Increased lending to the Agriculture Sector v0 21
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This document outlines a 5-step plan to increase lending to Kenya's agriculture sector. The plan includes: (1) establishing an 18% mandatory minimum allocation of financial institution's loan books to agriculture financing; (2) defining agriculture lending broadly to include the entire value chain; (3) financial institutions that do not meet lending targets must invest in low-yield agriculture bonds; (4) the government will provide very cheap on-lending facilities for agriculture loans to help lower interest rates for farmers.
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![How to increase lending to the Agriculture Sector
A concept paper (in 5 steps) Comments
1 AgriFin Lending is critically important In 2014 Agriculture contributed 22.03% to Kenya’s GDP which made it by far
the largest economic sector. Yet according to the CBK 2015 Annual Report,
aggregate bank lending to the sector did not amount to more than 4.14% of
total loan exposure in 2014.
Development of a modern Food & Agriculture Sector is determined to be a national
priority in which the financial sector has a critical role to play.
2 18% loan-book allocation A system of priority sectorlending has existed in India since the 1970’s. Whilst
the debate amongst economist as to the merits and challenges of the system
is fierce and ongoing, there is not the slightest doubt that India’s Agricultural
Sector is considerably more advanced than that of Kenya. We believe Access
to Finance is an important factor.
A mandatory priority lending framework is phased in (step-wise, over a period of 5
years) whereby all regulated financial institutions are eventually required to allocate
18% of their loan-book to AgriFinance.
3 AgriFinance … more than farming alone
At F4A we believe that all parts of the value chain are important and need
support and investment. In certain crops post-harvest spoilage ratios still run
as high as 40%. Banks enjoy individual strengths, and will find their own ways
to operate (lend) within risk-tolerant parameters. We equally believe in the
power of market-pull … investing in warehousing, logistics and processing will
drive large(r) numbers of farmers towards inclusion in formal supplier
networks.
Clear rules are established to define what constitutes Agricultural Lending – which
realistically includes the entire Value Chain (incl. inputs, farming, services, logistics,
warehousing, processing etc.). There’s a role for all financial institutions well inside
their respective comfort zones.
4 Non-compliance means investing in AgriFin Bonds
So either way funding is channeled towards the Food & Agriculture sectors(s).
Banks build their own relationships, expertise, and credit portfolio, or they
pay-up for omitting to do and [indirectly] sponsor other financial institutions
to do it instead.
Financial Institutions that fall short pay a penalty. They shall be required to invest in
low yielding AgriFinance Bonds issued by the Government of Kenya – for an amount
equal to their shortfall.
5 Government to provide [very] cheap on-lending facilities The idea comes from Uganda where the Central Bank of Uganda (BoU) is
running the Agricultural Credit Facility (ACF). Banks can apply for a 50%
refinancing for AgriFin client loans which is made available by BoU at zero
percent interest. This is then blended with the bank’s own 50% loan
component which is priced at commercial rates. As a result AgriFin clients end
up with an attractive blended rate (capped at 10% p.a.).
Nairobi, June 2016
The proceeds of these Bonds are recycled back into the Financial Sector. An on-
lending programme is established whereby Financial Institutions can refinance
AgriFinance loans at very low rates, provided these rates are passed on to the
ultimate borrowers (which are farmers or agri-businesses).](https://image.slidesharecdn.com/ea602c75-931f-44c0-a29b-2e7094689a95-160626105734/85/Increased-lending-to-the-Agriculture-Sector-v0-21-1-320.jpg)
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This document summarizes the State Bank of Pakistan's efforts to promote financial inclusion and consumer protection in Pakistan. It discusses SBP's multi-pronged strategy, which includes requiring banks to offer basic low-cost accounts, expanding branch networks, developing regulations for microfinance and branchless banking, supporting a national financial literacy program, and establishing a legal and regulatory framework for consumer protection. It also describes the Financial Innovation Challenge Fund's second challenge round focusing on innovative rural and agriculture finance to improve financial access for rural communities and small farmers in Pakistan.
Agricultural finance
Agriculture contributes around 15% to India's GDP but employs over 50% of the population. Rural areas are home to over 70% of India's population, many of whom are poor farmers dependent on agriculture. The government prioritizes raising agricultural productivity to reduce poverty. Formal agricultural financing through banks has grown over time from money lenders to include cooperative banks, nationalized banks, regional rural banks, and now a multi-agency approach including public, private, and foreign banks. Key agricultural financing products include crop loans and Kisan Credit Cards (KCC), which consolidate short and long-term credit needs. However, many small and marginal farmers still lack adequate access to agricultural credit.
Role of Banks on Agricultural Development in Bangladesh
The aim of this study is to determine the role of banks on agricultural development. Agricultural development is determined in respect of crops, purchase and installation of irrigation equipment, livestock, marketing of agricultural goods, fisheries, poverty alleviation and income generating activities. A total number of 50 respondents were interviewed through semi-structure interview schedule for obtaining primary data. Secondary data was collected from annual reports of Bangladesh Bank during period from 2010 to 2014. The disbursement of agricultural credit on crop production is increased up to Tk. 71.31 billion in 2014 from Tk.33.19 billion in 2010. Subsequently, the disbursement of agricultural credit on purchase and installation of irrigation equipment, crop production, marketing of agricultural goods, fisheries are changed significantly with time. The credit on poverty alleviation increased up to Tk. 18.64 billion in 2014 from Tk.13.61 billion in 2010. The result indicates that bank plays on a significant role on agricultural development in Bangladesh. Timely flow of agricultural credit can meet farmers demand to ensure agricultural productivity. The study will help governmental policy makers and NGOs to address and analyze the issues of agricultural sector to provide loan to the farmers for promoting actual development in this sector.
A Review of Bank Loans to Farmers: Implications for Agricultural Diversificat...
A Review of Bank Loans to Farmers: Implications for Agricultural Diversificat...CrimsonpublishersMCDA
This document reviews bank loans to farmers and their implications for agricultural diversification in Nigeria. It finds that loans to farmers carry more risks than other business loans due to unfavorable cost-price relationships in agriculture and the difficulty of obtaining farm operation information. It also finds that commercial banks consider factors like a farmer's ability to manage operations and generate positive cash flow. The document recommends that the government and banks take actions to address risk factors and information problems, ensure banks have well-trained farm representatives, focus on loans that meet standards, and help farmers improve soil productivity and cash flows. The overall aim is to enhance agricultural productivity and diversification in Nigeria.Financial Inclusion in India
The document discusses financial inclusion in India. It defines financial inclusion and notes that it aims to provide access to appropriate financial services and products to vulnerable groups at affordable costs. It identifies groups that are commonly excluded from financial services like farmers and slum dwellers. It discusses various initiatives taken by the Reserve Bank of India and private companies to promote financial inclusion through expanding branch networks, increasing ATM availability, and issuing loans and credit cards to farmers and small businesses. Overall progress has been made in increasing access, but challenges remain in promoting awareness and usability of these services.
Micro finance in India
This document presents information on microfinance in India. It discusses how microfinance provides financial services like credit, savings and insurance to poor individuals. It notes that microfinance aims to improve livelihoods through capital provision. The document provides statistics on microfinance in India and outlines the roles of various regulatory bodies. It discusses self-help groups and their importance in poverty alleviation. It also examines the role of banks in providing assistance to microfinance institutions and some problems faced by these institutions. Finally, it proposes various solutions and concludes by emphasizing the potential of self-help groups and microfinance to reduce poverty in India.
5 managing risk in agriculture by mr. ramon yedra
This document discusses managing risk in Philippine agriculture through insurance, credit guarantees, and microfinance. It provides details on the Philippine Crop Insurance Corporation which insures farmers against losses, and the Agricultural Guarantee Fund Pool which guarantees loans to small farmers. It also describes the Rural Household Business Financing program which provides financing for farm and off-farm livelihood projects to diversify farmer incomes and risks. Expansion of these programs is needed to better manage agricultural risks.
microfinance in India
Microfinance has existed informally in India for ages, but the legal framework and institutions to support it have developed over time, starting in the early 20th century. Currently, an estimated 350 million people live below the poverty line in India, but formal microfinance has only reached around 5% of the rural poor. There remains a large unmet demand for financial services among the poor. While microfinance institutions have grown, challenges remain in achieving sufficient scale, access to low-cost funding, developing appropriate legal structures, and balancing financial sustainability with an inclusive development agenda.
Leticia presentation to rbap11.11
The document outlines several programs offered by the Land Bank of the Philippines (LBP) to assist countryside financial institutions (CFIs). Key programs discussed include:
1. Rediscounting facilities and credit lines to provide CFIs with short-term and term loans.
2. The Grassroots Development Program which provides loans to CFIs to on-lend to small farmers through accredited partners.
3. The CFI Calamity Assistance Program which offers loans to CFIs affected by natural disasters to help recover their affected loan portfolios.
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Increased lending to the Agriculture Sector v0 21
- 1. How to increase lending to the Agriculture Sector A concept paper (in 5 steps) Comments 1 AgriFin Lending is critically important In 2014 Agriculture contributed 22.03% to Kenya’s GDP which made it by far the largest economic sector. Yet according to the CBK 2015 Annual Report, aggregate bank lending to the sector did not amount to more than 4.14% of total loan exposure in 2014. Development of a modern Food & Agriculture Sector is determined to be a national priority in which the financial sector has a critical role to play. 2 18% loan-book allocation A system of priority sectorlending has existed in India since the 1970’s. Whilst the debate amongst economist as to the merits and challenges of the system is fierce and ongoing, there is not the slightest doubt that India’s Agricultural Sector is considerably more advanced than that of Kenya. We believe Access to Finance is an important factor. A mandatory priority lending framework is phased in (step-wise, over a period of 5 years) whereby all regulated financial institutions are eventually required to allocate 18% of their loan-book to AgriFinance. 3 AgriFinance … more than farming alone At F4A we believe that all parts of the value chain are important and need support and investment. In certain crops post-harvest spoilage ratios still run as high as 40%. Banks enjoy individual strengths, and will find their own ways to operate (lend) within risk-tolerant parameters. We equally believe in the power of market-pull … investing in warehousing, logistics and processing will drive large(r) numbers of farmers towards inclusion in formal supplier networks. Clear rules are established to define what constitutes Agricultural Lending – which realistically includes the entire Value Chain (incl. inputs, farming, services, logistics, warehousing, processing etc.). There’s a role for all financial institutions well inside their respective comfort zones. 4 Non-compliance means investing in AgriFin Bonds So either way funding is channeled towards the Food & Agriculture sectors(s). Banks build their own relationships, expertise, and credit portfolio, or they pay-up for omitting to do and [indirectly] sponsor other financial institutions to do it instead. Financial Institutions that fall short pay a penalty. They shall be required to invest in low yielding AgriFinance Bonds issued by the Government of Kenya – for an amount equal to their shortfall. 5 Government to provide [very] cheap on-lending facilities The idea comes from Uganda where the Central Bank of Uganda (BoU) is running the Agricultural Credit Facility (ACF). Banks can apply for a 50% refinancing for AgriFin client loans which is made available by BoU at zero percent interest. This is then blended with the bank’s own 50% loan component which is priced at commercial rates. As a result AgriFin clients end up with an attractive blended rate (capped at 10% p.a.). Nairobi, June 2016 The proceeds of these Bonds are recycled back into the Financial Sector. An on- lending programme is established whereby Financial Institutions can refinance AgriFinance loans at very low rates, provided these rates are passed on to the ultimate borrowers (which are farmers or agri-businesses).