Increasing access to finance for young agro-enterpreneurs


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Presentation Fin4Ag S39 by kyanika abdul

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  • Until now, I have only spoken about overall population trends and projections.
    However, a critical factor facing African countries is urbanization.
    As we see, Africa’s population not only will be much, much larger in the coming decades – but increasingly urban in location.
    Again based on UN projections, greater than 60% of the population is expected to be urban by 2050 – compared to about 37 percent in 2010 and 15 percent in 1960.
    This shift has profound policy implications for African governments – as we will see in greater detail.
  • Most Youth are moving to urban areas and ending up in slums and get involved in drugs and prostitution. Some of them end up being used in human trafficking.
  • Within that population expansion, here are UN’s projected figures by age group.
    As you see, the bottom of the pyramid widens significantly.
  • As at December 2013.
  • CenteVSLAs, CenteSACCOs
  • Bank Report as per end of March 2014
  • Ministry of Finance Report August 2012 from Participating Institutions
  • Increasing access to finance for young agro-enterpreneurs

    1. 1. INCREASING ACCESS TO FINANCE FOR YOUNG AGRO - ENTERPRENEURS GOU YOUTH VENTURE CAPITAL LOAN SCHEME Revolutionizing Finance for Agri -Value Chain 14th – 18th July 2014 Nairobi, Kenya
    2. 2. Outline 1. Background 2. Centenary Bank Information 3. Benefits to the CB 4. Eligibility Criteria 5. Design and Other Products 6. Performance 7. Management and Challenges
    3. 3. Youth Capital Venture Fund  GOU established the Youth Venture Capital Fund (YVCF) and Graduate Venture Capital Fund (GVCF) in FY 2011/12  The purpose of the fund was to support MSMEs to enhance employment creation and widening the tax base  The Fund comprised of $ 5 Million from the German Development Agency (KfW), with equal contribution by three participating Banks (Centenary, Stanbic, and DFCU Banks)
    4. 4. Youth Venture Capital  Uganda has the Second World’s highest youth population of about of about 7.4 million which is about 55% of the total population  Uganda has also the highest youth unemployment of about 83%  Rate is higher for those who have formal education because of disconnect of degrees achieved and skills needed in the job market  Un employed youth will find their way into crime like drugs, robbery and prostitution  These youth are likely to become a source of instability if government does not plan for them early
    5. 5. The Urbanization Phenomenon Source: United Nations 5
    6. 6. Youth Population Characteristic s Male Female Total Population(18 – 30) Years 2,913,800 3,381,800 6,295,700 Place of Residence Urban 20.2% 22.9% 21.7% Rural 79.8% 77.1% 78.3% Age Groups 18 - 19 22.9% 20.2% 21.5% 20 - 24 36.3% 36.8% 36.6%
    7. 7. Population by Age Group
    8. 8. Youth Access to Finance  Youth like women is one of the marginalized groups in access to financial services  They are considered very risky due to irrational decision making because of lack of responsibility  Most of the youth lack assets which can be pledged as collateral in Traditional Financial Institutions  This can be can be financed by lending to youth who are involved in productive economic activities  Lending to youth who are in JLG, Cooperatives and Farmers’ association
    9. 9. CENTENARY BANK HISTORY  The bank is one of the biggest local bank which was started in 1983 as a Credit Trust.  Operations began in 1985, registered as Commercial Bank in 1993.  Objective to serve the poor and contribute to development of the country.  Bank vision and mission is being the best provider of microfinance services to people in rural areas in a sustainable way.
    10. 10. Centenary Bank Ownership
    12. 12. Bank Market Share Item Banking Industry Centenar y Bank Percentag e Rank Total No. Accounts 3,167,900 1,240,077 39.00 1st Borrowers 1,395,700 147,950 10.00 1st Branch Network 572 62 10.8 2nd ATM Network 714 147 17.00 2nd Deposits $ 4.568 Bn $ 386 Mn 8.5 5th Gross Loans $ 3.186 Bn $ 269 Mn 7.00 3rd Assets $ 6.914 Bn $ 580 Mn 8.4 4th Profits $ 169 Mn $ 23 Mn 13.8 3rd
    13. 13. AWARDS  Best Bank in Top Fifty Brands 2011  1st Runner-Up in 2013 Financial Reporting Award  People’s Choice Quality Awards  NSSF Employers Awards  KACITA Quality Awards x 2 14
    14. 14. Benefits to Centenary Bank  Fulfill its mission of reaching out to rural and urban people  Increase its market share by reaching out to the biggest section of the population  Recruiting new clients who couldn’t qualify for accessing normal credit from the Bank because of the collateral requirements  Deposit mobilization through fund and deposits by the clients
    15. 15. Eligibility Criteria  Support business ventures by youth for expansion  Youth should be holders of at least O – Level Certificate later dropped for no education  Client should be first time borrower  Business financed should be licensed and registered by Uganda Registration Services Bureau  Business has been in existence for at least three month  Business able to employ at least four people  Borrower must have been trained by identified service providers by the project
    16. 16. Design of the YVC PRODUCT SPECIES DESCRIPTION Target Clients Youth (18 -25) Years Amount to be Financed $ 3.32 Million Sectors Manufacturing, Agro Processing, Primary Agriculture, Fisheries, Livestock, Health, Transport, Education, Tourism, ICT, Construction , Printing and Construction Services Loan Amounts $ 40 – 10,000 ( Individual $ 2,000 & Registered Grps – $ 10,000) Grace Period Maximum One Year Own Contribution 10% Loan Periods Maximum 4 Years Acceptance Commission 1% Interest Rate 15% Penalty 0.5% per day
    17. 17. Other Youth Products PRODUCT FEATURES Cente Junior Account Children Savings Account operated by parent or guardian Targeting of toddlers to a maximum of 17 years Purpose is for parents/guardian to save early for their siblings future and introduce them to banking Benefits of Cente Account High interest rate Free Account statements, standing orders, no withdraw charges, account statements, Life Assurance covering life and disability
    18. 18. CenteVolution Youth Account PRODUCT FEATURES Cente Volution Youth Account CenteVolution Youth Account will be operated by youth in tertiary educational institutions Targeting of toddlers to a maximum of 18 – 26 years CenteJunior account holders to graduate to CenteVolution Youth Account and start operating their account Targeting Students in Tertiary Institutions soon joining the working classBenefits of Cente Account Attractive interest rate No account maintenance fee Free Bank drafts for school fees payment Free account statement issued once a
    19. 19. Achievements  The Bank was able to disburse all funds(USD 3.32 Mn) including its contribution within five months  The Bank was allocated additional USD 1.2 Million, from other participating institution,  Another government body KCCA placed Youth Venture Fund of USD 1.32 Million in October 2012 with CB
    20. 20. Performance of NYVC No. Parameters Numeric 1 Total Disbursement $13.517 Million 2 Total Number of Beneficiaries 8,789 Youth 3 Total Outstanding Loan Balance $ 5.28 Million 4 Current Clientele 5,607 5 NPR 5.8%
    21. 21. Performance of NYVC
    22. 22. Sectors Financed No. Sector Enterprises Finance Percentag e 1 Agriculture Poultry farming, Cattle Keeping, Diary Farming, Honey Processing, Goat Rearing, Nursery Beds, Banana Farming, Coffee Farming 23.4% 2 Trade and Commerce General Merchandise, General Supplies, SACCOs, Art and Design 53.1% 3 Service Industry Saloon and Barber shops, Clinics, Internet Café, Events Mgt, Tour and Travel, 16.1%
    23. 23. Management of Youth Loan Portfolio  Assignment of specific Credit Supervisor to manage the Bank Youth Portfolio  Assigning of the specific code in the MIS for close monitoring on utilization, portfolio growth and quality  Efficient client selection using existing account information, use of recurrent clients, groups, market authorities, and associations  Sound underwriting of youth loans with efficient analysis and appraisal
    24. 24. Management of Youth Loans  Efficient credit supervision of branches for compliance to credit policies and procedures  Partnering with other stakeholders like training institutions, NGOs like ILO, GIZ, SSLOA, KAMBA, VERMA Co and Associations  Aggressive recovery of non performing youth loans by the Bank
    25. 25. Challenges  Poor attitude of Bank Staff towards the scheme due character of youth and politicization of the scheme  Politicization of the scheme by some government leaders like MPs, Local Government Youth representatives  Lack of additional funds after exhaustion of allocated funds leading stoppage of disbursements  Lack of entrepreneurship skills by youth which leads to high rate of collapse of business leading to default
    26. 26. Challenges  High taxes levied on youth enterprises by government authorities which eliminates some clients who fail to qualify on eligibility criteria
    27. 27. Way Forward  Increased supervision of Youth Portfolio to ensure sound under writing of loans for a quality portfolio  Development of new credit products targeting youth i.e. CenteYouth Individual Loan Product, Group Loans and Asset Financing  Financial Literacy for young agro- entrepreneurs to equip them with
    28. 28. Way Forward  Capacity building for credit staff in evaluation of youth clients and groups to enable them mitigate risks associated with this age group  Establishing partnerships with other stakeholders like NGOs, Companies, Associations, Government and Training Institutions for complementing financial services with appropriate services and funding.
    29. 29. Thanks