African Agribusiness Academy Regional

Event Presentation from

CRDB BANK PLC on SME Agribusiness Financing

Alpha Wilson Magubila

Relationship Manager – SME

14th November 2011 1

Content • Introduction • Bank’s Vision & Mission • Bank’s Coverage • Bank’s Financial Position • Bank’s Agriculture Financing • SME Agribusiness Products • Financed SME Agribusiness Projects • Achievements • Challenges • Future Developments • Lesson learned

2

Introduction CRDB Bank PLC originates from former Cooperative Rural Development Bank (100% Government owned) following privatization, recapitalization and restructuring in 1996

DANIDA played a significant role in re-structuring the new institution and is among current owners of the new Bank

Now the bank is listed at Dar Stock Exchange and last week (09/11/2011) shares were traded at Tshs.175

3

4

Introduction The Bank is owned by institutions and

private individuals as detailed in the table below:

S/No. NAME OF OWNER% AGE OF

OWNERSHIP

1 Private Individuals via DSE 39.3

2 DANIDA 21.5

3 Tanzania Cooperatives 7.4

4 Private Companies 13.3

5 Government of Tanzania Parastatals 18.5

TOTAL 100

Vision & Mission Statements Vision:

“The leading Bank in Tanzania” To be a leading bank, which is customer

need driven with competitive return to shareholders.

Mission: “Quality Banking Service” To provide quality and competitive financial

services with a strong focus on retail banking, customized corporate and institutional services while ensuring confidence and trust from stakeholders.

Country Coverage Number of Branches: 63

Number of SACCOS: 472

7

BANK’S HIGHTLIGHTS

ON AUDITED ACCOUNTS

2010

8

Indicators 31.12.2008 31.12.2009 31.12.2010

Dividend per

share (Tshs) 2 7 8

Basic earning

per share (Tshs) 19 22 22.22

Dividend yield 1.33% 6% 7%

Dividend pay

out ratio 11% 33% 36%

9

DATA FOR OTHER LISTED BANKS (SELECTED) IN EAST AFRICA 31st DECEMBER 2010

INDICATOR/BANK CRDB Tshs

NMB Tshs

EQUITY

KY Kshs

COOP

KY Kshs

KCB

KY Kshs

STANBIC

UGANDA Ugs

Shareholders funds/Net

assets (billions) 240.922 230.519 27.204 20.477 39.130 230.087

Number of Shares 2,177mn 500mn 3,702mn 3,492mn 2,600mn 5,119mn

Share price 115 650 19 9.65 17.00 170

Share book value 95.46 462 6.19 4.63 10.29 41.26

Profit after tax

(billions) 48.373 53.981 7.131 4.581 7.178 72.082

Dividend per share 8 36 0.80 0.4 1.02 7.03

Earnings per share 22.22 108 1.93 0.850 2.76 14.08

Dividend yield 7% 5.5% 4.2% 4.2% 6% 4.14%

Dividend pay out ratio 36% 33% 42% 30% 37% 50%

10

Comparison with other Banks 31st Dec 2010 in Tshs. Billions

Details CRDB NBC NMB SCB BARC

LAYS EXIM

Position

Deposits 2,019 1,218 1,804 821 389 530 1

Loans 1,123 711 858 458 211 329 1

Total Assets 2,305 1,471 2,107 1,072 527 692 1

PBT 66 5 78 29 -4.8 26 2

11

BANK’S HIGHTLIGHTS

ON 3rd QUARTER FINANCIAL

PERFORMANCE

2011

12

Bank’s Position as at 30/09/2011

Description Tshs. US$Deposit 2.3 Trillion 1,352,941,176

Loans & Advances 1.3 Trilion 764,705,882

Profit Before Tax 63 Billion 37,058,824

BANK’S CONTRIBUTION TO AGRICULTURE SECTOR

Agriculture sector is a leading sector in Bank’s portfolio

28% of the bank’s portfolio is agriculture loans

Bank finances the sector through three windows: Corporate, SMEs and Micro Finance, where Corporate loans takes more than 60%.

But now the bank’s strategy is to boost SME contribution in the portfolio as well as Agriculture sector because of its economic importance

Bank conducts trainings to SME customers on different aspects including trading, warehouse receipt system, collateral and loan management

Bank’s SME Definition

14

Income Sales Turnover

No. of Employees

Loan Amount

Capital Invested

US$ 11,700– US$ 590,000

US$ 2,900– US$ 295,000

1 – 100 peoples including family members

US$ 600–US$ 177,000

On providing services to our Esteemed SME

Customers; the bank has designed two types of

Loans:

5.1 Working Capital Loan

5.2 Investment Loan

These loans are branded as BIDII Loans.

BANK’S SME PRODUCTS

Bank’s SME Products…….

Working Capital Loans – This is normally used to increase stock of merchandise

16

Own Capital (Stock)

Working Capital (Additional Stock)

Plus =

Stocks owner Financed

Stocks Financed By Bank

More Stocks

Bank’s SME Products……

Investment Loans

17

Bank’s SME Products……

18

Bank provides credit facilities to SMEs businesses in the agriculture sector (including those in the agricultural value chain and enterprises linked to agriculture). Customers engaged in primary Agriculture production, and agriculturally linked businesses like following activities: Contract farming, Out-grower schemes, Processors of agricultural products, Buyers, and traders of agricultural products. Also those engaged in Agricultural input supplies, Suppliers of support services to agriculture, advisory roles in the sector and related businesses.

19

1. Former Extension Officer

2. Employed for 10 Years until 1997

3. In 2006 borrowed Tshs.5M cultivated 40 acres of Irish potatoes

4. 2010 Borrowed Tshs.50M cultivated 140 acres

Financed SME Agribusiness Projects

20

Self Employments in Agriculture…

Financed SME Agribusiness Projects

Since 2006; the Bank started financing SME Agribusiness on Coffee to small growers. In 2007, the bank ventured on cashew nuts on inputs loans and crop purchase financing. On Cashew nuts; Warehouse-Receipt System backed lending was used for the First time. Pre-Season: •Farmers were assisted in reviving Agriculture Marketing Cooperative Society (AMCOS) through training (Toolkit Training).

Financed SME Agribusiness Projects ….…

Cashew Nuts Financing: • Usually the Bank disburses 70%

of farm gate price for 50 tons to AMCOS

• AMCOS pays 70% of farm gate price to farmers (Average farm gate price in 2009 season Tshs. 800/Kg)

• 2010 Farm gate price was Tshs.1,000/Kg

• Bank takes 100% risk on initial stock of up to 50 tons

• Subsequent purchase financed at 65% of bonded stocks

Sunflowers:

The bank have financed sunflower business working capital loans to 16 AMCOS from three regions and 49 individual sunflower oil processors

The arrangement is under collateral management because most of them do not have adequate security to cover the loans

Farmers used to sell at Tshs.20,000 to 30,000 per bag but after bank financing; the prices have gone up to Tshs.50,000

Financed SME Agribusiness Projects……

Financed SME Agribusiness Projects……

• Sunflower business under collateral management system have proved successful

Status of Cashew nut Business

Total amount of Tshs. 24billion was approved during the Cashew nut season 2010

All loans were liquidated and AMCOs recorded profit for the 1st time in history

Bank granted Tshs.29 Billion as new loans for 2011 season

Financed SME Agribusiness Projects…

Financed SME Agribusiness Projects…… Livestock keeping

• Bank have financed cattle fattening is small and large scale

• Supported privately owned ranches on Construction of Cattle Dip and Water Dam

•The sector have created more jobs and food availability

•Cattle fattening financing has repayment record of 100%

Financed SME Agribusiness Projects…… Livestock …..

•Poultry projects are also enjoying bank financing

•Local breeds, Layers and Broilers are among businesses ran by SMEs

•Due to perceived risks and high management cost; some development partners have supported the bank through guarantee schemes (DANIDA, AfDB/USAID).

Summary of Financed Loans

CROPS AMOUNT (Tshs.) AMOUNT (US$)

Coffee 18,714,000,000.00 11,008,235.29

Cashewnuts 29,000,000,000.00 17,058,823.53

Sunflowers 8,000,000,000.00 4,705,882.35

Simsim/Sesame 11,680,000,000.00 6,870,588.24

Paddy 11,680,000,000.00 6,870,588.24

Subtotal 67,394,000,000.00 39,643,529.41

LIVESTOCK 1,138,640,000.00 669,788.24

SME Financing on Agriculture as at 31st October 2011

Bank reaching out to agriculture projects Bank venturing in warehouse receipt system confidently Bank increased its agriculture lending knowledge CRDB paved the way for other lenders Customers especially farmers gained confidence in agriculture activities Improved social welfare amongst farmers, they managed to pay school fees for children, built better houses, bought small tractors and Trucks Increased confidence amongst association leaders they gained knowledge in agro-trading and banking Associations managed to purchase tractors, trucks, build warehouses/godowns, weighing scales e.t.c.

Achievements

Bank Challenges: High costs of monitoring and supervision due to long distances (remote areas)

High cost of training

Lack of resources for supervision

Limited agriculture lending knowledge amongst staff

Collateral is still a challenge, many peasant do not have security

Unfavorable infrastructure i.e. roads it takes longer traveling time hence costly

External Challenges: Farmers are not focused in commercial and modern agriculture

Lack of storage facilities in some areas

Lack of extension officers to assist farmers

Lack of modern farming equipments

Lack of reliable Market of farm produce

Political challenges

Unfavorable Government policies

Challenges

The bank is under way designing special women Agricultural products After noting the rate of un-employment in our country; bank has gone further by designing special product for University Graduates, The bank will start with Sokoine University of Agriculture on December 2011, by granting startup loans to graduates ready for self employment, So far the bank is processing 40 applications The success will be replicated to other universities and colleges.

Near Future Developments

It is possible to create wealth through agriculture Farmers are trainable It is possible to increase food security Value addition in primary agriculture produce is vital Farmers are bankable population Poverty alleviation is possible through rural financing CRDB bank have tried and managed to recovery the depositors money!!!!

Lesson learned

Advert of Bank’s Call Centre

Thanks for Your attention and

Contributions.

34

Warm Welcome to CRDB Bank Plc for Business and

Owning shares