Kabir Mohammed Adamu, the Managing Director of Bank of Agriculture (BOA), in this interview with ISABEST OMOREGBEJI speaks on the journey of actualizing the mandate of BOA and experiences in driving the CBN Anchors Borrowers Program. Excerpts.
Can you let us into the mandate of the Bank of Agriculture?
The Bank of Agriculture was established over 40 years ago, exactly around 1972 and the mandate was to extend credit facilities to smallholder farmers to make them stronger to increase the agricultural output.
Apart from Agriculture we also support the non-agric sectors; we support women so that they can increase their capacities in various trades. Another mandate of the bank is creating employment amongst the youths, currently the social problem bedeviling the country has to do with unemployment and lack of economic empowerment, we are focusing on those key areas to make the youths more productive by providing avenues to make them have more opportunities to be self employed. Basically those are the things that we do.
To what extent will you say the bank has achieved its objectives?
Well, over the years I can say the bank has done a lot, before now farmers in Nigeria depend mainly on local techniques in carrying out their farming activities, but with the coming of the bank, we have been able to introduce different kinds of modern farming techniques that have helped to increase farm output.
Fishing for example has always been at the subsistence level. The fishermen do it locally, they go on manually driven canoes and fish with the primitive kind of equipment but today it’s no longer so, we now have fishing boats as well as other tools that make their job easier and more efficient.
Before now there was nothing like the economy of production budget. That is to say people don’t apply scientific analysis to farming to say for example this sector of land, I need to invest so much amount of money in inputs, in labour for me to be able to achieve the desired yield volume, but today because of the training we provide the farmers and the improved seeds we also give them, they can do that.
So you can see that there have been a lot of improvements in that regard. Very clearly the government has done a lot over the years to make sure farmers are supported in clearing the farms and all that but today it has transcended beyond that.
Apart from government support, farmers have formed cooperatives to support each other. Even the coming of cooperatives in farming is as a result of the bank’s intervention and I can go on and on to say what the bank has done over the years to impact positively to the growth of agricultural outputs in Nigeria.
Now that the raining season is by the corner, farmers will be expecting to go back to their farms. With the level of insecurity and attacks on farming communities don’t you think in the coming years famine could be inevitable?
The most affected areas of this kind of attacks are around the North East and even in the North East it’s not all areas that have that threat. The target of Bank of Agriculture is to cover about two million farmers, the challenge that we may face is the numbers, if we don’t start in good time we may not be able to cover the whole two million and that’s why we have decided to start opening accounts for farmers that don’t have such accounts now, capture their data, do the biometrics, and then do the farm mapping.
As soon as we are able to achieve this between now and middle of April then we will be in a very good position to start distributing the inputs.
I’m sure by then the first rain must have dropped in almost all the regions of the north effectively to start planting. And if all this is achieved in good time, I think we’ll have a good harvest and there would be abundance of food.
Sir, how much has been released from the Anchor Borrowers Programme as loan for the Farmers since the Programme started?
The Anchor Borrowers Programme has from inception through the Bank Of Agriculture disbursed N28.2 billion to 160,650 farmers across the length and breadth of Nigeria to cultivate about 191,077 hectares of agricultural land. This will in the coming year have a very positive impact on the food security in Nigeria.
What is the update on loan default?
You know with the interest that farming has been generating since the coming of this administration, even after the flag off of the Anchor Borrowers Programme in 2014/2015 farming season, those that defaulted were barred from participating in subsequent seasons. It is one of the policies of the bank that if you owe you cannot be supported in any way and that is even a requirement from CBN. And that is why before the BOA give credit facilities we usually carryout credit search at the CR&F at the CBN and also involve one credit search agency, so with those two the bank will be able to be in a position to better determine the credit worthiness of the customer.
The bank is also able to know the state of the outstanding loans. With that, the bank has good information to take its decision as to whether to go ahead and support the customer or not. Certainly any customer that has bad credit history will not be allowed to participate. With this entire arrangement in place the farmers are aware that if they default they will be losing in the long run. So the bank, based on the credit policies, agreed to listen to reasons why farmers were unable to pay. Some of them were because of natural factors like low rainfall, pest infestation and even drought; that led to poor output. There are some areas too where there are insurgencies like in Borno State where the insurgents deliberately set some of the farms on fire for which we have received factual evidence. But there are some that deliberately decided to divert the produce. They did not allow the off-takers to up-take; they sold it by the side, realized their money and ran away. But we’ve put measures in place that unless you repay you will be exempted from further participation. It has greatly impacted positively on the totality of our programmes.
You know this credit support that they’re getting is not a political lie that some of them thought but a magnanimous credit support from government to encourage farming so that people’s lives can be affected positively by getting employment and creating wealth for themselves.
Is there any exception in the treatment of people who default in repaying the loans as a result of their farms being destroyed by terrorist?
Well I don’t know what you mean by exception, but credit process is supposed to be a culture whereby people become used to repaying. If you give exceptions just like that, you are destroying that good credit culture, then people will come up with different reasons on why they will not pay. There are no exceptions as far as this is concerned, loan default is a breach of trust, and there are no exceptions than to deny defaulters the needed support. In fact farmers are aware that if for example a member of their cooperative defaults it counts against their entire group so they contribute money to pay off outstanding debt against that defaulter so that they can continue to receive support. They don’t want to allow him to create problems for them because the bank will withdraw further support for them.
Sir, permit me to digress a little, from your explanation there seems to be a little similarity between the intervention of the Bank Of Agriculture and the Central Bank Of Nigeria’s Anchor Borrowers Programme?
Well, for your information, the Central Bank owns 40 percent of Bank of Agriculture, the other 60 percent is owned by the Ministry of Finance incorporated, while the Ministry of Agriculture and Rural Development drives the Federal Government’s initiative in agricultural transformation, it supervises the bank. So it’s not surprising if CBN apart from its mandates in developing the economy is also into what BOA is doing, at a higher level, we are partners.
Currently we are the main platform where the Anchor Borrowers programme is deployed. There are Participating Finance Institutions (PFIs) that are involved but BOA remains the major arrowhead that is involved in the implementation of the programmes.
Sir, our small scale farmers keep complaining of problems in accessing credit facilities, they complain of stringent conditions in accessing these loans, as a development bank what are you doing to change this?
You see, Nigerians, we have to be very honest whenever we complain. Often people complain without understanding what the problem is. As a banker, I know the basic requirements to open an account is universal, either commercial, agriculture or any development finance institution. It is the same thing, you have to meet the know your customer (KYC) requirement before an account is opened. I cannot understand why people will now complain that opening an account in a development finance institution is more difficult than the commercial bank. But they don’t complain about the commercial banks because it is an accepted requirement, if you don’t meet the requirements there is no way an account will be opened, if an account is not opened there is no way you can access any facility that is available in that bank. I think that it is not true that it is difficult to access facilities at the BOA, in fact it is easy in the sense that we go to the farm lands with our phones and our computers to register and open accounts for our customers right in the field. So you cannot have it better than that. Another thing is the issue of farmland, some of them will say – there is a requirement for you to have a farmland before you’re granted credit facility. Somebody once said that if you don’t have a farmland for goodness sake why would you come to the BOA seeking for loan? Are you going to farm in the sky? It is not possible. So the issue of farmland nobody is saying that if you have a farmland a collateral arrangement will be created on that no.
The programme requires that we capture the coordinates of the farm so that we know that there is a farm that is being utilized for agricultural purposes. Once we are able to capture that and we get the co-ordinates, what that does is another farmer cannot lay claim to the land.
If another farmer comes to say that this is my farm land please provide me with support the moment you go into the banking software it will reject it by reflecting that,- the farm has been registered by someone else and you cannot have one farm covering two customers. Aside from that our interest rate is low, single digit 9%. There is no bank in Nigeria today that lends as low as that. Today we are trying to even get funding from outside in a manner that we can further defray interest rate because we still feel that 9% is not good enough when you’re thinking of developing an economy, when you talk about diversifying an economy, when you talk about empowering a people, creating wealth, creating employment. There is definitely the need for you to have an interest rate that is as low as possible because we believe the lower the interest rate the lower the risk of default.
Sir, talking about default, there are some persons that have benefitted from your loans but in terms of repaying they fail or have even diverted the loan to unprofitable or other purposes other than agriculture, what are you doing about this?
You see, the first step is creating quality credit facility. That I can say is the first critical step to the problem of default because if you create quality risk assets, people will certainly pay. What we have been doing particularly in our agricultural loans, we don’t give out facility in cash alone. A part of it is given in inputs, part of it in cash. Like in every agriculture, what you need as inputs are the seeds, fertilizers, pesticides, bags and so on. So we now create what is called a per hectare budget, each hectare in different location, we now say that you require so much quantity and blend of fertilizer, pesticides, seeds and so on. And then the labour element of it, that is the amount of money you pay to people that work on the farm either in the time of planting, weeding of grasses or at the time of harvest because you need to employ people manually to work on the farm, we also grant cash credit for that. Why we do that is to ensure that there is no diversion. Even for fisheries we don’t just give you money to go into fishery or livestock we don’t do that. There is part of the credit that is granted in input supply, part of it granted in cash.
Apart from diversion it also ensures that you get the quality inputs for your agricultural activities. And therefore the inputs suppliers are companies that are recognized worldwide and their products have being tested and certified by agricultural regulatory institutions across the country, so we do that. In addition, we are trying to automate our processes in a manner that we’ll be monitoring what the customers are doing while in our office such that we know that you can look at our dashboards at different locations and monitor what customers are doing and be able to even connect with them online, identify with them and find out if there are problems and assist in finding solutions to those problems. That way, we reduce the opportunity for diversion to the barest minimum.
There is what we call extension service workers, we have quite a lot of them and that is why we are partnering with crop farmer associations like RIFAN. RIFAN is giving us good support in that regard because their officials are always with us at the national, state and local levels, monitoring to ensure that funds are not diverted and whatever is given goes into farming activities. At the time of harvest we are there to ensure that produce are harvested and up-taken. We don’t only provide the credit but also provide the market for the farm produce. For example under the Anchor Borrowers Programme we have what is called off-taker.
The off-taker usually is a processing mill, if the farmer is granted the credit facility to plant rice, at the time of harvest there is already market, a processing mill designated as off-taker uptakes whatever is produced and pays the money which goes into the farmer’s account and liquidates the facility and whatever is the difference is the customer’s profit.
Sir, apart from what you met on ground at BOA, what are the new reforms you are bringing in to change the operations of this bank?
Well, when we came in, first and foremost was governance, which is key. It is a big problem and no matter what you do you’ll not get there unless you correct that. We have put in place governance structures, when we came in there was the need to strengthen the risk management department and we have been able to do that, bringing risk management to the table of a director, we have an executive director that is in charge of risk management. We have also introduced basic automation in the bank whereby customer’s data are captured into the bank’s database. That will prevent, duplicity, several customers using the same key KYC requirements. For example when we came in we had in some instances more than one account with the same BVN. Now with the basic automation we have started, it is no longer there. We have focused on capacity building, training our personnel, and even farmers on new techniques that will even improve yield, production and so on. We have collaborated with over five development finance institutions across the world within the short period that we have been here. We have also been able to initiate discussions with some development partners and investors across the world that are ready to bring funds into the bank. We have looked at our financial books over the years. Three years prior to our assumption of office we have being getting penalties from CBN for non rendition of our financial books. This year, God willing, we are going to render them on time and not only that, it is going to be different because we have done a lot to clean up the books and make them more attractive to investors. We are increasing the branch network. We have realized that the potentials in agriculture are so huge in the country. What we are projecting is that in the next two years we will have like five million customers on our database. How do we do that?, we want to bring banking to the door steps of customers thereby meeting our mandate of financial inclusion, thereby providing services to rural communities. How do we do that?, we have already collaborated and signed MOUs with NIPOST, we are going to have 774 branches over the next two years so from next year in most of the NIPOST locations you’ll see BOA. When you came in you saw some IT service providing company that we are talking to, we want to provide IT products and services to our customers so that a farmer in the rural area does not have to travel all the way to urban cities for simple financial transactions that can be done using his phone or handset. We are doing quite a lot.
Without prejudice to the Federal Government’s efforts to ensure that Nigerians really get the change they voted for, there are still high rates of poverty in the land, youth unemployment, dependency on foreign goods, and you know the foreign exchange now. What’s your take on all these?
You see the whole idea is to ensure, like the President directed, that we produce what we consume. If you are able to achieve that, we would have created employment; we would have taken care of poverty. We would have alleviated it to the barest minimum because the parents would have enough food to eat, you’ll have also provided saving in terms of foreign exchange because the forex that you use to import would be retained. Take for example the issue of rice importation, so much have been saved on rice importation. We would also diversify the economy because the issue of depending solely on oil and gas revenue will no longer be, though it will still be there but will play what is call value addition in the economy.
But then, if you’re talking of reach, the impact is in agriculture, you look at the value chain, it entails production, processing, transportation, marketing and the rest. So if you look at the value chain and activities along the value chain it is inexhaustible for you to say this is the limit that you can reach in creating employment.
Agriculture remains the only and the greatest sector that can take us out of poverty. The bank is doing a lot in financing activities along the agricultural value chain and you know what it does, because when you’re granting credits it is not just giving out the money you want to analyze in terms of the viability of the money you are giving out, you’ll want to see the potential of its growth, you’ll want to see its sustainability. So when you look at all these things together you’ll see that by the time that we are able to achieve all that the government had set we’ll be out of poverty.
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