Stanbic smallholder farmer finance, Nigeria

Through its agricultural finance scheme, Stanbic aims to reach 5,000,000 smallholder farmers over a five year period. This inclusive business model bundles technical assistance and training with commercial financing to link famers to formal markets.

Around 90% of Nigeria’s agricultural production is from smallholder farmers, yet they constitute the majority of the nation’s poor. Lack of access to finance and the resultant inability to invest in basic farming inputs such as seedlings, fertilizers, implements and irrigation which consequently leads to relatively low yields and productivity levels are some of the underlying factors for their poverty. Also, the lack of access to formal markets as well as little or no commercial financing hinders farmers to earn sustainable profits.

Stanbic IBTC’s Smallholder Farmer Finance Scheme aims to address this gap in agribusiness financing and lack of market access to ultimately increase smallholder livelihoods. The model will be piloted in the Plateau State in Northern Nigeria, where 8,000-10,000ha cultivated by smallholder farmer groups have been identified. In the pilot, the maize and soya farmers will gain access to production finance from Stanbic IBTC (usually input costs are around US$330/ha and 50% of the costs are subsided by the government) at an effective interest rate of between 10 and 15% against a current prime lending rate of 24%. In addition, Stanbic IBTC has agreed a pre-season price contract with Grand Cereals Limited (GCL), which means farmers are guaranteed a minimum price for their produce at the end of the season. If at the time of harvesting market prices are higher than the agreed minimum price, GCL will pay the market price.

For the company this approach decreases the risk of side selling. In 2012, Stanbic IBTC will also introduce its web-based Warehouse Receipt system (WRS) in Nigeria that has already been tested successfully in other African countries. Currently, lack of access to storage facilities and direct access to buyers not only forces farmers to sell their produce at time of harvest but also means that they only receive a small fraction of the actual market price (an average of 48%) due to various middlemen involved. The WRS is based on a network of physical grain silos and will allow farmers to store their produce (enabling them to sell their produce at potentially higher prices later in the year) as well as provides the opportunity to access cash from Stanbic IBTC backed up by their commodities stored in the warehouse before the actual produce is sold. In the medium to long term, the inclusive business model aims to develop an integrated, multi-partner approach that bundles technical assistance (soil mapping and agronomy training) and extension services with commercial financing to link smallholder farmers to formal markets through tailored loans, quality assured training and input packages, crop insurance and regulation of commodity trading.

After five years, Stanbic IBTC aims to reach 5,000,000 farmers through the scheme. The main commercial gains for Stanbic IBTC in this venture is the development of its agricultural financial services through the increased number of loan agreements with individuals and businesses in the agricultural sector, the profitability of these loans and the increase in subscriptions to the bank’s other agriculture-based services.

BIF will provide support towards brokering agreements with buyers and other stakeholders, conducting a review of the business model to ensure its sustainability, and identifying sources of grant funding to pay for agricultural extension services and the investment required

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