IMPROVING THE COMMERCIAL ATTRACTIVENESS AND THE BANKABILITY OF A NATIONAL AGRICULTURAL PROJECT IN RURAL SUDAN

1. IMPROVING THE COMMERCIAL ATTRACTIVENESS AND THE BANKABILITY OF A
NATIONAL AGRICULTURAL PROJECT IN RURAL SUDAN
Source: [10]

2. Summery
• Sudan is the world’s largest exporter of gum Arabic and has a considerable scope for growth in the production of a
variety of crops including cotton and livestock to meet both domestic and export demands. Agriculture continues
to employ 80% of the work force of which the majority are the vulnerable sectors of the population however,
agriculture contributes to only 27% of the countries’ GDP [1]. This is mainly due to the large portion of informal
sector employed in the agricultural industry which might explain partially the low tax to GDP ratio (8.6%) [2]. A
socio- economic agricultural revitalization program is thus required to reduce poverty and enhance growth by
increasing domestic resource mobilization via exports and increased employment. The Productivity and Investment
Climate Survey (PICS) 2008 however, found that 47 percent of firms surveyed considered access to finance a major
obstacle in Sudan. The share of financing to agriculture in total bank credit has been declining, from 18 percent in
2000 to 7.4 percent in 2006 [1]. Blending of milestone grants with loans and equity, as well as guarantees and risk
sharing mechanism via lender syndication, mezzanine debts and increased diversification schemes ,can catalyze
public and private investments . This presentation represents a financing model for the government to improve the
commercial attractiveness and the bankability of a national agricultural project in rural Sudan.

3. • Agriculture contributes to just 1/3 of Sudan’s
GDP –[2]
• Recorded investment in agriculture 3.8 % [1]
• The share of financing to agriculture in total
bank credit has been declining, from 18 percent
in 2000 to 7.4 percent in 2006 [1]
• Only an estimated 15%-20% of Sudan’s arable
land is cultivated [3]
• Rain-fed traditional agriculture-60% of the total
cultivated land-Employs informally about 65% of
the agricultural population-It is characterized by
low productivity [2]
There is considerable scope for growth in
the agricultural sector to meet both
domestic and export demands. the
realization of this growth demand will
alleviate poverty in rural Sudan
Source: [6]

4. CROPS
Sudan has three major agricultural
production systems
1. Irrigated
2. Rain-fed semi-mechanized
3. Rain-fed traditional agriculture [2]
LIVESTOCK
livestock is the leading agricultural export
product of Sudan. There are some 69
million sheep and goats in Northern Sudan,
with most produced in the two poorest
regions in Sudan Kordofan and Darfur, and
exported to neighboring middle-eastern
countries [2]
Results reveal that improving the agricultural
efficiency under a devalued Sudanese pound by
5% would improve the Sudanese exports, trade
balance, and the GDP [2]
Source:[7]
Source:[7]

5. • Sudan produces 75-80% of the world’s total output
of Gum Arabic
• There are some 69 million sheep and goats in
Northern Sudan
• Labor force in the agricultural sector represents
80% of total employment
• Agriculture contributes to other activities such as
transportation, agro-industries, and commerce, in
the industrial, trade, and service sectors which
account for a large share of the GDP [4]
Source: [9]

6. • Sudanese authorities, allocated 5 Billion USD to promote the
agricultural sector
• The Central Bank of Sudan (CBoS) has formulated a strategy
for developing and expanding the microfinance sector
• In 2007, Central bank of sudan mandated commercial banks
to lend 12 percent of their lending portfolio to microfinance
• Loan Tracking System (LTS) is intended to support
microfinance institutions in managing data relating to loans
disbursed to clients. A number of Multilateral financial
institutions have applied to the Multi donor trust fund for
funding for the procurement of the LTS
• The establishment of a Ministry of Investment (MOI) with its
one-stop-shop, demonstrates the government’s commitment
to pro-investment policies
• The incentives include low profits tax
• 10 percent for agriculture; exemptions from customs duties
for machinery and equipment including commercial vehicles;
reduced duties on intermediate inputs and spare parts; and
access to land below commercial prices [4]
Earnest efforts are now being made by
the Sudanese government to revive
cotton production
Source:[10]

7. Access to credit is one of the major constraints to private sector economic activity in Sudan. The
Productivity and Investment Climate Survey (PICS) in 2008 found that 47 percent of firms
surveyed considered access to finance a major obstacle while 52 percent considered the cost of
finance a major obstacle to doing business [1]
To catalyze public and private/SME investments, increase domestic resource
mobilization, employment, exports and bring an end to poverty in Sudan
The proposed financing model presents a solution to improve the commercial
attractiveness and the bankability of the national agricultural project in rural Sudan.

8. LENDER-GOV TRANSACTIONS
GOV-SPV/FARMER TRANSACTIONS
SPV/FARMER-CONTRACTOR/CIVIL SOCIETY TRANSACTIONS
REVENUE STREAMS
KEY
NON FINANCIAL TRANSACTIONS

9. LENDERS/FUNDING
DEBT (70%)
COMMERCIAL
LENDERS (BANK
SYNDICATE
)
MULTILATERAL
/BILATERAL/
EPORT CREDIT
AGENCIES
CENTRAL
GOVERNMENT
SUB-NATIONAL
GOVERNMENT
CONTRACTORS
EQUIPMENTS
CONSTRUCTION
OPERATIONS &
MAINTENANCE
CORE INFRUSTRUCTURE & CAPCITY
BUILDING
• WATER FOR IRRIGATION
• WHOLESALE MARKET AND TRADING
CENTER
• AGRO-PROCESSING
• INFRASTRUCTURE & COMMUNICATION
TECHNOLOGY
• ROADS, POWER SUPPLY
SPV (EQUITY
PARTNERS/SME’s)-30%
GROWERS &
EXPORTERS
50% DEFAULT RISK
GRANTS & /LOANS
(LONG GRACE PERIOD)
RE-PAYMENT
AWARD PROJECT &
DEVISE REGULATORY
FRAMEWORK &
INCENTIVES
SERVICES
PAYMENT FOR
OPERATIONS &
MAINTENANCE
LOAN
RE-PAYMENT
BUNDLING AGRICULTURAL
INFRASTRUCTURE
(DIVERSIFICATION TO REDUCE RISK)
– REACH A SIZE THAT RENDERS IT OF
INTEREST TO BOTH EQUITY AND
COMMERCIAL LENDERS
MILESTONE CONSTRUCTION &
LAND FOR FACILITY GRANTS
SMALL-FARMERS
MICRO CREDIT LOANS (LOW
INTEREST RATE)
MICROFINANCING INSTITUTE
(GRAMEEN BANK)
RE-PAYMENT
REVENUE STREAMS:
DOMESTIC SALES ,
EXPORTS & TOLLS
TAXES & CROSS- SUBSIDY
FROM PROFITS OF URBAN
BASED CONCESSIONS
CIVIL
SOCIETIES &
FAO
MONITORING &TRAINING &
SERVICES PROVISION
REVENUE STREAMS:DOMESTIC
SALES
PROFIT &
EXPORT TAX
REDUCED TAX

10. Entity Funding source , revenue streams and risk mitigation mechanism (default
payment back up plan)
Commercial lenders • Syndication to share risk with other banks
• Mezzanine debt (Bank receives equity share if SPV fails to re-pay)
Multilateral agencies Donors (ODA, MDB, Civil societies , NGO’s, UN, IFAD, FAO)
Government • Taxes
• Export tax a modification to the tax that allows additional exports after
producers meet a minimum sales requirement for the domestic market and
taxed exports
• Cross-subsidies (e.g. to utilize urban concession subsidies e.g. telecom)
SPV’s (private sector) • Reduced risk through diversification and bundling of agricultural
infrastructure
• Revenue steams: domestic sales, export and toll fee
Microfinance institutions The Multi-Donor Trust Fund administered by the world bank

11. Government willingness
Incentives and regulatory
framework
Attract international financial
and donor organizations , civil
societies & non for profit
organaizations
Introduction of monitoring,
management and training
bodies (training, wholesale and
trading centers)
Introduce microfinancing for
small farmers & Risk sharing &
diversification schemes
Increased trust and transparency
International and domestic
private investor participation
(SME’s)-increased attractiveness
through bundling agricultural
infrastructure schemes which
creates additional revenue
streams
Expertise and knowledge sharing
(efficient practices and
introduction of other crop
production lines and reviving
more profitable crops such as
cotton, R&D and environemtnal
preservation schemes )
Increased efficiency,
accountability & shared
responsibility
Increased export and growth
Increased export and profit tax
and domestic resource
mobilization, Increased foreign
currency & appreciation of local
currency
Increased employment &
welfare of the poorest
Investors attracted to invest in
more rural rehabilitation scheme
and secondary capacity building
Decreased urbanization
Sudan moves towards
achieving sustainable
development goals
(social, economic and
environmental)

12. Potential stakeholders
• Arab agricultural fund
• Micro financing banks e.g. Grameen
• Civil organizations
• GIF (world banks global infrastructure facility)
• MIGA (guarantees to infrastructural funds)
• OPIC Aid funds for education hospitals
• IFAD
• FAO
• Arab companies (willing to participate
)
• Development and export banks e.g Arab African
Bank
• Ministry of finance and trade and agriculture
• Ministry of investment
• Rural development fund companies
• ODA
• MDBS (to join after revenues have been secured to
match their additionality criteria)
• Sudanese fmcg’s
• UAE funds companies

13. Sources
[1] https://www.imf.org/external/pubs/ft/scr/2013/cr13318.pdf
[2] http://www.indexmundi.com/sudan/economy_profile.html
[3]http://ageconsearch.umn.edu/bitstream/112786/2/Agricultural-Efficiency-AgEcon1.pdf
[4]http://www.fao.org/3/a-i4388e.pdf
[5] http://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/837.pdf
[6]www.unccd.int
[7]www.umuhinzi.com
[8]rainwaterharvesting.tamu.edu
[9]www.fao.org
[10] radiotamazuj.org