A Global Expert Meeting on Agriculture and Agro-industries

A Global Expert Meeting on Agriculture and Agro-industries Development towards Sustainable and Resilient Food Systems Plenary panel III: Leveraging public and private funding for an inclusive agriculture and agro-industry development. Victoria Falls, Zimbabwe April 2017 1

Outline v Introduction v Agriculture Investment Challenges/ Risks v Interventions for Overcoming Investment Challenges v Examples of Impactful Interventions/ Experience v Awards & Accolades 2

Introduction Our purpose We exist to transform the lives and livelihoods of our people socially and economically by availing to them modern, inclusive financial services. Our Vision To be the champion of the social-economic prosperity of the people of Africa Our mission We offer inclusive, customer focused financial services that socially and economically empower our clients and other stakeholders 3

Introduction …. 4

Agriculture Investment Challenges/ Risks Production risks linked to natural hazards (such as droughts, floods and pests) Many agricultural activities are subject to seasonality and gestation periods Market uncertainty and fluctuating prices Limited collateral – farmers generally lack the collateral traditionally required by banks to secure loans. Land use management/ land ownerships -Women who are majority players in the sector lack traditional collateral to access credit Regulatory Environment Contracts that are not enforceable Agriculture is a sensitive sector prone to policy issues. 5

Agriculture Investment Challenges/ Risks…. Poor infrastructure in rural areas — for example, poor roads, erratic electricity provision, and lack of communications systems — this impedes effective outreach to customers High transaction and logistical costs – customer visits/follow ups Increasing climate variability and rampant land degradation – result to low and unreliable production Over reliance of rain fed agriculture and low adoption of technology Low financial literacy rates majority of rural farmers lack basic business and financial management skills and a limited understanding of traditional banking requirements 6

Opportunity In Agriculture Financing The value chain approach provides many opportunities for financing various players from production to processing and distribution Growing middle income population / Change in dietary habits – higher demand for processed/niche food Commercialization of agriculture has attracted many players – opportunity for partnerships Climate change - Financing is needed for investments in sustainable production systems and climate adaptation technologies 7

Financing Agriculture – Equity Bank Approach Innovative Financing Models • Deposit Mobilization supported lending • Partnerships – Risk sharing/credit guarantee funds • Contracts – WFP, EABL, etc • WRS – post harvest management • Crop/livestock insurance • Social Payments – KCEP / HSNP 8

Interventions to Overcome Risks v Established strong partnerships and alliances to promote investment in Agriculture v Through partnerships the bank offers market linkages to smallholders e. g. WFP, EABL v Deployment of high end technology to enhance efficiency and convenience of access – v Agency banking model brings financial services to farmers’ doorstep thus encourage clients to develop a saving culture 9

Interventions to Overcome Risks v Staff training– The bank has a pool of agribusiness staff who offer training to farmers and advice them on how to undertake farming as profitable businesses v Agricultural customized loan products that are relevant to farmers needs - this has enabled farmers to borrow and repay loans successfully v Offers indemnity (Multi peril), Index based and crop yield based Insurance v De-risking through financial and entrepreneurship education 10

Examples of Impactful Interventions/ Experience Documented success stories may also be accessed at https: //www. youtube. com/user/Africas. Farmers 11

Strategic Partnership Kilimo Biashara – Farming as a Business Solution • • Agriculture value chains – Input finance to market linkages Staff trained in agriculture – Offering technical training to farmers. Kilimo Biashara loans - New credit product design and roll out 10% risk sharing fund Result • • 78, 772 Households since the year 2008 Over US$ 70 Million in loans to smallholder farmers, agro input suppliers e. t. c 12

Partnerships with World Food Programme Cash Transfers • • • Agency Banking Model – Payments of cash in remote areas and opening accounts by phone (Hapo) EGF – Fi. Ka – Financial literacy training to beneficiaries Food aid beneficiaries receive cash and not physical food items 13

Partnership with KFS & Food and Agriculture Organisation (FAO) Western Region 14

Apparel and Clothing Industry Cotton Value Chain • Loans to cotton farmer • Agriculture value chains integration – input supply to market linkages • Rural extension services and financial literacy training • • • Loans disbursed KES 300 million Cotton farmer earnings rose from 23 M (US$270, 600) in 2012 to KES 300 M (US$ 3. 5 M) p. a. High yield – Targeted 20 tonnes of cotton from 800 kgs 15

Warehouse Receipt Financing Post Harvest Management 16

Other Examples of Impactful Interventions 17

Driven by Technology - Farm Input Subsidies Disbursement Kenya Cereal Enhancement Programme Innovative Farm Inputs Electronic Voucher Scheme • Real time settlement of input suppliers as farmers collect input • Farmers contribution trigger the Government subsidy amount 18

Unlocking Agriculture Potential through Medium Size Farms Integrated Extension Delivery Ecosystem The program has developed an agriculture ecosystem to deliver services and link farmers to an integrated supply chain 2000 selected Medium size farms in this program are used as model/demonstration farms, to small scale farmers in the respective localities 19

Awards and Accolades October 2016, Equity Bank Awarded Best Commercial Bank during Nairobi International Trade fair 20

Way Forward / Recommendations • To ensure sustainability PPPs for UN Agency agriculture projects – the projects should be implemented for at least 5 years to provide adequate time for preparations, implementation and evaluation • Impactful agricultural projects are those that are market led ( demand driven by agroindustries) and are multi stakeholder and multi dimensional • Partnerships to promote value chain financing concept will greatly attract investment in agriculture • Agriculture financing is more than offering credit facilities – holistic approach is required to achieve the desired impact ( financial inclusion) • • Investment in technology can result in reduced costs of doing business in agricultureagency banking, Equitel–mobile/digital banking platform • Regulatory Framework - improve land ownership, registration and security of tenure this will streamline the process of using land as collateral for agricultural lending. • There is also need to improve legal contract enforcement to improve quality of contacts both for farmers and buyers of agricultural products 21

Thank You Email: info@equitybank. co. ke Website: equitybank. co. ke 22