A PAPER PRESENTATION ON FINANCIAL SERVICES TO PROMOTE MECHANIZATION BY BANK OF AGRICULTURE (BOA) May 4, 2016 1
OUTLINE OF PRESENTATION • INTRODUCTION • FINANCIAL SERVICES OF BOA • BOA/FEDERAL MINISTRY OF AGRICULTURE AND RURAL DEVT PATNERSHIP ON IMPLEMENTATION OF AGRICULTURAL TRANSFORMATION AGENDA PRIVATE SECTOR DRIVEN MECHANIZATION INTERVENTION PROGRAMME • MECHANIZATION INITIATIVE OF BOA • CHECKLIST OF REQUIREMENTS FOR ACCESSING AGRIBUSINESS FACILITIES FROM BOA • CONCLUSION May 4, 2016 2
INTRODUCTION Bank of Agriculture in Perspective Bank of Agriculture (BOA) Limited was incorporated as Nigerian Agricultural Bank (NAB) in 1972 and became operational in 1973. In 1978, the i�stitutio�’s name was changed to Nigerian Agricultural and Co- operative Bank (NACB) Limited to reflect a broader mandate. In October 2000, following the Federal Go�er��e�t’s efforts to streamline the operations of its agencies, the NACB, Peoples’ Bank of Nigeria (PBN) and the risk assets of the Family Economic Advancement Programme (FEAP) were merged to form Nigerian Agricultural, Co-operative & Rural Development Bank (NACRDB) Limited. Ten years later, in October 2010, the bank was rebranded and it adopted the new name Bank of Agriculture Limited as part of its institutional transformation programme. May 4, 2016 3
Key Mandates The Ba�k’s key �a�dates are: • Provision of agricultural credit to support all agricultural value chain activities. • Provision of non-agricultural micro credit. • Savings mobilization. • Capacity development through promotion of co- operatives, agricultural information systems, and the provision of technical support and extension services. • Provision of opportunities for self-employment in the rural areas, thereby reducing rural-urban migration. • Inculcation of banking habits at the grass-roots of the Nigerian society. May 4, 2016 4
Strengths • Nigeria’s largest de�elop�e�t fi�a��e i�stitutio� a�d leadi�g agri�ultural fi�a��e institution. • DFI with the highest rural operational coverage nationwide, with 110 outlets nationwide, 6 Zonal Offices and a Head Office. • Highest interaction/interface with rural farmers with deep institutional knowledge of rural and agricultural finance. • Over 40 years experience in rural and agricultural finance. • Strategic partnerships with USAID MARKETS, IFAD, World Bank, RUFIN and ECOWAS Funds, Federal Ministry of Agriculture & Rural Development, Federal Ministry of Women Affairs, State, Local Governments and other stakeholders in agriculture. May 4, 2016 5
FINANCIAL SERVICES The financial services of the bank are classified into credit delivery services and savings mobilization services. CREDIT DELIVERY SERVICES Direct Credit Products Micro – Credit Developed for financing both agricultural and non-agricultural activities with a maximum loan volume of N250,000.00 Small and medium scale Loans Developed to finance agricultural and agro-allied activities with loan volumes ranging from above N250,000 – maximum of N50 million. May 4, 2016 6
Financial services cont’d. Agribusiness Loans Developed to finance agricultural and agro-allied activities with loan volumes ranging from above N50 million – a maximum of N2 billion single obligor. Marketing loans for Agricultural Commodities In order to ensure prompt repayment of loans taken by the large scale crop farmers, the Bank introduced the commodity marketing loans. It cuts across the micro-credit, SME and Agribusiness loans. On-lending Credit Product This is a lending strategy through which the Bank partners with States, Local Governments, Agricultural Financing Agencies, NGOs, Community Based Organisation etc. to reach larger segment of Nigerians especially the under- privileged and rural poor with micro-credit for enterprise development May 4, 2016 7
Financial services cont’d. Collaboration This involves the establishment of formal relationship with a third party for the purpose of implementing agricultural credit projects jointly. It is another strategy through �hi�h the Ba�k rea�hes �lie�tele at the grassroots. “o�e of the Ba�k’s collaborating partners are: Federal, States and Local Government Agencies, NGOs, Micro-Finance Banks, Micro-finance Institutions, Financial Co-operatives etc. Credit Products For Nigeria Youths And Women The Bank in its efforts to expand its financial inclusion activities introduced two credit products viz: Youths Agricultural Revolution in Nigeria (YARN) for Youths and Grow and Earn More (GEM) for Women. YARN – Developed to encourage Nigerian Youths to key into agriculture and take it as an investment or as a business. It has the following features: May 4, 2016 8
Financial services cont’d. It has the following features: • The maximum loan limit under this product is N1 million per beneficiary. • The beneficiaries must be small holders as defined under the Nigeria Incentive Risk Sharing for Agricultural Lending (NIRSAL) guidelines. • To facilitate unhindered access by these target groups, the beneficiaries need not have collaterals but must provide acceptable guarantors. • The loans are accessible by individuals or groups. The individuals in the group can get N1 million each subject to technical determination of scope and financial requirements of the project. • The loans can be access by individuals and groups in line with NIRSAL Credit Risk Guarantee (CRG) and Interest Draw Back Program (IDP). • Loan period, Grace or Moratorium on the products will be determined based on the project type. May 4, 2016 9
Financial services cont’d. GEM – Developed to encourage Nigerian women to key into agriculture and take it as a business. It has the following features: • The maximum loan limit under these products is N1 million per beneficiary subject to technical determination of the scope and the input requirements. • The beneficiaries must be small holders with the required land for cultivation or any of the value chain products. To facilitate unhindered access by these target groups, the beneficiaries need not have collaterals. In lieu of this, there will be collateral substitutes such as adequate and acceptable guarantors with variable income, NIRSAL Credit Risk Guarantee to cover 75% of the loans accessible by individuals or groups. The individuals in the group can get N1million each subject to technical determination and financial requirement of the project. May 4, 2016 10
Financial services cont’d. • Loans period grace or moratorium on the products will be determined based on the project type and the gestation period of the project. SAVINGS MOBILIZATION SERVICES The savings product of the bank at the moment include but not limited to the following: o Lien Savings Account o Farmers Savings Account o Salary Savings Account o Liberty Savings Account (LISA) o Meso Savings Account (MESA) May 4, 2016 11
BOA/FMA&RD PARTNERSHIP ON IMPLEMENTATION OF AGRICULTURAL TRANSFORMATION AGENDA, PRIVATE SECTOR DRIVEN MECHANIZATION INTERVENTION PROGRAMME The immediate past Minister of Agriculture and Rural Development, Dr. Adesina Akinwumi, as part of his efforts in achieving the Agriculture Transformation Agenda (ATA), set up an Advisory Ministerial Mechanization Committee (AMMC), of which BOA is a member, on 18 th December, 2012 to develop a framework on implementation of private sector driven Mechanization intervention programme. The key activities of the intervention inter-alia include the following: May 4, 2016 12
BOA/FMA&RD Partnership cont’d. • Identification of �pilot� �e�ha�izatio� �e�tres o� the �asis of de�a�d a�d �ithi� farming communities and clusters with high potentials of benefitting from such e.g., SCPZ sites, near One Stop Agro Centres (OSAC), FADAMA related clusters and other nationally important project sites and centres. • Selection of Agro Machinery Manufacturer Representatives with verifiable ability to deliver tractors, implements and other required machineries within 90 days. • Funding and placing orders • AMMC in conjunction with BOA to structure the Agriculture Equipment Hiring Enterprise (AEHE) in the identified locations and to advertise for Private Sector Operators acquisition through bidding. • Delivery of machinery to locations and handover SPO (Bid winner). The agricultural machineries recommended for the programme includes: May 4, 2016 13
BOA/FMA&RD Partnership cont’d . Tractors – 65HP, 75HP or 82HP of Massey Fergusson, Foton Tractors, John Deere, Mahindra, New Holland and Tak Tractor. HP capacity matching implement viz disc ploughs, disc harrow, disc ridger, tipping trailer, bio sprayer, harvesters, fertilizer sprayer, planter and trans planter. Harvest/post-harvest equipment Motorized hand tillers Agriculture Equipment Hiring Enterprise (AEHE): Out of 80 AEHE that was proposed, 72 had been established across the nation. Refinancing Strategy : The refinancing strategy as contained in the MOU signed between the bank and the FMA&RD is as follows: May 4, 2016 14
BOA/FMA&RD Partnership cont’d . • FMA&RD exposure 35% • BOA loan to the Service Provider Operators (SPOs) 35% • Equity Contribution by the SPOs 20% • Vendors Stewardship to the Programme 10% • Loan period 4 years • Interest rate 7% • Repayment arrangement: Loan granted to the SPOs by vendors and BOA 2 years. Loan granted to the SPOs by the FMA&RD 4 years. May 4, 2016 15
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