Upload
oscar-westmoreland
View
219
Download
5
Tags:
Embed Size (px)
Citation preview
NATIONAL MICROFINANCE BANK PLC
“FROM FARM TO FOOD!”(Sustainable Lending to Agriculture in Tanzania: Challenges & Opportunities for the Financial Sector)
Presented by Mark Wiessing 1
About NMB
Presented by Mark Wiessing
• Privatised in 2005, listed 2008
• From savings and payment “factory” to broad based universal bank
• Key segments: Retail: Personal, Micro enterprises, SME Wholesale: Corporate, Institutional, Government / Public sector, Agribusiness
• Key Products: Liabilities: Current and Savings, Fixed Deposits Lending: Salaried Workers’ Loans, Overdraft, Short Term Loans, Capex loans Transactional: Payments, Trade, Collections Treasury: Forex, Money Market
NMB Plc – COFI Presentation: November 2014 2
About NMB
Presented by Mark Wiessing
• Distribution: 170 branches (25-30% of all bank branches in Tanzania) 600 ATMs (35-40% of all ATMs in Tanzania) 60,000 e-money cash points NMB Mobile (1 million users)
• Total assets of $ 2.2 bi, total loans $ 1.1 bi, Market cap $ 1.3 bi
• Our Passion: Financial Inclusion: 2 million customers Rural Presence: 60% of branches are in rural areas Agriculture and agribusiness: 26% of total loans are in food and
agribusiness!!
NMB Plc – COFI Presentation: November 2014 3
From farm to food: The Recipe
Presented by Mark WiessingNMB Plc – COFI Presentation: November 2014
“Ingredients”
Land Rain / Irrigation Farmer Input supplies Off taker Processor Trader Retailer Consumer
4
From Farm to Food: The Recipe
Presented by Mark WiessingNMB Plc – COFI Presentation: November 2014
“A well equipped kitchen”
“Enabling Environment”
Planning (the rains always start at the same time!) – Follow Crop Calendar
As little Government intervention as possible, as much as needed
Reliable input suppliers and strong off-takers (i.e. traders, processors..…)
5
From Farm to Food: The Recipe
Presented by Mark WiessingNMB Plc – COFI Presentation: November 2014
Clear “Cooking Instructions”
Coordinated value chain actors – Chain leaders required
Genuine & timely delivery of inputs
Good Agricultural Practices especially on agronomy support
Storage and market infrastructure
“Serves”The world, population 7 billion – 9 billion by 2050!
6
Presented by Mark WiessingNMB Plc – COFI Presentation: November 2014
“Farmers up in arms over “fake” seeds from agents”
“Unscrupulous importers force Kenya to hold up maize purchases from Tanzania”
“Adulteration of tobacco leaves irks councillors ”
“Crack down on illegal sugar imports on cards”
Cotton farmers threaten to strike over high seed prices but Government refuses to yield”
“Government stance on grain surpluses lacking market this week”
“Farmers assured over sale of surplus maize”
7
Recent Headlines
Presented by Mark WiessingNMB Plc – COFI Presentation: November 2014 8
Recent Headlines
“Invest more in agriculture, appeals Minister”
Presented by Mark WiessingNMB Plc – COFI Presentation: November 2014
44Mn Ha’s of Arable land - only 25% being utilized for agri-production
Out of 44Mn Ha’s; 29Mn Ha’s are suitable for irrigation – only 1% irrigated
80% of the 45Mn Tanzania population earn living from Agriculture activities
28% of the Country GDP is contributed from Agriculture sector
7% expected economic growth
Higher imports than exports indicates available Demand
TZ among few Countries in Africa with highest agri-investment potentials
9
Tanazania’s Compelling Statistics: Macro
Presented by Mark Wiessing
16.8% of rural households use improved seeds - hence TZ farmers realizes less than 40% of world average yields
19.3Kg/Ha average fertilizer application rate as compared to 150Kg / Ha world average
92% of TZ farmers still use hand hoes and farm on average of 0.5 - 5 Acres
6.5% of rural households have access to credit resulting to lack of WC to buy inputs, farm preparations and other costs
24% of the rural people have access to reliable all season roads - hence higher costs of transportation on average 83% of mkt. costs
35-40% post harvest losses due to little or no storage infrastructure
10
Tanzania’s Distressing Statistics: Micro
NMB Plc – COFI Presentation: November 2014
Presented by Mark Wiessing
;;
11
Slowest Growing Sector
NMB Plc – COFI Presentation: November 2014
Agricu
lture
Communication
Finan
cial S
ervice
Man
ufactu
ring
Mining
Constructi
on 0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
4.3%
20.6%
13.2%
8.2% 7.8% 7.0%
2013 PERCENTAGE SECTOR GROWTH.
2010 2011 2012 2013
56.3
24.7
14.2
59.2
23.2
12.9
56.9
24.3
14.1
59
23.6
13.7
CONTRIBUTION TO GDP GROWTH RATE IN PERCENTAGE.
Service Industry Agriculture
Presented by Mark WiessingNMB Plc – COFI Presentation: November 2014
Farm level
Lack of economies of scale Rain fed, vulnerable to weather risk Infrastructure / transport Lack of affordable inputs Low penetration of machinery Low prices post-harvest Lack of collateral/land title/capital Lack of financial documentation Lack of skills Lack of understanding bank requirements Weak cooperatives
Institutional level
Unpredictable government services Political intervention in agri markets Lack of supporting legislation (e.g. warehouse
receipt law contract enforcement)
Bank level
Lack of understanding of agriculture markets Large distance between bank branch and
farmers Mismatch in financial products and sector
needs High perceived risk in financing agriculture Lack of long-term funding
12
Main obstacles for access to finance in agriculture
NMB Agriculture lending
13
Input Supplies
Crop Farming
Post-Harvest Transport & Processing
Distribution & Export
Retail & Marketing
Pre-Harvest Finance Warehouse receipt
collateral management
Presented by Mark Wiessing
26% OF NMB TOTAL LOAN PORTFOLIO IS IN FOOD & AGRIBUSINESS AS AT END OF 2013
Post - Harvest Working capital Trade finance
NMB Agri-lending approach
Presented by Mark Wiessing
Corporate farms
Commercial farmers
Emerging farmers
Commercial smallholders(cash crops)
Subsistence farmers
Traditionallybankable
Traditionally unbankable
Relationship approach, lending and capex needs, cross sell trade, forex
Retail / SME approach with "agri twist" lack of financials, need for benchmarking, technical assistance on agro & financial skills
Scheme based approach (eg out grower schemes), use coops for coordination and aggregation
Via SACCOs, coops, saving based loan schemes, etc
NMB Agri-lending approach
• Strategic partnerships with leading chain actors• Distribution network close to VC actor to borrower & monitor loans• Modern / upgraded creditworthiness criteria (6 Cs – Character, capital,
capacity, collateral, conditions, & credit history) • Recruit strategic partner’s with capacity for agri-production support
throughout the season• Tri-partite agreements with leading chain actors to facilitate purchase of crops
and pay on behalf of the farmers directly to bank• Ensure support services, technical advice, on-going visits and monitoring • Cash flow and knowledge based lending unlike purely asset based • Need partners for risk sharing for more business opportunities
Presented by Mark Wiessing
Presented by Mark WiessingNMB Plc – COFI Presentation: November 2014
Dedicated agriculture team at Head Office Dedicated agri loan officers in selected branches Well defined primary agriculture segments:
Corporate, commercial Emerging Smallholder, outgrower
Selected crops only: Cashew Tobacco Coffee Rice Sugar
Food and agri research team (FAR) NMB Foundation for Agricultural Development (NFAD)
16
NMB Agri lending approach
Presented by Mark WiessingNMB Plc – COFI Presentation: November 2014
TobaccoCrop input finance to 120 Amcos (with 200 to 300 farmers per group)
CashewInput finance, asset finance and warehouse receipt finance to 180 Amcos (with 200 to 300 farmers each)
Outgrower Schemes Input finance based on offtake / contract farming agreements• Sugar (10 associations with 1,000 members each)• Paddy (18 associations / Amcos with 100 to 200 members each)• Barley (20 emerging farmers)
Commercial / corporate farms• Only a handful of real commercial and corporate farms• Some serve as nuclear farms supporting clusters of outgrowers
17
NMB Experience
Presented by Mark WiessingNMB Plc – COFI Presentation: November 2014 18
Satisfactory performance, though higher than average NPLs
Most Amcos credit facilities are approved without financials but with robust due diligence on planted acreage, input validation and coordination with input supplies and offtakers
Several value chain incidents have had significant impact o Tobacco: power struggles between PCs, Apex and Unions resulted in sideselling
and fraudso Cashew: dispute on market prices, “bail-out” at higher than market prices resulted
in sideselling and fraudso Rice / sugar: duty free imports and reported smuggling can significantly impact
prices and result in severe adverse impact on commercial farms and outgrowers
NMB Experience (continued)
Presented by Mark WiessingNMB Plc – COFI Presentation: November 2014 19
Outreach• 1,092 AMCOS, SACCOS, Farmer Organizations & associations trained• Total of 291,607 members trained• 6,306 Leaders trained
Structure• Training (governance, record keeping, cash flow preparation, loan management)• Grants (dam construction, seedlings, computers)
Delivery• Through branches and NFAD dedicated officers in key agri-zones (visit farmers in their farms)
Issues• Effectiveness of governance training is low if not coupled with better agronomy standards
NMB Experiences – NMB Foundation
Presented by Mark WiessingNMB Plc – COFI Presentation: November 2014 20
Research topics & papers released
End to end value chain analysis: cashew, tobacco, coffee, sugar, rice…. Etc
Detailed seasonal crop budgets for loan officers
Market outlook and trends for key crops
Internal sector guidelines
NMB Experiences – Research
Presented by Mark WiessingNMB Plc – COFI Presentation: November 2014 21
Key Outcomes / Learnings
Value chain structures • Too many players along the value chain?• 5 national initiatives, 9 crop boards, 32 support institutions, at least 50 NGOs• Complex value chains, uncoordinated: need to simplify and empower value chain leaders to coordinate
Value added / production cost breakdown• Unempowered farmers remain at the bottom of the pile in uncoordinated value chains• All making money, except farmers?• Well managed chains generate more returns to farmers
Industry structure • Many small scale projects• Few commercial farmers despite huge potential
NMB Experiences – Research
Presented by Mark WiessingNMB Plc – COFI Presentation: November 2014
Experiences / Challenges
Food is politics! Politics drive policies• Commodity market system interventions - Price setting (floor prices)• Export restrictions or duty free imports
Regional / District Interventions• Regional & District authorities intervention in commodity and input financing systems• High cess charges not going back to support famers or infrastructure (storage, roads)
Frauds / Collusion from service providers and partners• Collateral management losses• Warehouse receipt operators confiscating bank owned stocks to pay for AMCOS warehousing bills• Overestimation of inputs needed by farmers (side selling of inputs - frauds!)
22
Summary
Presented by Mark WiessingNMB Plc – COFI Presentation: November 2014 23
Value Chain delays• Not following specific crops calendar to catch up with the farming seasons• Late signing of input supply contracts• Late signing of offtake contracts• Late issuance of ECGS guarantees• Late disbursement of loans!
Politics• Borrowings at PCS vs Apex / Union level• Internal power struggles within Amcos
Industry structure• Fragmented industry structure• Multiplicity of NGO projects and initiatives focused on poverty reduction• Lack of scale, not enough attention to professional farming and wealth creation
Summary (continued…)
Presented by Mark WiessingNMB Plc – COFI Presentation: November 2014 24
Summary (continued….)
ECGS and other guarantee schemes
• Issuance delays• Payout delays• Complexity in reporting• Credibility of guarantees is crucial especially for the financing of the bottom of the pyramid!!
Scale:– Mobilisation of agricultural loan officers over large distances is costly– Lack of standardisation, multiplicity of exceptions– Uncoordinated value chains create risks
Presented by Mark WiessingNMB Plc – COFI Presentation: November 2014 25
Lessons learned in agri financing
• Approach agriculture as a business and not as a social sector• Knowledge is key so invest in agri sector knowledge and systems• Segment the market in sectors and customer segments and adjust your financing
approach accordingly• Focus on payment capacity, financials, collateral and guarantees comes second• State owned agri banks don’t work (too many debt write-offs & recapitalisation)• Commercial banks with rural stakeholders seem appropriate model• Be close to your customer, e.g. via rural branch network• Be careful with going down market (e.g. smallholders) too fast• Capacity building (e.g. of coops) can enhance the bank’s risk management• Work closely with traders and processers since they know the reliable suppliers• Farm blocks work: Large nuclear commercial farms and outgrowers
Presented by Mark WiessingNMB Plc – COFI Presentation: November 2014
Committed to agriculture despite challenges
Differentiate social schemes (poverty reduction) versus commercial & emerging farming (wealth creation)
Active engagement with stakeholders, including GOT, value chain partners (extension services, off-takers…..etc), guarantors
Supportive of any initiatives improving the fate of farmers:o Better farm gate pricingo Higher yieldso Encourage increased acreage / scale
26
Way forward for NMB