Perspective
26 August 2014
Farmers seek better relationships with banks
Region:
Middle East & Africa
One of the liveliest debates at the Fin4Ag conference in Nairobi centred on the responsibilities that farmers have in facilitating agrifinance. Although heated criticisms of banks’ lack of understanding of agriculture came thick and fast, farmer groups also pledged to help bridge the gap by improving their record keeping and business skills.
One of the liveliest debates at the Fin4Ag conference in Nairobi centred on the responsibilities that farmers have in facilitating agrifinance. Although heated criticisms of banks’ lack of understanding of agriculture came thick and fast, farmer groups also pledged to help bridge the gap by improving their record keeping and business skills.
One thing that both financiers and farmers agreed on is that farmers are easier to finance if they are organised in big collectives and associations.
Smallholders need to pool their resources so they are “big enough to be bankable,” Theo de Jager, president of the Southern African Confederation of Agricultural Unions (SACAU), told the 2nd African Continental Briefing, just before Fin4Ag kicked off.
By working collectively, smallholders can negotiate a better deal with private buyers and financiers, agreed David Ruchiu, Africa director for Farm Concern International.
A strong relationship with the private sector is crucial to the future of farmers, who need to wean themselves off government handouts and subsidised loans, according to Lamon Rutten, manager policies, markets and information and communication technologies (ICTs) at the Technical Centre for Agricultural and Rural Cooperation (CTA).
To get the most from commercial banks, farmers need to think like a business and observe how other sectors tap finance, Esther Muiruri, general manager of agribusiness at Kenya’s Equity Bank, told delegates on day two of Fin4Ag.
While banks have a responsibility to understand the needs of farmers Equity Bank, for example employs staff who are trained in agronomy farmers also need to prepare business plans and take steps to identify and mitigate risks before they approach banks for finance, Muiruri argues.
To do so, farmers first need to improve their record keeping. Keeping detailed records of financial incomings and outgoings
as well as the use of inputs and yield produced can create a picture of a farmer’s credit risk that banks are happier to lend against, Fred Kiteng’e, director of lending, East and Southern Africa at Root Capital, told one of the final sessions on day three. The practice also helps farmers take control of their business and improve profits.
Farmers also pledged on day three to improve the governance of farmer organisations still a major obstacle for some
when trying to obtaining finance. One delegate from Uganda’s Centenery Bank called for legal crackdowns on leaders of farmer
organisations that are suspected of corruption or mismanagement. His comments met with widespread approval from farmers and financiers alike.
Noting that the comments had touched a “nerve centre,” de Jager acknowledged the problem but said that farmer organisations need access to better training and that this is something development agencies could invest in.
Indeed, providing more technical assistance, not only in terms of governance and business skills but in technology and
agronomic practices, is something that most banks, governments officials and development agencies acknowledged at Fin4Ag as a responsibility their part of the bargain.
As de Jager summed up, loosely quoting Confucius: “Don’t give them fish; teach them how to fish.”
