Wednesday 26 August 2015

Farmers News - How Accessible Are The Agricultural Loans

The need for the success of the Agricultural Transformation Agenda(ATA) is tied to the ability of both agricultural and commercial banks to support the initiatives of the federal government. Ruth Tene Natsa writes on the need to ensure that farmers get access to banking loans set aside for agricultural purposes.
The Federal Government through the its Ministry of Agriculture and Rural Development (MARD), with support from the Ministry of Finance and the Central Bank of Nigeria (CBN), in 2011/2012, created the Fund for Agricultural Finance in Nigeria (FAFIN) as well as the Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) among many other initiatives to create soft loans to small holder farmers seeking loans.
The loans, which are to be managed by the Bank of Agriculture with support from other commercial banks, is supposed to be made available to farmers at single digit interest rates. However, this is not the case as alleged by many farmers who have at one time or the other sought for such loans, especially from the commercial banks.
There is no gainsaying that the banks, particularly the commercial banks, are in the business for profit making but in line with the vision of the Agricultural Transformation Agenda (ATA), which seeks to partner with the banking sector, the banks may have to give out way more than they are willing to before enjoying their benefits.
While the federal government believes that the banks are willing to give loans to farmers at single digit interest rates, this may not be so as farmers from various platforms claim that banks request double digit interest rates, some as high as 24 per cent.
Unfortunately, this defeats the purpose for which the partnership is sought between the federal government and the banking sector. In the words of president general, Agbekoya Farmers Association, Kamorudeen Okikiola, “No Nigerian farmer had been able to access the N15 billion promised by the government to the Bank of Agriculture (BOA).”
Speaking with journalists at the 2nd Farmers’ National Conference, which held with the theme, ‘Financial Risks and Agricultural Funding in Nigeria’, he said, “They are giving us 24 per cent bank interest, which no commercial farmer can take, except it is a single digit. So we have to call the BOA and the CBN to let them know the truth of what is happening with the Nigerian farmer. At different states, where they called for single digit, the farmers have been unable to access the loans. For example, the Farmers Association brought all the necessary documents requested over 18 months ago and till now all we get are promises from the banks.
“So saying Nigerian farmers can produce a lot of food for the Nigerian people, is a lie because Nigerian farmers are still very poor.”
National financial secretary and secretary to the electoral committee of the All Farmers Association of Nigeria, Dr. Tunde Aronsanye, opined that less than 20 per cent farmers had been able to access any form of agricultural loans as they are constrained by many reasons including the requests for seed money required to open an account either as an individual or as a cooperative. He said, “And one is expected to run such an account for a period of 3-6 months before the farmer can obtain a loan form and he is also expected to have 10-20 per cent deposit and in most cases the farmers are expected to make several trips to the bank because most of these banks are not in the farming communities. In the end, most farmers just chose to use the little they have to farm what they can rather than putting such money in the bank for a period of 3-6 months, when they are not even sure of getting the loans. All these stresses militate against the farmers who are domiciled in the rural areas. Some of them have tried in the past and gave up when it did not work out. So government must look for a less stressful way to package our food security program to make it easily accessible to our peasant farmers”.
Meanwhile, the minister of Agriculture and Rural Development, Dr Akinwumi Adesina, said that lending to farmers has increased considerably. He provided details, “Bank lending to the sector increased from 2 to 4 per cent of total lending. Banks’ lending to the GES program increased from N 3.5 billion to N 25 billion between 2012 and 2013.

“The CBN with the facility it has with NIRSAL is helping to derisk the financial value chain and we in agriculture are fixing the agricultural value chain.”
The minister, who is opposed to double digit interest rates, told LEADERSHIP, “If anybody is in agriculture and tries to borrow money at 24 per cent interest rate, one can never make a profit. But that also depends on where you are borrowing from. If you borrow at such rate then maybe you are dealing in drugs, because if you look at other countries, American farmers since about 1865 have been borrowing money at 4 per cent interest rate. Europeans subsidize their farmers expenses. I believe that agricultural loans should be provided at single digits interests rates because of the risk and the fact that majority of the farmers that are there need money and also because the loans they are looking for are not just short term loans.”
Source: http://leadership.ng/business/376131/accessible-agricultural-loans


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