A PAPER PRESENTATION ON

FINANCIAL SERVICES TO

PROMOTE MECHANIZATION BY

BANK OF AGRICULTURE

(BOA)

May 4, 2016 1

May 4, 2016 2

OUTLINE OF PRESENTATION

• INTRODUCTION

• FINANCIAL SERVICES OF BOA

• BOA/FEDERAL MINISTRY OF AGRICULTURE AND

RURAL DEVT PATNERSHIP ON

IMPLEMENTATION OF AGRICULTURAL

TRANSFORMATION AGENDA PRIVATE SECTOR

DRIVEN MECHANIZATION INTERVENTION

PROGRAMME

• MECHANIZATION INITIATIVE OF BOA

• CHECKLIST OF REQUIREMENTS FOR ACCESSING

AGRIBUSINESS FACILITIES FROM BOA

• CONCLUSION

May 4, 2016 3

INTRODUCTION

Bank of Agriculture in Perspective

Bank of Agriculture (BOA) Limited was

incorporated as Nigerian Agricultural Bank

(NAB) in 1972 and became operational in

1973. In 1978, the i stitutio ’s name was

changed to Nigerian Agricultural and Co-

operative Bank (NACB) Limited to reflect a

broader mandate. In October 2000, following

the Federal Go er e t’s efforts to streamline

the operations of its agencies, the NACB,

Peoples’ Bank of Nigeria (PBN) and the risk

assets of the Family Economic Advancement

Programme (FEAP) were merged to form

Nigerian Agricultural, Co-operative & Rural

Development Bank (NACRDB) Limited. Ten

years later, in October 2010, the bank was

rebranded and it adopted the new name Bank

of Agriculture Limited as part of its institutional

transformation programme.

Key Mandates

The Ba k’s key a dates are: • Provision of agricultural credit to support all agricultural

value chain activities.

• Provision of non-agricultural micro credit.

• Savings mobilization.

• Capacity development through promotion of co-

operatives, agricultural information systems, and the

provision of technical support and extension services.

• Provision of opportunities for self-employment in the

rural areas, thereby reducing rural-urban migration.

• Inculcation of banking habits at the grass-roots of the

Nigerian society.

4 May 4, 2016

Strengths

• Nigeria’s largest de elop e t fi a e i stitutio a d leadi g agri ultural fi a e institution.

• DFI with the highest rural operational coverage nationwide, with 110 outlets

nationwide, 6 Zonal Offices and a Head Office.

• Highest interaction/interface with rural farmers with deep institutional

knowledge of rural and agricultural finance.

• Over 40 years experience in rural and agricultural finance.

• Strategic partnerships with USAID MARKETS, IFAD, World Bank, RUFIN and

ECOWAS Funds, Federal Ministry of Agriculture & Rural Development, Federal

Ministry of Women Affairs, State, Local Governments and other stakeholders in

agriculture.

5 May 4, 2016

FINANCIAL SERVICES

The financial services of the bank are classified into credit delivery services and

savings mobilization services.

CREDIT DELIVERY SERVICES

Direct Credit Products

Micro – Credit

Developed for financing both agricultural and non-agricultural activities with a

maximum loan volume of N250,000.00

Small and medium scale Loans

Developed to finance agricultural and agro-allied activities with loan volumes

ranging from above N250,000 – maximum of N50 million.

6 May 4, 2016

Financial services cont’d.

Agribusiness Loans

Developed to finance agricultural and agro-allied activities with loan volumes

ranging from above N50 million – a maximum of N2 billion single obligor.

Marketing loans for Agricultural Commodities

In order to ensure prompt repayment of loans taken by the large scale crop

farmers, the Bank introduced the commodity marketing loans. It cuts across

the micro-credit, SME and Agribusiness loans.

On-lending Credit Product

This is a lending strategy through which the Bank partners with States, Local

Governments, Agricultural Financing Agencies, NGOs, Community Based

Organisation etc. to reach larger segment of Nigerians especially the under-

privileged and rural poor with micro-credit for enterprise development

7 May 4, 2016

Financial services cont’d.

Collaboration

This involves the establishment of formal relationship with a third party for the

purpose of implementing agricultural credit projects jointly. It is another strategy

through hi h the Ba k rea hes lie tele at the grassroots. “o e of the Ba k’s collaborating partners are: Federal, States and Local Government Agencies, NGOs,

Micro-Finance Banks, Micro-finance Institutions, Financial Co-operatives etc.

Credit Products For Nigeria Youths And Women

The Bank in its efforts to expand its financial inclusion activities introduced two

credit products viz: Youths Agricultural Revolution in Nigeria (YARN) for Youths and

Grow and Earn More (GEM) for Women.

YARN – Developed to encourage Nigerian Youths to key into agriculture and

take it as an investment or as a business.

It has the following features:

8 May 4, 2016

Financial services cont’d.

It has the following features:

• The maximum loan limit under this product is N1 million per beneficiary.

• The beneficiaries must be small holders as defined under the Nigeria

Incentive Risk Sharing for Agricultural Lending (NIRSAL) guidelines.

• To facilitate unhindered access by these target groups, the beneficiaries

need not have collaterals but must provide acceptable guarantors.

• The loans are accessible by individuals or groups. The individuals in the

group can get N1 million each subject to technical determination of scope

and financial requirements of the project.

• The loans can be access by individuals and groups in line with NIRSAL

Credit Risk Guarantee (CRG) and Interest Draw Back Program (IDP).

• Loan period, Grace or Moratorium on the products will be determined

based on the project type.

9 May 4, 2016

Financial services cont’d.

GEM – Developed to encourage Nigerian women to key into agriculture and

take it as a business.

It has the following features:

• The maximum loan limit under these products is N1 million per beneficiary

subject to technical determination of the scope and the input requirements.

• The beneficiaries must be small holders with the required land for cultivation

or any of the value chain products.

To facilitate unhindered access by these target groups, the beneficiaries need not

have collaterals. In lieu of this, there will be collateral substitutes such as

adequate and acceptable guarantors with variable income, NIRSAL Credit Risk

Guarantee to cover 75% of the loans accessible by individuals or groups. The

individuals in the group can get N1million each subject to technical

determination and financial requirement of the project.

10 May 4, 2016

Financial services cont’d.

• Loans period grace or moratorium on the products will be determined based on

the project type and the gestation period of the project.

SAVINGS MOBILIZATION SERVICES

The savings product of the bank at the moment include but not limited to the

following:

o Lien Savings Account

o Farmers Savings Account

o Salary Savings Account

o Liberty Savings Account (LISA)

o Meso Savings Account (MESA)

11 May 4, 2016

BOA/FMA&RD PARTNERSHIP ON IMPLEMENTATION OF

AGRICULTURAL TRANSFORMATION AGENDA, PRIVATE

SECTOR DRIVEN MECHANIZATION INTERVENTION

PROGRAMME

The immediate past Minister of Agriculture and Rural

Development, Dr. Adesina Akinwumi, as part of his efforts in

achieving the Agriculture Transformation Agenda (ATA), set up

an Advisory Ministerial Mechanization Committee (AMMC),

of which BOA is a member, on 18th December, 2012 to

develop a framework on implementation of private sector

driven Mechanization intervention programme. The key

activities of the intervention inter-alia include the following:

12 May 4, 2016

BOA/FMA&RD Partnership cont’d.

• Identification of pilot e ha izatio e tres o the asis of de a d a d ithi farming communities and clusters with high potentials of benefitting from such e.g.,

SCPZ sites, near One Stop Agro Centres (OSAC), FADAMA related clusters and other

nationally important project sites and centres.

• Selection of Agro Machinery Manufacturer Representatives with verifiable ability to

deliver tractors, implements and other required machineries within 90 days.

• Funding and placing orders

• AMMC in conjunction with BOA to structure the Agriculture Equipment Hiring

Enterprise (AEHE) in the identified locations and to advertise for Private Sector

Operators acquisition through bidding.

• Delivery of machinery to locations and handover SPO (Bid winner). The agricultural

machineries recommended for the programme includes:

13 May 4, 2016

BOA/FMA&RD Partnership cont’d.

Tractors – 65HP, 75HP or 82HP of Massey Fergusson, Foton Tractors, John

Deere, Mahindra, New Holland and Tak Tractor.

HP capacity matching implement viz disc ploughs, disc harrow, disc ridger,

tipping trailer, bio sprayer, harvesters, fertilizer sprayer, planter and trans

planter.

Harvest/post-harvest equipment

Motorized hand tillers

Agriculture Equipment Hiring Enterprise (AEHE): Out of 80 AEHE that was

proposed, 72 had been established across the nation.

Refinancing Strategy: The refinancing strategy as contained in the MOU signed

between the bank and the FMA&RD is as follows:

14 May 4, 2016

BOA/FMA&RD Partnership cont’d.

• FMA&RD exposure 35%

• BOA loan to the Service Provider Operators (SPOs) 35%

• Equity Contribution by the SPOs 20%

• Vendors Stewardship to the Programme 10%

• Loan period 4 years

• Interest rate 7%

• Repayment arrangement:

Loan granted to the SPOs by vendors and BOA 2 years.

Loan granted to the SPOs by the FMA&RD 4 years.

15 May 4, 2016

MECHANIZATION INITIATIVE OF BOA

BOA in its effort to support the Agricultural Transformation Agenda

(ATA) of the Federal Government of Nigeria has developed series of

credit products to finance agricultural activities across the entire

agricultural value chain, namely; Input Supply, Production, Storage,

Processing, Transportation, and Marketing.

Therefore, to take care of mechanization service providers, the bank

has developed a credit product named, Input Procurement Credit

Facility .

16 May 4, 2016

Mechanization Components To Be Financed Under The Product:

o Land Clearing Equipment: This will include but not limited to the

following: Bulldozer caterpillars, pay loader and excavators.

o Tractorization equipment: Tractors and implements, power tillers,

sprayers, planters, harvesters, threshers, etc.

o Irrigation equipment: Irrigation pumps, water pumps, irrigation

pipes/accessories.

Target Borrowers

Corporate bodies, co-operative societies, associations and individuals.

Sources of funding

• Intervention funds from CBN.

• CBN Anchor Borrowers Programme on Agricultural Mechanization.

• Collaborations with Federal and state government.

17 May 4, 2016

Loan Tenor

2 – 4 years depending on the nature of the equipment financed.

Interest Rate:

Single digit interest rate depending on the source of the funding.

Security

Asset debenture on equipment financed.

Tangible collateral securities acceptable to the bank.

CHECKLIST OF REQUIRMENTS FOR ACCESSING AGRIBUSINESS LOANS FROM

BOA.

Potential borrowers/investors are guided by the attached checklist of

requirements.

18 May 4, 2016

May 4, 2016 19

CHECK LIST OF REQUIREMENTS FOR LENDING

TO CORPORATE AGRIBUSINESS ENTITIES

S/NO. ITEMS DETAILS

1. Account Opening Ope i g of a a ou t at a y of the BOA’s ra h offi e earest to you.

2. Formal Request for Loan Buy and complete BOA prescribed Loan Application Form and

submit to the branch where the form was purchased.

3. Feasibility Study/Business Plan on the

Proposed Project.

Two copies showing clear trends and project cash flows and profit &

loss for the proposed loan period.

4. Bankers Information required include:

Name of Bankers

Address of Bankers

Account numbers of all Banks

Statement of Bank Accounts for six (6) months; up to date for

your establishment and the Directors.

May 4, 2016 20

5. Security for the Loan (A)

Acceptable securities which may be one or more of the following:

Realties, accompanied with their C of O and approved building plan.

Shares of blue chip companies.

Treasury bills.

Corporate guarantees.

Deposit with CBN.

Personal guarantees backed by any one or combination of all above.

Letter of intent to guarantee backed by tangible security (where applicable)

(B)

Where Real Estates are proposed as security:

Provide 3 copies of C of O of the property(s).

Approved building plan of the property.

3 copies of colored photographs of 3 sides (side, front and back views of the property).

3 copies of registered deed of assignment/conveyance (where applicable).

Two copies of current valuation report by BOA registered Estate Surveyor and a visit

by BOA Branch/Zonal office nearest to the project location.

Copies of Share Certificates if proposed as security.

Copies of any other document, if proposed as security.

May 4, 2016 21

6. Current Tax Certificate of Company and key

Directors for the last 3 years/

Two copies each.

7. Recent passport sized photographs of the

Managing Director/Chief Executive of the

company.

Two copies.

8. Evidence of leasehold of Business premises or

ownership, if any.

Two copies.

9. Certificate of Incorporation Two copies.

10. Board resolution authorizing the company to

borrow from BOA.

Resolution must state the amount being requested.

11. Detailed C.V of all top Management Staff and

Directors of the company. Detailed CV of the

farm manager with relevant qualifications.

One copy each.

12. Audited Financial statements for the last

three to five years.

Two copies of immediate past 3 – 5 years audited financial statements. Notes

to the accounts should be detailed.

13. Forms CAC 2 and CAC 7 Two (2) copies each.

May 4, 2016 22

14. Memorandum & Articles of Association

(MEMART)

Document should show:

Power to borrow

That Paid-Up Capital is at least 25% of the Loan applied for.

Evidence of any increase in Paid Up or authorized share capital

must be submitted (if applicable).

Clause must include agricultural business.

15. Evidence of filing of annual returns.

16. Names ad signatures of persons

authorized to deal with the Bank in

respect of the loan application.

17. I ter atio al Passport/Dri er’s License/National Identity Card of

Chairman and Directors.

18. Bank Statements of the company and

Chief Promoter for the last one year.

One copy each.

Conclusion

• To initiate credit process with the bank, potential

borrowers/investors should visit the BOA branch office closest to

their area of operation.

• Interact with the branch officials and obtain a checklist of

requirements. The essence of this is to acquaint them with the

operations of the bank and various facilities available.

Thank you for the attention.

Bank of Agriculture (BOA)

May, 2016.

23 May 4, 2016