As I sat in the e-conference Hall of the Kenya School of Monetary Studies, the venue for the 2nd African Continental Briefing organised as part of the Fin4Ag Conference: Revolutionising Finance for Agri-value chains, I could not but help listen attentively as Esther Muiruri, the General Manager Marketing and Communications, from Equity Bank gave the presentation on “Banking Agriculture in the Eastern African Region”. As she spoke, all I could say to myself was “These are the things the banks in Nigeria should be doing to finance agriculture”.
Today I am going to share the 6 things done by the Equity Bank in East Africa, that in my view, I believe Nigerian Banks will find helpful if implemented both for them as a business and for the beneficiaries (players in the agric sector).
Understand the client: the risks in agriculture are not perception, they are realities. As a matter of fact, there are some conditions that the farmers absolutely have no control over. Thus, it is important that bank understand the farmers, the peculiarity of their business, be it cropping or animal production. What this does is to enable the banks develop and offer products and services tailored to the need of the client.
Know the kind of value chain the client is into: This helps the banks identify and know the players in the sector the client is. Who are the buyers? What is demand like? How effective are the other players in the chain.
Recruiting Agric based employee: The Equity Bank, according to Esther Muiruri, ensures they employed people with agricultural knowledge base and this helps them to have people on the ground who can relate to the feelings of the farmers, and more importantly, build a relationship with clients (farmers/growers), that in turn, aid to serve as a risk mitigation strategy. These employees are of course trained in money management and finance.
Offering trainings for farmers: these trainings help the banks to understand better the activities of the farmers in terms of their growing cycle and practices. It also help to get feedbacks and monitor the progress of the farmers and other value chain player throughout the season.
Provision of financial training programme: The farmers are given financial education to aid their businesses and also encourage them to save so as to be able to have access to investment money from the bank.
Partnership: To be able to serve their client well, the bank partners with relevant organisations like AGRA, IFAD, input dealers, commodity buyers and this enables them know the acceptable standards, new best practices and technology available.
To be able to finance the agriculture value-chain, fund providers must understand what goes on in the agricultural system. Seating in offices and waiting for client will not help. Activities need to be on the ground. Banks need to be in the shoes of the farmers, growers and agribusiness owners to know and meet their needs. And the only way to achieve this is by building relationships and going all the way out to provide tailored services and products for farmers and relevant value chain players.
Will the Nigerian Banks take up this task and make changes that will help in revolutionising agriculture and agribusiness? Will they contribute in removing so many smallholders out of poverty helping them increase their income and be better player in agribusiness? Only time will tell..
Photo credit: C. Schubert/CCAFS
First published on the CTA blog