Sources of Agricultural Finance (Loan)
There are different sources of agricultural finance loan option available for farmers across the agricultural value chain. This topic takes a keen look analyses on the different sources and types of agricultural loan available in Nigeria
FINANCE
- Finance is a very important aspect of human being in running their daily activities and in keeping the body, soul and mind together.
- It is so vital that it provides for everything that we need to live our life (except for the air we breathe in).
- The only instrument for finance is MONEY, irrespective of its denomination.
BUSINESS FINANCE
- Finance is very essential in other to start a business or maintain it. Getting the necessary finance to start up a business is the most challenging part.
- Except you are born into a wealthy family, difficulty in getting startup capital can lead to the end of your business idea and kill your entrepreneurial spirit.
- Once you are able to startup a business no matter how small, growing the business is another hurdle to be crossed. Your ability to survive this will determine the lifespan of the business.
- However, in Nigeria startup capital and capital for growth and expansion is a very difficult challenge due to policy and economic instability.
AGRIC FINANCE
- In as much as getting startup capital is difficult, the financial institutions in Nigeria are always reluctant to finance Agric business projects despite the fact that there is always a ready market for Agric produce.
- The excuse is that Agricultural production is too risky for them to invest in rather they prefer to invest in the processing aspect of Agribusiness because it falls under manufacturing.
- They have forgotten that the raw materials for the manufacturing firms are basically and primarily Agric produce directly or indirectly.
- If these raw materials are not locally sourced and become scarce because of lack of finance to increase productivity, they will be imported and this will have an effect on the cost of the firms’ products and the economy.
IMPORTANCE / BENEFITS OF AGRIC FINANCE
- Job creation
- Employment generation
- Increase Agric farm output/produce
- Increases income of farmers
- Encourages technology utilisation
- Boosts the economy
- Prevents malnutrition
SOURCES OF AGRICULTURAL FINANCE
- Finance for Agric business can be sourced from different places such as personal savings, family and friends but this is not enough as sometimes you may not even get any from this source.
- However, financial institutions in Nigeria now provide funds for Agribusiness but not all of them.
The following are the sources of Agric finance
- Commercial Banks
- Microfinance Banks
- Cooporatives
- Bank of Agriculture
- Bank of Industry
Let us analyse each of this sources
COMMERCIAL BANKS
Commercial Banks have been known to be very discrete and beaurucratic in the approval & disbursement of loan most especially Agribusiness loans. They see Agribusiness as a very risky business as a result they don’t believe in its viability except if it has been in existence for some years.
However, some commercial banks now have special package for SME’s as they now see the need to improve and boost the nation’s economy through them. Agriculture and Agribusiness are categorised under the SME package.
The customers of SME package enjoy great benefits one of which includes loans. Some of the banks are:
- Fidelity Bank
- United Bank of Africa
- First Bank of Nigeria
- Access Bank Plc
- First Bank of Nigeria
- StanbicIBTC
- Ecobank
MICROFINANCE BANKS
The following are the Microfinance Banks that provides finance for Agribusiness
- BOWEN Microfinance Bank
- ACCION Microfinance Bank, etc.
- These microfinance banks have different loan plans, repayment structure and interest rate.
COOPERATIVES
- Cooperatives are a wonderful source of funds for any business either small or big. This is because they operate a pool of funds from members contribution which may be daily, weekly or monthly.
- It is safe, reliable; it comes with low interest rate, flexible repayment plan and tenure.
- Locate any multipurpose cooperative society today and begin to enjoy access to funds
BANK OF AGRICULTURE (BOA)
- It is owned by the Federal Government of Nigeria while their activity is managed by the Central Bank of Nigeria.
- The bank offers different types of loan to practicing farmer. The bank from its name is basically for people engaging in Agribusiness.
- Account opening is very easy, you can operate a savings (individual) or corporate account (organisation).
- They offer Micro Credit and Macro credit funds to people, with no collateral from N250,000 to N1,000,000.
- Interest rate is as low as 12%.
- Repayment tenure is 1year with 3 months moratorium.
- You are eligible to apply for loan after one month of operating the account.
- Your site will be inspected and you will be interviewed before final disbursement of loan.
BANK OF INDUSTRY (BOI)
- The Bank of Industry was established by the Federal Government of Nigeria to support industrialization that cuts across different sectors to provide special funding for startups and established firms.
- Bank of Industry offers various loan funding package for Nigerian entrepreneurs depending on the sector their business falls into.
- These are the following loan funding windows from Bank of industry.
- GRADUATE-ENTREPRENEURSHIP-FUND
- AGRO-PROCESSING GROUP
- BOI – DANGOTE FUND
- BOTTOM OF THE PYRAMID
- CAP FUND
- CASSAVA BREAD FUND
- COTTAGE FUND
- FGN SPECIAL INTERVENTION FUND
- STATE MATCHING FUND
Visit their website at www.boi.ng for more details.
CONCLUSION
- Obtaining loans for Agribusiness is as easy now, just identify the one that suits you and your business.
- While planning on the loan you want to obtain from any of these sources you must put your repayment plan and capability first, this is to ensure that you don’t get indebted to these financial institutions and as a result end your dream.
A call to Action!
Are you interested in Agriculture, do you need a land to start with, do you require the right technical skills to start, grow and be successful, call us now and get 1 Acre (6plots) of Agricultural Land for N400,000 and 1 plot for as low as N8,500 within one year.
For the right training, skills acquisition and mentoring, business plans, marketing in Agriculture call us today on 07086221295, 08093582213.
