Rundu — Agribank CEO Sakaria Nghikembua says that looking at the agricultural bank's loan book it is quite clear there is a lot that Agribank needs to do for all farmers in the country, more specifically for farmers in communal areas and specifically the northern communal areas (NCAs).
Nghikembua was speaking at the Namibia National Farmers Union of Namibia (NNFU) stakeholders' engagement meeting that was held in Rundu last Thursday. He said that the loans that the bank has extended to farmers is about N$2.6 billion.
"The reason why I said we have to do a little bit more for communal farmers is that if I look at that loan book and I analyse it closely, I come to a point that 5 percent of that book is sitting in these northern communal areas, north of the red line. The five percent is about N$133 million out of the N$2.6 billion, so that is what it is," explained the Agribank CEO.
According to Nghikembua, N$28 million of that is in Zambezi, N$30 million is in the two Kavango regions and N$75 million is in Oshikoto, Ohangwena, Omusati, Oshana and parts of Kunene.
"Our problem historically with the communal farmers has been that when we lend money we ask for collateral, so we will give the farmer money but we will need something tangible so that if he does not manage to repay the loan we will go and take that thing and sell it, and at least recover some of our money, if not all," Nghikembua informed stakeholders gathered in Rundu.
"That something can be either a house or it can be any investment that you might have in a fixed-term investment, or in an insurance policy that has surrender value and so on. Or a business property or an erf that is in a proclaimed town for it to have value and a title deed - and if you look at the communal areas many do not have that, that is why the figures I spoke about look the way they do," he added.
Nghikembua said to solve that problem Agribank has thought of loans with no collateral for farmers who can't provide collateral.
"So we did a two-strike deal or action last year. First, we said we will have phase one and in that phase we will introduce what we call a salary-backed no-collateral loan product so if anyone has employment and gets a salary we would sign up with that employer so that we have a salary deduction agreement from that employer. If they get a loan from us we would then deduct from the payroll every month and then that loan will be paid," he said.
The product was launched on April 28 last year and in the 7th month to the end of December they approved no-collateral loans to the value of N$21 million.
"So, if we can pump in N$35 million to N$40 million per year - I think before everyone knows we would have pumped some good amount of money on a non-secured basis into communal areas," he noted.
"On 22 June last year, the board approved a strategy for what we call the emerging finance retail product. It's a product non-secured to farmers and of course what we wanted to do is to ask the government to provide some money into a fund that will serve as a guarantee for the loans, so that the farmer does not need to provide any guarantee," Nghikembua revealed.
"We engaged the shareholders which is government, and it was so supportive of the idea we asked for around N$300 million over the next five years, and we have put in our request in the next budget to have that money. We have decided not to wait for that but on a limited basis we will now kick-start this product in this quarter starting January to March with Agribank's own funding on a limited basis. However, we need to start while we wait for funds from government and then we will be able to provide loans to unemployed farmers ... so that they can be productive," he said.