How value chain, ICT improve agric financing

Increased use of new technologies and value-chain approaches in financing agribusinesses will enable Africa, including Nigeria, play a crucial role in feeding the expected 9 billion people in the world by 2030.

This has become very clear from the recently concluded global forum on “Revolutionising Finance for Agricultural Value Chains in Africa’’ held at the Kenya School of Monetary Studies in Nairobi, Kenya, from July 14 to 18, this year. Information and Communication Technology (ICT) and value-chain approaches would no doubt be needed by banks in Nigeria to give the expected N600 billion in 2014, and N800 billion in 2015, to finance agribusinesses in the country.

Akinwunmi Adesina, Nigeria’s  minister of agriculture and rural development, stated at the forum that Nigeria’s bank lending to the agric sector was expected to reach 7.5 percent in 2014, and 10 percent by 2015. With  banks’ annual total lending portfolio standing at over N8 trillion, the agric sector is expected to get N600 billion this year and N800 billion in 2015.

At this agric financing forum tagged ‘Fin4Ag,’ which had representatives of Nigerian banks and financial institutions from many African nations in attendance, innovative financing driven by ICT tools and value-chain approaches were shown to be the only viable options for banks to realise their projected financing targets for the agric sector in their various countries. 

During the forum, Adesina said: “Financial sector players need to be more innovative and proactive. Banks and other private financing institutions have a responsibility to develop credit instruments and other innovative financing structures and services that are tailored to the specific risks and cash flow patterns in the various agricultural value-chains.”

Adesina drew an example of the use of the electronic wallets through which farmers pay subsidised amount of money to banks to get coupons to buy fertilisers and other inputs from accredited agro-dealers. Since the agro-dealers get their full pay from the payment of the subsidy by the government and what farmers pay, they have been very committed to helping farmers grow their businesses, even offering extension services.

Adesina said: “Because of the success of our efforts to couple risk sharing with fixing agricultural value chains, bank lending to seed companies and small agricultural input retailers rose from zero in 2011 to $10 million in 2012, and $53 million in 2013. Bank lending to fertiliser companies rose from $100 million in 2012 to $500 million in 2013.”

Nigeria is the first country in Africa, and in the world, to develop the electronic wallet system for reaching farmers with subsidised farm inputs on mobile phones, he said. “The impact is reaching well beyond Nigeria. Several African countries, as well as others in emerging markets like India, Brazil and China have expressed interest in adopting the electronic wallet system in their own countries. Nigeria, which used to have a terribly corrupt fertiliser system, is now exporting transparency,” he said.

Also, buttressing the need for ICT and value-chain approach, Michael Hailu, director, Technical Centre for Agricultural and Rural Cooperation (CTA), said “value-chain finance generally comes with improved access to inputs as well as a more secure market for crops.”  Hailu added that “for financial institutions, value chains addresses the frequent inability of farmers to repay loans.”

In a similar vein, Saleh Usman Gashua, secretary general of the African Rural and Agricultural Credit Association (AFRACA), stated that financial access to the agric sector had significantly improved in countries such as Kenya, mainly through the use of technologies, saying “I am convinced that the Fin4Ag conference will catalyse the establishment of appropriate rural and agricultural finance policies and provision of inclusive financial services across Africa.” Hailu stated at the closing ceremony that the conference had succeeded beyond the stakeholders’ expectations in creating an ideal forum for financiers, central bank governors, farmers, ICT entrepreneurs and others to come together and address the challenges of financing agriculture and find solutions that could work.

He said: “There is a great degree of optimism that all the actors working together can turn around Africa’s agricultural sector into a modern and profitable business that will create decent jobs for millions of young people and feed the continent’s growing population.”

Mamadou Biteye, managing director of the Rockefeller Foundation Africa regional office, said: “The conference timely mobilised key stakeholders in African agriculture and in the financial sector to create new linkages and better align their visions and to bring together those who implement innovative approaches to boost agricultural production, with those who can finance them. As we depart, it is with the unanimous agreement that finance for agriculture is a risk well worth taking for the well-being of African farmers, for the strength of their nations, and for the prosperity of the entire continent.”

Millison Nahr, chair of the African Rural and Agricultural Credit Association (AFRACA) and deputy governor of the Central Bank of Ghana, said: “We need to learn from countries which have been successful in resolving the bottlenecks to releasing funds to agricultural value chains,” he said, citing Tanzania’s success with Warehouse Receipt Systems and the Nigerian Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL), which Nigeria’s minister Akinwunmi Adesina described in detail to the audience during the opening ceremony.

Lamon Rutten, policies, markets and ICT programme manager at CTA, stated: “CTA wants to play a catalytic role in bridging the gap between agricultural and financial markets. We got the right people together in Nairobi. We saw them discussing what needs to be done to link farmers to financial markets, what the Governments and Central Banks have to do and what farmers have to do. At the end of the conference, we can say that we all accept everyone has to work together, that we all know what to do and that we all share the responsibility for moving ahead.”

The conference was formally closed by Felix Koskei, Kenya’s minister of agriculture, livestock and fisheries, saying “countries don’t reduce their dependence on agriculture by getting out of it, but by getting better at it.’’ And that would only happen if farmers had better access to affordable credit.

This conference, he believed, has helped to identify the bottlenecks to creating closer relationship between farmers and financiers that can bring about a paradigm shift in the way that finance can unleash the potential of agriculture around the world.

The nine winners of the Youth in Agriculture Blog Competition (YoBloCo Awards) were also announced  during the cocktail dinner organised at the end of the conference in which Nigeria’s Olawale Ojo carted one of the most prestigious awards.

 

OLUYINKA ALAWODE

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