repayment by previous rural credit beneficiaries as a result of diversion or loss of farm produce
Lack of tangible and technically realizable collateral for agricultural and rural credit.
Lack of storage facilities for farm products
How to improve access to Finance for Rural Communities
H l ti hi / ki t ith l i fi Have relationship/working agreements with rural microfinance institutions, in areas where your bank does not have an outlet
Leverage on Farmers Co-operatives and Associations to take advantage of economies of scale and therefore enhance the cost/benefit appeal of funding rural businesses, instead individual
llh ldsmallholders
Develop credit scoring system for Rural Farming/Agro Industrial co-operatives in collaboration with other interest groups to prequalify agricultural loan beneficiaries
How to improve access to Finance for Rural Communities Cont’dCommunities Cont d Develop a supply-chain financing approach. Link credit facilities
with contract farming or off-taker agreements. Bank pays directly to i li d ff k d i il f d li dinput supplier and off-taker domiciles payment for produce supplied by farmer with the bank
Collateral issue can be further addressed via institutional support framework like an effective warehouse receipt financing system, commodity exchanges and agricultural credit guarantees(ACG )(ACGs)
Government support with non-market distorting subsidy of Agriculture, through agricultural credit interest rebates and Growth Enhancement Schemes
How to improve access to Finance for Rural Communities Cont’d
M bil b ki i iti ti th t b i b ki t t i Mobile banking initiative that brings banking to certain areas on certain market days
Central Bank initiative towards the introduction of banking agents targeted at the rural unbanked
Funding of storage facilities/warehouses to facilitate use of warehouse receipts (this requires legislative backing)
How to improve access to Finance for Rural Communities Cont’d
Organising and running of bank sponsored enlightenment campaigns in local languages – use of fertilizers, pesticides, benefits f iof insurance
Partner with cocoa producing states to enhance the efficiency of farmer field schools
Diamond Bank’s Intervention Provide financing for agrochemicals and fertilizer to farmers signed on to an Provide financing for agrochemicals and fertilizer to farmers signed-on to an
off-taker agreement. Pilot scheme to start with Saro/ADM.
Loans to be advanced to Farmers’ associations for on lending to members for Loans to be advanced to Farmers associations for on-lending to members for the purchase of agrochemicals and fertilizers.
A Cocoa Value Chain Finance Product based on the CBN ACGS guarantee A Cocoa Value Chain Finance Product based on the CBN-ACGS guarantee has been structured but awaiting further inputs from our partners (IFC/ADM/Saro).
Discussing ongoing with Ondo State Ministry of Agriculture and Top Wedges Ltd to fund set up of a Chocolate Processing Facility with Ondo state government and Top Wedges ltdgovernment and Top Wedges ltd
Diamond Bank’s Intervention- continuedDiamond Bank s Intervention- continued
• To commence a 2-year Technical Assistance Program with IFC , on AgriFinance Development ; 6 value chains in view (Cocoa RiceAgriFinance Development ; 6 value chains in view (Cocoa, Rice, Poultry, Sorghum, Corn and soya)
• A budget of N3bn in 2012 ear marked for Cocoa Farm Input Financing• A budget of N3bn in 2012 ear marked for Cocoa Farm Input Financing under the IFC/WCF led partner bank deal
• Thank You• Thank You
ACCESS TO FINANCE AND SERVICES IN RURAL COMMUNITIESIN RURAL COMMUNITIES
L’A(R)GENTL A(R)GENT PROVOCATEURPROVOCATEUR
CA$H I$ NOT AN I$$UE$ $ $$
BANKABILITY SMALLHOLDERSBANKABILITY SMALLHOLDERS
• Assets / Collateral• Assets / Collateral• Land tenure / title• (Informal) savings • Specialist bankersSpecialist bankers• Ag risk assessmentD t li t• Data on applicants
• Women
MICRO CREDIT SCHEMESMICRO CREDIT SCHEMES
• Nano‐financeNano finance • Loan & Saving combined• Productive investments• Productive investments• Small like‐minded groups W f• Women focus
• Clear repayment scheme• Peer group pressure • Trained loan officers
A FISTFUL COCOA POINTSA FISTFUL COCOA POINTS • Cash flow plan • Crop / weatherCash flow plan• Data applicants• Land title
Crop / weather insurance
• (Micro)‐leasing• Land title• Save in liquidity
( f l)
(Micro) leasing • Trained loan officers• Trained Ag bankers• Save in (informal)
groups• Trained Ag bankers• More womenE• Saving accounts
• Smart phone tech• Even more women
05°21,727N, 03°26,388W05 21,727N, 03 26,388W
UNE POIGNÉE DE FÈVES DE CACAO
THANK YOU La création des réserves nécessairesWCF Partnership Meeting – Washington 2012
THANK YOU
WHY Should the Cocoa Sector Improve Access to Finance and
Services in Rural Communities?
Jonas Mva MvaIDH Program Manager Cocoa
WCF Partnership Meeting, June 12, 2012
Increasing gap between demand and supplysupply
6000
4000
5000
0s)
N d d S l
+2.5% / yr1.3M MT Demand Growth
3500
48252000
3000
Cocoa (000 Needed Supply
Demand
3500
0
1000MT C
2007 2020 2020
Source: Industry data & FSG
Characteristics of the production unit in West Africa
Future of cocoa farming is
at risk & Cocoa farming not g
yet a business
Challenges = Triple
production of cocoaproduction of cocoa
farmers and leave land
available for food crop
Immediate solution (2012 – 2016)
Cocoa tree of the futureCocoa tree of the future
2020 Target = Increasing productivity
1070 kg/ha
1521 kg/haNew Productivity:
1521 Kg/Ha
Plant material
Fertilizer585 kg/ha
1521 Kg/Ha
Knowledge/Pest control
Plant material450 kg/ha
Current
Improve land use efficiency by higher productivity inImprove land use efficiency, by higher productivity in West Africa
Current farming system Knowledge
More intensive farming system
system
3,5 million tons
KnowledgeFertilizerPest controlPlant material
4,5 to 5 million tons
6 million hectares
3-4 million hectares
The Cocoa Fertilizer InitiativeFertilizer Initiative for Cote d’Ivoire
and Nigeria
U1
Slide 29
U1 remove the text there as wellimprove the IDH logo pleaseUser, 6/5/2012
Aggregate volume projections (MT)scenario of 100% growth per annum
250 000
200,000
250,000
150,000
rtilizer (M
T)
Nigeria
100,000
Volume of fe
r Nigeria
Cote d'Ivoire
50,000
V
02012 2013 2014 (+100%)2015 (+100%)
Market opportunityMarket opportunity
USD 600 million USD 200 millionUSD 600 million USD 200 million
JigawaKatsinaZamfara Yobe
Sokoto
Adamwara
Borno
Kaduna
KanoKebbi
K
Niger
Gombe
PlateauPlateau
Bauchi
Edo
Fct
Kogi
Kwara
LagosOgun Ondo
Osun
Oyo
Taraba
Plateau
Enugu
Nassarawa
Benue
AnambraEbonyi
Ekiti
Cross RiverDelta
RiversBayelsa
Imo
Akwalbom
AnambraAbia
Three delivery models3 Cash-and-carryThree delivery models 1.Farm finance 2.Fertilizers-for-beans 3.Cash and carry
33
2
1
Improving Access to Finance and Services in Rural Communities = Shared Value Opportunity
•sustainable economic growth
Cocoa producing countries•sustainable economic growth, •price stability,• full employment,•external balance.
•Secure long term supply•Fertilizer business opportunity
•Community welfare•Profitability•Food security
•Environmental preservationReducing crop pressure
U2
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U2 I would remove the text and include it only on your speechUser, 6/5/2012
THANK YOU IDH cocoa teamMatthieu Guémas, Program Director Jonas Mva Mva, Program Manager Cocoa
Lucian Peppelenbos, Senior Manager Learning & Innovation Diana Kos, Junior Program Manager Cocoa
Sustainability: Sustainability: Improving Access to Improving Access to FinanceFinancep gp g
in Rural Communitiesin Rural Communities
June 14th 2012
Juan Fernando Valenzuela ArangoCocoa Development and Purchasing Director
Ricardo Mejía AristizábalCocoa Development Specialist
Outline
1. Grupo Nutresa and the Dow Jones Sustainability Index2. Finance in rural communities: current situation3 Equity Fund: “Cacao para el Futuro”3. Equity Fund: Cacao para el Futuro
• Why an equity fund?• How does it work?• Participantsp• Commitments• Strengths• Difficulties• Progress• Challenges• Opportunities
4 Q&A4. Q&A
Compañía Nacional de Chocolates and the Compañía Nacional de Chocolates and the C D l tC D l tCocoa DevelopmentCocoa Development• The Cocoa Development Area was founded in 1958• Some achievements:
– Sexual incompatibility study of the most important clones used in Colombia
– Good Agricultural Practices• Standard• Farmers training
“ l ” llh l l f– “Parcelas demostrativas”: smallholder experimental farms– Monilia campaign– Technology transfer to farmers: 534 farmers trained in 2011– Experimental farm: 250 ha farm in Santander – New varieties development– Cocoa projects with smallholders: 12.000 ha, 6.000 families
Finance in rural communities: current situationFinance in rural communities: current situation
• Government cocoa projectsp j– Low interest rates– Investment subsidies– Alliances: World Bank → Department of Agriculture →
Smallholder Association↔ IndustrySmallholder Association ↔ Industry
• Limited access to the financial system due to the lack of collaterals
• The financial support is limited in time (only for planting)
Equity Fund: “Cacao para el Futuro”Equity Fund: “Cacao para el Futuro”
Wh it f d t ?• Why an equity fund to grow cocoa?• Colombian cocoa supply deficit
• Colombian “Fine and Aroma” cocoa
• 1 000 000 hectares available to grow cocoa• 1.000.000 hectares available to grow cocoa
• Smallholders with available land and labor
• Private Investors looking for investment options with social impact
• Tax benefits
Equity Fund: “Cacao para el Futuro”Equity Fund: “Cacao para el Futuro”
How does it work?
Technical support C t l
Project Supervisor
Technical support Control
$
Cocoa %
Equity FundInvestors
2.75 x $
+ Technical assistance+ Inputs
+ Crop mgmt.+ Production‐IRR: 14.5 %
10 years
Equity FundInvestors
Portfolio manager:
p+ labor $+ Land rent
%
10 years
Smallholders
‐ Crop for 15+ years
Equity Fund: “Cacao para el Futuro”Equity Fund: “Cacao para el Futuro”
• Project key facts:j y• Total area: 1.700 ha• Productivity: 1.500 kg ha‐1 year‐1
• Total production: 2.550 MT year‐1 (after the 8thyear)
• About 170 families• About 170 families• 200.000 jornales (day of labor) per year during the productive stage.
• Employment: 850 direct425 indirect
Equity Fund: “Cacao para el Futuro”Equity Fund: “Cacao para el Futuro”
• Strengths• No need of mortgages• Financial and Technical support during the planting
and development of the cropand development of the crop• Difficulties
• Poor infrastructure• Land tenure
• Progress• Fund: USD 10 MM• 750 ha
Equity Fund: “Cacao para el Futuro”Equity Fund: “Cacao para el Futuro”
• ChallengesChallenges• To plant 1.700 ha promptly• To obtain the expected productivity• To obtain the expected productivity• Smallholder empowerment
O t iti• Opportunities• To keep growing• To extend to different crops
Q&AQ&A