A major constraint to the agricultural sector’s growth is access to loans. The Managing Director/Chief Executive Officer of the Bank of Agriculture (BoA), Dr. Mohammed Santuraki, says the bank has been repositioned to address this challenge. BoA’s warehouse receipt initiative, he says, will also assist farmers to overcome the challenge of storage facility, which forces them to sell produce at less profitable prices. He speaks on the need to recapitalise the bank, its loans recovery efforts and other major issues, in this interview with FRANK IKPEFAN.
What have you done since you became the bank’s chief?
When we took over the then Nigeria Agricultural and Cooperative Bank (NACB), as it was then called, the institution was in comatose. It was more or less like a dying institution largely because the bank did not have sufficient lending resources and it had a lot of non-performing loans. We can also say that risk management was very weak. Most of all, staff morale was very low because as you know, the NACB was the result of a merger of three institutions: Peoples Bank, the then NACB and then part of the FEAP.
So that was the situation when we came. The government was actually not paying too much attention to the bank. When we came, some of my friends did not know that the bank was still in operation. What we did was to put in place things that would turn around the fortunes of the bank. After nearly four years, we are very happy that the bank has been fully repositioned, of course, with the help and support of the stakeholders.
Since we arrived four years ago, we have been able to bring in additional resources totaling N28 billion to the bank because of some of the efforts we have done. We have rebranded the institution from the Nigeria Agricultural Corporative and Rural Development Bank (NACRDB) to the Bank of Agriculture (BoA). New corporate colour, new branding. It is not just the colour, what we want to do is work on the mind of the people to present ourselves as a new institution.
When we came, the operations of the bank were largely manual and we have computerised the bank. We have various IT projects going on; about 13 of them, some of them have been completed. Some of them we are still working on. We are rolling out the computerisation initiative branch by branch. We are taking on branches as we progress. Just to summarise, our transformational change was based on four points; the first point is modernisation. For modernisation, we meant rebranding and the issue of bringing in new technologies, we have substantially done that.
We also did institutional refocusing mainly to refocus the institution on its core mandate, which is providing loans to farmers; small, medium and large, and along the whole value chains that are for production, processing, marketing. So we will focus on the institution, improve the credit risk management framework, which is very important for any lending institution because if your risk management framework is not solid, you will create substandard assets which leads to non performing loans.
The third one is work force enhancement. This is bringing our people up to speed in terms of training in the areas of strategic support, core competences such as lending, deposit administration and technical issues lsuch as IT. We have seriously enhanced the level of the skills of our people. We also did operating model review. But that has been a bit interrupted because of the planned partial privatisation which is obviously going to lead to a major review of the way the bank runs.
How has modernisation affected the programme?
The modernisation, which I told you earlier, has two focuses: the rebranding and bringing in of new technologies, which also involved the retooling of our offices. First, I think the rebranding has had a tremendous effect because we have come out as a new institution. The NACRDB brand is very strong, no doubt about that, especially in the rural areas and so on. What we have done is to refresh and we are a much more visible institution. We are now preferred partners for a lot of stakeholders in the agricultural domain. For example, as part of the increased visibility we have been able to get, we currently have 16 ongoing partnerships with governments and other ministries departments and agencies (MDAs) that are involved in agricultural production. What we do with this collaboration is that we create funds with the government and other interested parties. They put money, we put money and then we lend the money to their farmers.
As far as this is concerned, we have about 16 of such going on and we have attracted about N11 billion with respect to that – fresh funds that came in from our partners to pursue this programme.
On the issue of technology, this has eased a lot of things. We are adopting the 21st Century approach to doing business and our branches are being computerised. Our communications are also very up to date. In our head office, we have a desk of breed data centre which we set up with facilities where all the data in the bank is housed and where all the technology is distributed to the branches. We are now piloting our mobile money services and BoA Green Cash. We are doing it with a technology partner called Cellulant. Very soon, we are going to roll out that scheme. This is going to be the standard for rural and agricultural payment system and we are going to leverage the farmers’ registration activities of the Federal Ministry of Agriculture and Rural Development. We are going to leverage the customer base we have there in order to push this card. Incidentally, the consultant that worked on the farmers’ registration is the same we are using. So there is a lot of interface as far as that is concerned. Technology is also reducing the cost of delivery and increasing penetration and financial inclusion which form part of the bank’s major objectives.
How have you been able to achieve the bank’s mandate of providing loans?
Well, in the last three years, we have been able to mobilise additional funding to the bank. Over the last three and half years that we have been in the management, we have disbursed over N18 billion in loans to about 471,000 beneficiaries, and we believe that we have been able to create 2.4 million jobs. That is the impact we have created and we think that this is great and with the continued availability of additional resources, we are going to do more.
Can farmers access some of these loans without any collateral?
Right now, we have a focus on small scale farmers. Like you know, the bulk of food production in this country, may be between 80 and 90 per cent, are done by small scale farmers. The tendency is that you are going to get more requests from the small scale farmers in terms of the aggregate request and so on. We have three categories of loans in terms of values. We have the micro loans, which are up to N250,000. Then we have the Small and Medium Enterprises (SMEs) loan, which can vary from N250,000 to maybe, up to N50 million. Then we have agribusiness loan which is actually for the large scale farmers. It is anything above N50 million.
For the small scale farmers, there are micro loans N250,000 like I said. Usually, we disburse these loans through cooperatives and farmers’ groups. For those categories of loans, you do not require any collateral. What you do require is somebody to guarantee you and that person can also be a part of the group. What we rely on is some kind of cross guarantee. For the medium scale loans, yes, usually we require collateral, but there are all kinds of new schemes now. There is a Nigeria Incentive Risk Base Agricultural Lending, which is a Central Bank of Nigeria (CBN) initiative providing some guarantee for agricultural loans. What it does is that the system guarantees part of the loans and reduces the level of collateral required for the loan. So, that is possible. And we also have creative arrangement where agricultural loans can be secured on the basis of the contract from your off takers. So what we are trying to do is improve the link between production and the industrial sector, which has actually been lacking, and that has been one of the reasons agriculture has moved the way it shouldn’t have. I mean if we have large scale processors who are really buying commodities in bulk, what it will do is to push up production and therefore, farmers will be encouraged to produce.
And access to us is very easy. We have about 136 outlets throughout the country. We have six zonal offices; an office in each geopolitical zone. So, we are present, especially, in the rural areas. In some of the rural areas that we are situated, our bank is the only institution in some of those areas. What you find is that one part of us is doing agriculture financing and the other is doing non-agric lending. We also render the normal banking services. Some local governments and rural enterprises pay salaries to their staff through our banks and so on. Apart from the agricultural micro loans, we also do non-agric micro loans. Anything up to N250,000 for micro activities, artisans, tailors and those kinds of small levels. We also do that in addition to our agriculture and rural mandate and of course, that part of our mandate was inherited from Peoples Bank. So we do all those things that the Peoples Bank used to do. I mean some of these things are just a misconception. People think it is difficult to get loans from banks generally and then conclude that it would be difficult to get agricultural loan. What you need to do is ensure that you have the farm or business that you want to finance because ours is a supervised scheme, which means we have people who will come to your farm to take measurement to see what you are doing. We give you the first disbursement and then when you have done that correctly, we give you the second to ensure that you are really an agricultural entrepreneur or a small scale farmer.
Which aspects of the agricultural value chain is the bank not active in?
I think I must give credit to the current Minister of Agriculture because what he has done since he came has redefined agriculture to include everything throughout the value chains: production, processing, storage and marketing. Before we came, NACRDB had suspended storage and marketing loans because they believed those were not part of agriculture. But you know, quite arguably, they are very important part of agriculture because the challenge of agriculture is that when a particular crop does well in a season, everybody moves into that crop and then you have a bloat, and then the prices crash. The following season they leave it and then there is scarcity, then prices go up, then farmers come back again the following year.
This happens because of lack of adequate storage and proper value chains. If you have marketing accumulators as we call them, who will actually buy these things in bulk, then the farmer is better and able to manage his production. So, we have reintroduced the marketing loans, which we believe is very important. We now have loans for storage, marketing and part of what we are doing because of the efforts that we are putting in that area is that recently, I led the working group for the establishment of the electronic warehouse receipt system, which we launched under the Nigeria Commodity Exchange.
Now, what we are trying to do with that is to improve access to finance because if we have a proper warehousing system, the farmers can bring crops to store, get a receipt and use that receipt to go to a bank to collect a loan while these crops act as security. The irony of agriculture is that prices are lowest during harvest because of the supply and then farmers are usually compelled to sell at harvest because they don’t have money.
So, if they have the facilities where we have a warehouse receipt system then they will be able to store their crops and wait until the prices go up to be able to sell. That is one of the schemes we have just launched and we are committed to the project. Right now, we are financing receipts that are issued by the recognised warehouses.
Another thing that it does is to improve volumes because commodity grain trade depends on a lot of volumes. If you have volumes and consistency then the trade will be very vibrant. With the proper warehouse receipt system we are piloting in this country, once we mainstream it and the adoption becomes nationwide, you are going to have better links with the agricultural sector and the industrial sector. If you look at the countries where their agriculture is very vibrant and even back to the 60s when we had the marketing board, they performed a very important role. Their role is to accumulate; they buy from the farmers. So farmers have a market, they sell and then the market (board) accumulates and either sell to the export market or sell to the industrial users.
Now with the scrapping of the marketing board, no institution has actually come out to take their place. So, the farmers are left on their own as there is no link with production and marketing. That is where we think the aspects of marketing, storage and processing are very important.
Another area we have revived the bank’s participation is in the area of processing. In the past, the bank was looking at processing as a different business. But it is all part of agricultural business. We now have facilities for processing; storage and marketing. Initially, the concentration of our portfolio was on the production and in the beginning of the value chain, but now increasingly, we are shifting the bank to participate in the downstream of the value chain.
Can we have a percentage distribution of your total lending?
I don’t have that right now.
What are your programmes and their targets?
We have two new products: one that targets youths, which is Youths in Agriculture Revolution in Nigeria (YARN) and the other which is Grow and Earn More (GERM). You can see the word YARN as a youth word. What we are trying to do is to come up with acronyms that fit the occasion we are trying to target. For this, we are targeting the youths especially, very educated youths and the loan limit for that scheme is enhanced up to N1million. This is for youths who have been trained. We are working with Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) and other enterprise development centres. What they do is that once the youths have experience and may have undergone the training, we now come in with the intervention.
Similarly, we have for women, the Grow and Earn More. For women, we found out that women are good borrowers. They usually pay back because of family concern and then the impact you create when you give loans to women is usually very significant because it impacts the family and so on. So, we have those schemes that we are running. For the youths, what we do is that during service orientation for corps members, people invite us to come and give talk to youths so that we can ignite their interests in agriculture. Those are the two programmes we have.
How many youths do you target for this scheme?
Our initial budget because of limitation of resources is N1billion funds for youths and N1billion for women. We are looking at an average of may be 750,000. We are more particular about the quality rather than the numbers. We want economic activities that are reasonable and sizeable so that you can have youths employing may be five to 10 people. So, that is what we are doing. Initially for N1billion, we are targeting about 1,500 for each. What we want to do is come up with a system that works, that can be replicated.
Looking into the future, what do you have to offer?
In the future, we want to expand the level of our activities. We are pursuing the recapitalisation of the bank; we are still not there yet. Some of our stakeholders are yet to pay up some of the committed resources and then of course, as you are aware, the government is partially privatising the bank, the two banks actually; the BoA and the Bank of Industry (BoI). They are all slated for partial privatisation so we are at the moment working with the Bureau of Public Enterprises (BPE) in order to achieve that.
That is one. On the issue of the current programmes that we are doing, we still have a lot in the pipeline. For example, we still have additional collaboration agreement that we are pursuing with our partners, so we are still going to drive that. We have the issue of ongoing computerisation programme. For us, those are the key areas we are trying to strengthen.
How far have you gone with the issues of non-performing loans and recovery?
We have done significantly well because we set up a new independent loan recovery unit and I can tell you that the unit has done very well. I can say that in the last four years, we have recovered about N22 billion because of the efforts of the new loan recovery unit. Apart from the loan recovery unit, we have also set up the risk management unit. Our loan process now is much more rigorous. In addition, we have also set up internal control department to complement the efforts of audit department.
What changes did you bring to your risk management framework?
In line with the new emphasis on risk management framework from the CBN, what we did was to come up with risk management framework. We got JPMG professional services to come up with a risk management framework for us. We now have a full fledge risk management which looks at every risk from liquidity risk to market risk and of course, credit risk. As part of our credit processing, before a credit is approved, it has to go through risk management. The bank did not have that before. So, the people, who are in risk management, don’t usually have interactions with the customers. They are more neutral and are able to exercise their opinions better without creating bottlenecks for the process.
