The funding options available to investors in agribusinesses in Nigeria were x-rayed at a seminar organised by a women’s network in Lagos recently.
The network called NECA Network of Entrepreneurial Women (NNEW) under the aegis of Nigeria Employers Consultative Association (NECA) brought in key finance industry experts.
This included representatives of the Bank of Agriculture (BOA), Bank of Industry (BOI), First Bank, Ecobank, NNEW Microfinance Bank, GroFin and so on.
Some of the financing options highlighted include debt financing, equity financing, leasing, factoring, invoice discounting, spontaneous financing, mezzanine financing, Commercial Agricultural Credit Scheme (CACS Agricultural lending (NIRSAL), Real Sector Support (RSSF), Nigerian Incentive Based Risk Sharing System of Agricultural Lending (NIRSAL), Small and Medium Enterprises Credit Guarantee Scheme (SMECGS), Agricultural Credit Guarantee Scheme Fund (ACGSF), Micro Small and Medium Enterprises Development Fund (MSMEDF).
According to the speakers, the Agricultural Credit Guarantee Scheme Fund (ACGSF) offers 75percent guarantee on outstanding principal plus interest. It supports any business involved in farming activities and agro-processing where substantial input is from own farm
The N220 billion MSME Development Fund launched by the CBN on August 15, 2013 provides long term affordable funding to the micro businesses and SMEs. Though targeted at different industries, investors in agriculture can access it to expand their businesses.
By accessing the fund, the beneficiary would also benefit from capacity building. 60percent of the fund has been earmarked for providing financial services to women to cater for their peculiar financial exclusion circumstance.
As at 19th June, 2015, N48.03b of this N220 billion have been disbursed according to the operators.
Other means of raising Agricultural Growth Funds without collateral include
•Venture capital: – It is a means of financing fast – growing private companies and is usually provided by outside investors for financing up and coming businesses.
•Angel investors: – unlike venture capitalists, typically invest their own funds. Angel investors bare extremely high risks and often require a very high return thus making angel investing an expensive source of funds.
At the forum, participants agreed that other sources of agricultural funding needs to be developed and speakers highlighted that the CBN is proposing a framework for venture capital companies and business angels. Another means financing is being enhanced is the establishment of National Collateral Registry to also address the challenge of collateral and provide a means of borrowing without collateral based on the borrower’s good credit history.
Participants also noted that farmers can raise growth funds with little or no collateral but the journey to that transformation involves all stakeholders and it must start now.
The various institutional lenders also x-rayed the various funding options. Representative of BoI spoke extensively of its Gender Desk which has been enhanced to include but not limited to:
•Coordination of capacity building programmes for female entrepreneurs.
•Promoting collaborative efforts between the Bank and commercial banks/individuals who are gender-friendly.
•Seeking funding schemes that ease access to finance for female entrepreneurs.
Though the fund addresses other sectors, it has strong focus on agro-processing. BoI does not fund farming alone except the farmer does some level of value addition or processing.
BOI has therefore committed N5 billion to the Cottage Agro Processing (CAP) Programme to enhance value-addition through processing of agricultural products.
The CAP fund is also designed to tackle the challenges of limited capacity for processing and preservation. Beneficiaries can access a maximum of N10 Million. Interest rate for CAP Fund is 9percent..
Presently, the Bank has established relationships with some SME-friendly commercial banks to provide working capital to entrepreneurs who access long term credit from BoI.
The Bank is in discussions to with the Enterprise Development Centre of the Lagos Business School on capacity building. The Bank has accredited 122 Business Development Service Providers who are charged with the responsibility of developing bankable business plans and proposals for SMEs to facilitate their access to long to medium term finance in line with the Bank’s Risk Acceptance Criteria (RAC).
To access the facility, the potential borrower
•Formal Application Letter
•Photocopy of Certificate of Registration (Form CAC/BN/A1)
•Photocopy of the bye-law for Cooperatives
•Business Plan
•Valuation report on existing assets prepared by an accredited BoI valuer (in case of existing project)
•Value of equipment to be purchased from a BoI accredited supplier (including invoices).
•Bank Guarantee / Collateral security (where applicable depending on the value of the facility)
OLUYINKA ALAWODE
