Proposed Non-interest Finance Will Open New Funding Options For Farmers – NADF

The National Agricultural Development Fund (NADF) said it is moving to open a new pool of agricultural capital by introducing a non-interest financing framework designed to give farmers, agribusinesses and other value-chain operators an alternative to conventional funding sources.

The proposed framework is expected to broaden the financing market for agriculture by creating structured channels for deploying non-interest funds into eligible agricultural activities, while establishing clear rules for governance, risk management, operations and Shari’ah compliance.

NADF Executive Secretary, Mohammed Ibrahim, disclosed in Abuja at a strategic roundtable and validation session on the proposed non-interest finance framework and guidelines.

Ibrahim said the initiative was part of NADF’s strategy to diversify agricultural financing and expand the range of funding models available to businesses and other participants across the agricultural value chain.

For farmers and agribusinesses, the proposed framework could lunch additional routes to capital beyond conventional lending, while providing financial institutions with a defined structure for participating in agricultural interventions.

Ibrahim said non-interest finance had become an important component of Nigeria’s financial system, offering ethical, asset-backed and risk-sharing models capable of complementing conventional sources of agricultural finance.

According to a statement issued by NADF, the proposed framework would provide a structured and transparent basis for delivering agricultural interventions through licensed non-interest financial institutions, while institutionalising governance, operational and Shari’ah compliance requirements.

The framework is also expected to provide greater certainty for financial-sector operators and other stakeholders on how non-interest agricultural interventions would be designed, assessed, approved, implemented and monitored.

Ibrahim noted the documents had deliberately been presented as drafts to allow regulators, financial institutions, development finance experts and other stakeholders to scrutinise the proposals and provide technical and practical inputs before finalisation.

He added that the commercial and developmental effectiveness of the initiative would depend not only on the quality of the framework but also on strong partnerships and collective commitment to implementation.

He said, “Our objective is not simply to introduce another financing framework. It is to broaden the financing ecosystem for agriculture by ensuring that every credible financing option is available to Nigerian farmers, agribusinesses, and other value chain actors.”

“Today’s gathering marks an important milestone in that journey,” he said, urging participants to examine the draft documents critically, challenge assumptions where necessary and share practical experiences”.

Speaking at the session, the director of the development finance advisory department of the Central Bank of Nigeria (CBN), Dr Paul Oluikpe, said substantial gaps remained in agricultural financing despite the sector’s importance to Nigeria’s economy and food security.

He said the scale of Nigeria’s agricultural financing requirements remained substantial, given the country’s population and the financing challenges confronting production, infrastructure, mechanisation and other areas of the value chain.

The CBN official said the federal government’s food security objective had further increased the need for institutions such as NADF to mobilise capital and develop financing mechanisms capable of addressing gaps in the agricultural economy.

He noted that the CBN’s development finance advisory department had moved away from direct developmental interventions, making institutions such as NADF increasingly important in responding to the sector’s financing requirements.

Oluikpe also welcomed the proposed non-interest finance framework, describing it as an opportunity to bring an often-overlooked financing model into the mainstream agricultural finance market.

Oluikpe said, “With the non-interest finance framework that is being looked at and validated today, it’s really a key opportunity for us to bring in that particular dimension, because oftentimes it’s overlooked.”

Also speaking, the deputy chairman of the CBN’s Financial Regulation Advisory Council of Experts (FRACE), Professor Bashir Aliyu Umar, said the initiative was consistent with efforts to deepen financial inclusion and broaden access to finance.

Umar said the integration of non-interest financing into the formal financial system formed part of wider financial-sector development efforts, noting that several development finance institutions had introduced or were considering non-interest finance windows.

He said the NADF framework could expand participation in the formal financing system, particularly among agricultural stakeholders who had access to alternative financing structures.

Umar said, “What we are witnessing today is also following this trajectory of financial inclusion and easing access to finance and having a level playing field and even developmental perspective for the whole country whereby no segment of society is left out.”

Providing an overview of the proposed financing architecture, NADF’s Head of Investment, Olalekan Alabi, said the framework and guidelines were designed to establish a structured mechanism for deploying non-interest financing to eligible agricultural activities and value-chain interventions.

He said the framework would define the institutional and operational architecture for NADF’s non-interest finance activities, covering governance arrangements, institutional responsibilities, financing approaches, risk management, compliance and controls.

Alabi said the accompanying guidelines would translate those principles into practical procedures for implementing specific financing interventions, providing operational clarity for institutions involved in the funding process.

He said the validation exercise was intended to determine whether the proposed framework could withstand technical scrutiny and operate effectively in real-world agricultural financing transactions.

Alabi said, “Together, the framework and guidelines are expected to provide clarity on how NADF’s non-interest financing interventions will be structured, assessed, approved, implemented, monitored and reported.”