way forward financing graduates to invest in agriculture through loans

7/30/2019 Way forward financing graduates to invest in agriculture through loans

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SELF EMPLOYMENT IN

AGRICULTURE

PROPOSED WAY FORWARD

PREPARED BY:

MGHWENO. OWEN, N

MICHAEL. FIDEL, T

FIVAWO. AGNES, B

(Sokoine Undergraduates)

Graduates Presentation for the 2nd steering committee meeting formed

jointly by CRDB Bank, DAEA, Development Partners and Sokoine

Graduates

March 12th 2011

Email: [email protected]

ASSET- LIABILITY COLLATERAL

MODEL
mailto:[email protected]:[email protected]


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CONTENTS Introduction

Field of opportunities at Sokoine University

Where graduate fit in Agriculture

Greatest obstacle

Graduates suggested solutions

Proposed solutionAbout the model

Conditions for the models efficiency

Advantages of the model

Limitations of the modelASSET-LIABILITY COLLATERAL MODEL

Recommendations


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INTRODUCTIONArising from the Forum on self Employment

in Agricultural sector that was organizedjointly by CRDB Bank and DAEA-SUA onFebruary 12th 2011, the following proposalhas been written to adhere the need of

having a steering committee resulted fromthe Forum.

Sokoine University of Agriculture isanticipated to have thousand graduateseach year as an outlet to the society, 90% ofthem being undergraduate level.


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Field of opportunities at Sokoine

UniversityThe University is an extreme multifunctionunit as it creates academicians who can grabvarious opportunities both agricultural basedand non agricultural based.

Sokoine offers degree and non-degreeprograms at undergraduate and graduate

level in the disciplines of Agriculture,Veterinary Medicine; Animal Science, RangeManagement, Wildlife, Forestry,Agronomy and Information Technology,

Library, Records and Information


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Where Graduates fit in

AgricultureSokoine graduates have a magnificent roleto play in our country and the world at largewhen speaking of agriculture.

As stated by DAEA in the last Forum, thesegraduates are primary actors i.e

Input suppliers, farmers, trade and

transport servers, processors, distributorsand retailers, consumers and most of allenvironmentally concerned disposalmanagers.


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GREATEST OBSTACLE

Most graduates fear to engage intoself employment in agriculture, thegreatest obstacle being inadequatefinance


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Graduates Suggested solutions

1. Use of Graduates certificate as

collateralAdvantages:

Financial acquisition as per valuation of

certificate High commitment motive to graduates

Disadvantages: Career development might be hindered

Collateral has no real commercial value

Hinder diversification priority

Certificate value measurement may be

complicated


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Graduates Suggested

solutions.

2. Use of collateral with title deed Advantages :

Financial acquisition as per securities

held

Commitment motive to graduates

Disadvantages:

Most graduates are dependent with no or

minimum valued assets

Third party claims might exist if the

collateral is family owned or otherwise


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Graduates Suggested

solutions..3. Use of development partners only(e.g.

PASS)

Advantages:

Financial acquisition based on partners

guarantee to pay

Disadvantage:

High risk of willful default

D.P might not be willing to support amere graduate


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Graduates Suggested

solutions.4. Use of Group enforcement

Advantage:

Financial acquisition based on the groups

registration as a legal entity

Easy to monitor group rather thanindividuals

Disadvantage:

Difficult to form groups with similarcharacter graduates (in terms of location,

interest e.t.c)

No specific collateral


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PROPOSED SOLUTION

ASSET- LIABILITY COLLATERAL

MODEL


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About the modelThis proposed model is designed to serve the quest ofthe Forum. It illustrates how graduates may be

provided with loan and enforce loan repayment . Themodel has taken into consideration four key actors:

Graduates

Consultation unit ( DAEA)

Guarantors (Development Partners + DAEA)

CRBD Bank

However the Government will be directly or indirectlyinvolved.

The model stress out on having the loan given interms of input assets rather than Cash. The assets willbe a liability to the graduate until it is completely paid.Also the asset will be used as the security to ensureminimum risk to the lender.


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ASSETLIABILITY COLLATERAL MODEL

1 2 3

4 (Input delivery) 6 (Cheque submission)

8 10

5 (Confirmation Cheque) 7(Cheque Payment)

9( Profit accumulation)

GRADUATESBUSINESS

PROPOSAL

GUARANTORS

/DEVELOPMENT

PARTNERS

CRDB BANK

(FINANCIAL FACILITATOR)LOAN

APPLICATION

CONSULTATION UNIT

DAEA andothers

INPUT

DEALERS

LOAN

REPAYMENTIMPLEMENTATION


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Condition for the models efficiency A comprehensive written business proposal to guide the

idea Initial starting scale for any business should be small

Mutual benefit based contract to describe mode ofpayment and legal rules

No cash involved, cheques only based on two signatories

(bank and borrower) Initially the title deed is held by the Bank until the loan is

fully paid

Borrower should open a current account to enableacquisition of cheque book for Input transactionmonitoring

Borrower should present monthly reports on the businessprogress to the Bank

Borrowers monetary transactions should be issued byrespective Bank


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Advantages of the Model

The created security will be legally signed

Theres an assurance that no other lenders will claim on theassets

No third party claims on security

The security produce a real commercial value as compared tocertificate

Easy to reinforce repayment incase of borrowers failure tobusiness

High motivation for borrowers commitment no hindrance ofgraduates career to develop

Asset may be transferred to another person who is willing torepay the debt incase of graduates failure

The model has mutual benefit for both borrower and lender Success of the model meets the goals for development

partners and DAEA s incubator program

The model will adhere to the nations policy on YOUTHEMPLOYMENT and MKUKUTA at large


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Limitations of the model

The model can only succeed if all partieswork together.

The model only explains a skeleton of

the business to be implemented as muchof it is expected to appear in the

business proposal


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Recommendations The proposed model is a nations solution

equipment for unemployment, but this can onlybe proved if its given a chance to be applicablein the reality. Putting the model in reality maybe done through the use of pilot group ofgraduates who have feasible business ideas.

Also the model can best work if the Bank givesa mutual priority concerning the interest ratesinvolved, the success of the model is only an

introductory success for the Bank, Graduates,consulting units, development partners and thegovernment as a whole.


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Thank you very much.

way forward financing graduates to invest in agriculture through loans

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