Agricultural Financing Training

Transcription

1 Agricultural Financing Training Nirdhan Utthan Bank Limited Presented by: Sunil Khanal

2 Agricultural Scenario in Nepal 1. Total area under agriculture in Nepal is 2.7 million ha. 2. No. of Agricultural holdings 3.4 million 3. Average size of land holding 0.70 ha. 4. Main Crops: Paddy nearly 21% share in agricultural production. Maize, Wheat and Potato are major cereal and food crops. Cardamom and Ginger are major spices grown in Nepal. 5. Cereal and other crops occupy nearly fifty percent of share in the overall agricultural production 6. Irrigation sources: 42% of the cultivated area has irrigation of some sort and remaining has to depend on rain. Only 17% of cultivated area has round the year irrigation. Major source of irrigation: Surface irrigation Terai region: Ground water consisting of 83% shallow tube wells 17% deep tube wells Hilly region: Kulo small canals from rivulets & streams

3 The AgriFin Project What & Why?

4 NUBL Goals (लक ष य) What are the key goals of NUBL? 3

5 NUBL Goals Improve economic condition of many clients -u fxs ;b:ox?sf] cfly{s :t/ psf:g'_ Achieve financial sustainability -ljlqo?kn] lbuf]kgf xfl;n ug'{_ 4

6 Field Staff s Goals Role: Manage Loan Portfolio, Savings Portfolio Goals: Growth (ब द द ) Quality (ग णस तर क यम र खन ) Client Satisfaction (ग र हक स त स ट बन उन ) 5

7 Field Staff s Goals, Contd. Portfolio Growth: New areas, new clients, keeping old clients, growing loan size Portfolio Quality: Delinquency prevention and delinquency management (most of field staff s time) Client service: Professionalism, clarity, respect, honesty, feedback, familiarity with clients, good knowledge of policies 6

8 Field Staff s Goals Growth Quality Client Satisfaction 7

9 Who need to learn Agricultural Lending? Field Assistant Branch Manger Regional Manager/Officer Departmental Staff Management 8

10 Difference between Conventional loans & Agri Loans Traditional/Conventional lending Agricultural lending in MFIs Borrower selection, credit decisions, product designs Bases credit decisions on current repayment capacity Bases credit decisions on projected income from future crop or livestock sales Often uses peer group information and past loan performance to determine the creditworthiness of borrowers Funds all or most of a targeted activity based on its merits and the borrower s ability to carry it out Uses credit appraisal to determine borrower s capacity to repay Funds all or most of a targeted activity based on its merits and the borrower s ability to carry it out 9

11 Difference between Conventional loans & Agri Loans, Contd. Traditional/Conventional lending Agricultural lending Borrower selection, credit decisions, product designs Ties repayment to proceeds of the agricultural activity Sometimes provides agricultural finance to small groups, which often administer rotating loan funds Often ties credit to the adoption of particular technologies, inputs, or marketing channels; often requires farmers to join groups or associations Schedules frequent payments to take advantage of the multiple income sources of a borrower s household Tends to use group mechanisms to gather client information and enforce loan contracts, but retains loan administration functions Does not tie credit to other services. If tied, it would be better. 10

12 Difference between Conventional loans & Agri Loans, Contd. Traditional/Conventional lending Agricultural lending Borrower selection, credit decisions, product designs Often sets interest rates to be affordable within (narrowly defined) projections of returns on agricultural investments Relies on trained technical staff (agronomists, animal husbandry specialists) or detailed analytical models (or both) to make loan decisions and monitor investment/ production programs Sets interest rates to fully cover costs, enabling microfinance institutions to engage in more operational activities which lowers risk Relies on staff trained in lending methodology, not on client activities 11

13 Difference between Conventional loans & Agri Loans, Contd. Traditional/Conventional lending Expects loan officers to spend most of their time developing and enforcing investment plans and ensuring production Expends enormous effort to ensure that loans are used according to predetermined plans Following through with borrowers Agricultural lending Expects loan officers to focus on building relationships with clients, enforcing repayment, and understanding the performance of farming households multiple economic activities Understands that money is fungible (interchangeable) and makes minimal attempts to control loan uses 12

14 Difference between Conventional loans & Agri Loans, Contd. Traditional/Conventional lending Tends to be far more lax in the timing of payments, often assuming that farmers time their sales to achieve highest possible prices Relies on extensive guidelines for multiple crops and livestock investment programs, expected cash flows, and repayment plans Uses less comprehensive loan tracking systems Following through with borrowers Agricultural lending Expends great energy enforcing rigid repayment discipline Relies on a couple of key indicators (such as loan or payment amount) to monitor repayment performance Develops efficient management information systems to facilitate immediate follow-up on late payments 13

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16 Queries/questions & Answers 15

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