NIRSAL reveals why banks don’t lend to farmers

The Managing Director and Chief Executive Officer of Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), Aliyu Abdulhameed, said in spite of agricultural loan opportunities, lack of structure along the value chain is a major challenge.

He disclosed this at the 2019 Agriculture Summit Africa, a two day summit organised by Sterling Bank in collaboration with the World Bank and other stakeholders.

The summit, with the theme, “Agriculture: Your Piece of the Trillion-Dollar Economy” has over 2000 participants, with representatives from the US, Europe, Asia and several other African countries.

Abdulhameed said there was no proper structure along the various value chains, from the smallholder farmers to the market that would give financiers the confidence that their money would not be at risk.

He said until smallholder farmers come together to form cooperatives that would on their behalf approach the banks for facilities, it would be difficult for them to do so individually.

Abdulhameed, who spoke on enabling the agricultural value chain, said banks are not a charity and as such would always check risks before obliging to release funds.

According to him, structuring the various value chains across the different aspect of agriculture including pre-stream, mainstream, midstream and downstream in a manner that banks will be assured that loan repayment will not be a problem is the way to go.

“Financiers are not charity because they have to check risks.

“There is competing demand for their dollar and for us to achieve this we must tell ourselves the truth.

“We must agree that a smallholder farmer trying to get N150,000 loan cannot get, therefore at the small level holder there must be structuring.

“So, if 100 farmers who want to get N150,000 loan each, for instance, come together to request for loan in bulk it makes more sense.

“Then, there must be a direction in terms of product. For instance, these farmers should be into single commodity, they should also be in a location with a defined off-taker and an aggregator that will aggregate their land for a single commodity.

“Our land-use system is such that people do not have access to large landmass like Brazil but we have to do something and then leverage technology to help the farmers,” he said.

He further noted that “It does not stop there, banks will not finance even if you aggregate. So, what next?

“Even if after observing all of these and you get abundant yield, if you do not tackle post-harvest loss you will not get the loan. Also, if the market is not organised even if the yield is much it will not achieve result.

“Talking of market, we have different kinds of market including consumer market. But they are not structured and banks would not risk their funds if they are not sure that all of these would translate to farmers being able to repay their loans.

“If we are able to achieve this then the loan will be accessible,” he said.

Abdulhameed, however, gave the assurance that it was achievable, adding that NIRSAL was created to handle such concerns and it was already doing so.

He pointed out that ” all the tools needed for doing that is within NIRSAL. It is 100 per cent CBN and we provide up to 75 per cent guarantee to banks to give out loans to farmers.

“NIRSAL is established to provide the necessary support and we are ready to support borrowers to do that,” he said.