Educación familiar y desarrollo de valores

The major strategies for dealing with agricultural lending risks are through:

(1) Group Lending

In group lending, a lender may provide funds to a group or a collective entity such as a cooperative or a village bank which then disburses the loan to individual members according to agreed criteria. In such a case, the group is jointly liable for the entire amount of the loan. On the other hand funds may be lent to members individually who are organized in groups in which case the group jointly guarantees all loans or simply furnishes information about individual participants.

Group lending allows risk pooling through joint liability. Joint liability improves loan repayment in two ways; first group members can put pressure on potential defaulters when their own interests are not at stake. Secondly, the risk that the whole group will default diminishes with increased membership, unless all of the members‟ activities are highly correlated.

(2) Agricultural Insurance

The occurrence of physiological crop failures, plants and animal diseases and pests, natural hazards such as drought and flood could be minimized by agricultural insurance. Agricultural insurance improves the position of the farmers in relation to agricultural credit. It guarantees protection against crop and livestock failure, thus, the insured farmers have greater confidence when applying for loans.

(3) Demanding Appropriate Security

Common securities (collaterals usually demanded of farmers by financial institutions include:

(a) Landed property, such as building;

(b) Insurance policies, especially life

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(c) Company stocks and shares; cash deposits especially in savings or fixed (time) accounts;

(d) Debentures on floating assets; and

(e) Personal guarantee by reputable persons.

Appropriate security or collateral is needed before a loan is given to farmers;

however most farmers and poor Nigerians are unable to provide easily realizable securities, due to the high rate of poverty among these groups. On the other hand, financial institutions are profit oriented organizations. Therefore, there is the need to de-emphasis the conventional loan securities, rather security arrangement should be in such a manner that does not discourage genuine farmers seeking credit. For prevention of default, farmers should be encouraged to form co-operative associations, in order to enjoy the benefits of group lending. Also using a solidarity group approach with joint liability for borrowing assumed by a group of borrowers can be viable alternative to the more traditional collaterals required by financial institutions.

(4) Effective Loan Supervision and Project Monitoring

Project/loan supervision and monitoring refers to the process of control, usually applied by a lender on a borrower by visiting, overseeing and inspecting the project for which the loan was obtained. Supervision/monitoring involve physical presence at the project sites it includes a pre-loan visits, monitoring and supervision of a project. This reduces or prevents wrong production decisions which could increase risks of loan default. The visits should be done frequently and by well trained professionals. It is also suggested that such visits should be extended to the homes of borrowers in order to know the socio-economic problems of the borrowers. If the borrower is in need of money to take care of some pressing family needs, it might be an indication that if he is given a loan at that particular time, such will be diverted to meet his immediate needs.

10.1.2 Nigeria Incentive Based Risk Sharing for Agricultural Lending (NIRSAL) NIRSAL is a dynamic, comprehensive strategy introduced under the Agricultural Transformation Agenda (ATA) to redress issues relating to both the agricultural value chains and the agricultural financing value chain. The agriculture value chains and the agricultural financing value chain are inter-dependent (Figure 1) and thus, in moving agricultural financing forward in Nigeria, fixing the financing value chain without addressing the agricultural value chains would be a futile exercise (FMARD, 2012). The strategy entails leveraging of USD 500 billion in agricultural lending from commercial banks into agricultural value chains. NIRSAL is based on five pillars that aim to “de-risk” agricultural lending and lower the cost of lending for banks. The total package as apportioned within its five pillars as follows (Figure 2):

i) Risk-Sharing Facility (USD 300 million). This facility is aimed at correcting banks‟ perception that agriculture is a high-risk sector. NIRSAL will share banks losses on agricultural loans.

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ii) Insurance Facility (USD 30 million). This facility primarily aims at expanding insurance products for agricultural lending from the current coverage to assist in alleviating credit risks and increasing lending across the entire value chain. These will be by expanding the coverage of existing products provided by the Nigerian Agricultural Insurance Corporation (NAIC), piloting and scaling new products, such as weather index insurance, new variants of pest and disease insurance, etc.

iii) Technical Assistance Facility (USD 60 million). NIRSAL will equip banks to lend sustainably to agriculture, as well as equipping producers to borrow and use loans more effectively, with the view to producing more and better quality goods for the market.

iv) Holistic Bank Rating Mechanism (USD 10 million). This mechanism rates banks based on two factors: the effectiveness of their agricultural lending and its social impact.

v) Bank Incentives Mechanism (USD 100 million). This mechanism complements NIRSAL‟s first three pillars and offers banks additional incentives to build their long-term capabilities to lend to agriculture.

Agriculture value chain

Farmers Agro Dealers Input

producers

Agro processors

Industrial manu-facturers

Trade and exports

Agricultural financing value chain

Loan Product Dev. ¹

Loan origination

Distribution Credit

Assessment

Managing and pricing for risk

Loan Disbursement

1 IncFigure 1: NIRSAL integrates an end-to-end agriculture value chains with agricultural financing value chains ludes working capital loans; fixed asset finance; trade financeCSo

Enablers

Infrastructure Credit bureau Policies Extension services Price guarantee boards

5

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6

NIRSAL (₦75 billion assets to stimulate lending by banks and other financial players )

De-risk agriculture finance value chain

Build long-term capacity

Institutionalise incentives for agriculture lending NIRSAL

Objective

Goal Expand bank lending in agricultural value chains Risk

sharing Facility (₦45B)

Insurance

Facility (₦4.5B) Technical assistance facility (₦9B)

Bank incentive mechanism

(₦15B) Agricultural

bank rating scheme (₦1.5B)

 Shares lending risks with banks (e.g.

50% loss incurred)

 Link insurance products to the loan provided by the banks to loan bene-ficiaries

 Build the capacity of banks, micro-finance institutions

 Build capacity of agricultural value chains

 Expand financial inclusion

 Targeted incentives that move banks to a long term, strategic position and commitment to agricultural lending

 Rate banks according to their effective-ness of lending to agriculture.

NIRSAL and De-Risking Agricultural Value Chains . . .

Figure 2: NIRSAL and De-risking Agricultural Value Chains

Source: Federal Ministry of Agriculture and Rural Development (2012)