Transcript Document

FUNDING COMMERCIAL AGRICULTURE IN ENUGU
STATE: How to access and benefit from the Agricultural
Credit Guarantee Scheme Fund (ACGSF) of Central Bank of
Nigeria (CBN)
Presented by:
Tobin Jonathan
Introduction:
The thrust of the developmental initiatives of the CBN has been hinged
on:
 Increased credit flow to strategic sectors
 reduced financial exclusion rate
 quantitative easing measures and
 stimulation of agricultural value chains
Interventions have been delivered through:
 Policies and regulations
 Programmes and schemes
 Institutional collaborations
Nigeria Agricultural terrain at a glance
Population Size
Agric contribution to GDP
174.5m
21%-48.6% from 2000n till date
Population
Agricultural mechanization index
6-7 tractors per 100sq km
Agric raw materials export (% of merchandised export)
<8.0%
GDP
Gross Domestic Product
$510Bn
Reasons for CBN’s intervention in agriculture:
Potential to boost food supply and attain self
sufficiency in food production
Employment generation
Provision of raw materials for our industries
Contribute to GDP
Enhance the overall living standard of the average
Nigerian
NIGERIAN AGRICULTURAL CREDIT GUARANTEE
SCHEME (ACGS)
Establishment:
 Decree No.20 of 1977
Ownership:
 N3 billion capital base
 Federal Government of Nigeria (FGN)
 Central Bank of Nigeria – 40%
- 60%
Objective of the Scheme:
 The scheme was borne out of the need to provide an effective credit risk
management tool for facilities extended to famers by banks and also
stimulate small farmers’ productivity across the agriculture value chain The
Scheme offers leverage as a partial substitute for banks’ collateral
requirements for agriculture lending
Highlights of the Scheme:
 Scheme provides 75% gurantee of amount net in default
 The activities covered under the Scheme are crop, livestock and fishery
production; Processing where 50% of the raw material comes from the processors
farm.
 The establishment or management of plantation for the production of rubber, oil
palm, cocoa, coffee, tea and similar crops
 Beneficiaries – Individual, Co-operative societies, corporate entities
 Loan limit up to December,1999 maximum loan without tangible collateral
security was N5,000.00, maximum loan under the scheme with security was
N100,000.00
 Loan limit from January,2000 maximum loan without security was N20,000.00
while maximum loan the Scheme can guarantee with tangible collateral security
was N 10,000,000
 Effective from June, 2014, the minimum loan limit without collateral was increased
to N50,000.00 while the maximum loan limit was also increased to
N50,000,000.00
 Form of Security acceptable under the Scheme include: charge on land on which
the borrower holds a legal interest, or a charge on the assets on the land including
fixed assets, crops or livestock; charge on the moveable property of the borrower;
life assurance policy , a promissory note or other negotiable instruments; Stocks
and shares; personal guarantee and; any other securities acceptable to the bank
Operational procedure of the Scheme:
 Lending bank will be required to furnish the CBN with the following:
A copy of application for credit facility from
A copy of application for guarantee form
A formal letter from the lending bank specifying that the pledged security is
adequate and realizable or a letter of domiciliation of salary from the
beneficiary’s employer if it is a salary fed account
A copy of Nigerian Agricultural Insurance Corporation (NAIC) certificate
Upon submission, the Development Finance Office of the CBN in the State
will do the following:
CBN to organize a pre-guarantee farm visit to project location in conjunction
with the lending bank
CBN to issue or decline guarantee of project(s) after such inspection
CBN to sustain routine monitoring of projects to facilitate repayment and
build capacity
Furthermore, the lending bank will provide regular (quarterly) information
on the status of the beneficiary’s loan account to the CBN.
INNOVATIONS UNDER THE SCHEME:
Self Help Linkage Banking Programme:
Inculcate the culture of savings and banking
habit in group members
Enable them to build up resources for
financing their farm projects without recourse
to bank borrowing on the long run
Operational Procedure:
Under the programme, farmers are encouraged to form themselves into groups of
between 5 and 15 on the basis of common purpose (informal and informal).
The groups are encouraged to undertake regular savings with a partner bank of their
choice. After operating such savings for six months, they could then apply to the
partner bank for loan.
The amount saved provides part cash security for loans to saving groups. The group
savings security would not be drawn on until the loans are fully repaid.
Bank loans to the groups are normally in multiples of the balance in their savings
account at the time of the application for the loan.
Innovations under the Scheme (contd)
Trust Fund Model (TFM):
Objectives of the TFM:
 A framework for enhancing credit supply to the agricultural and rural sectors of the
economy
 To reduce the risk exposure of banks in agricultural lending to uncollateralized
farmers under the ACGS.
 Introduced to reinforce the confidence of banks in granting credit facilities to farmers
Operational Procedure:
 Under the Model, oil companies, State/Local Governments and Non-Governmental
Organizations (NGOs) place funds in trust with lending banks to augment the small
group-savings of the farmers as security for agricultural loans.
 The Trust Fund secures 25% or more of the intended loans of the prospective
borrowers; farmers’ savings secure another 25% of the loan while; ACGSF guarantees
75% of the remaining 50%, thereby leaving the lending bank with a risk exposure of
only 12.5%.
 TFM has provided an effective succour to the problem of collateral requirement for
lending to small farmer borrowers.
 A tri-partite arrangement comprising the CBN, the counterparty and the lending bank
is put in place. The roles and responsibilities of each party are signed and sealed
Interest Drawback Programme (IDP):
 Provide interest rebates to farmers that borrowed under the ACGS to
reduce the cost of borrowing and burden of high interest rate
 encourage repayment therefore reducing loan
 default and also reducing the contingent liability
 on the ACGS Fund
Operational Procedure:
Farmers borrow from lending banks at market-determined rates
IDP provides interest rebates to farmers that borrowed under the ACGS to
reduce the cost of borrowing and burden of high interest rate.
The farmer has a grace period of 3 months after scheduled tenure of loan.
The IDP rate is determined by the monetary authority (CBN) at the
beginning of each financial year and announced through the Monetary and
Credit Policy Guidelines
Achievements of the Scheme:
S/NO.
ACTIVITY (as @ Sept, 2014)
NUMBER
VALUE
912,572
N80.81 billion
8,070
N1,249,889.00
683,076
N54.36 billion
1
Loans Guaranteed
2
Loans Guaranteed by Enugu State (Inception to date)
3
Loans Repaid
4
Loans Guaranteed by Enugu State (Inception to date)
3,064
N454,622
5
Claims Settled
15,174
N584.8 million
6
Interest Drawback Claims paid
254,071
N2.02 billion
7
Formal Groups under Self Help Linkages
10,061
N1.58 billion
8
Cooperatives under Self Help Linkages
12,920
N2.5 billion
9
Trust Fund Model (TFM)
58 Stakeholders
N5.516 billion