By Hilary Mare
IN a revision of some of its key policies to align the bank to the market, Agricultural Bank of Namibia (Agribank) will look to launch a ‘no collateral’ product for salaried emerging farmers by the 31st of March 2017.
Responding to Confidente last week about the rationale behind the product considering that the bank is still owed an excess of over half a billion, CEO Sakaria Nghikembua, said that Agribank had mitigated all the risks associated with this move and potential in this market is extremely huge.
“We have taken note of the risks involved and we have taken necessary steps to safeguard the bank on these. Indeed we cannot service the whole market and therefore there would be some that would not qualify.
“We are targeting civil servants who are salaried, those who actually go into other banks and borrow money and are able to repay the money. We are essentially targeting civil servants who have a stable monthly income and engage in farming activities but genuinely do not have collateral yet they have the capacity to pay back loans.
“Some of the ways that we have tried to address the risk is that we will mortgage these loans against payroll reduction where we will collect the money from the employer, we will mortgage the loans against the salary, we will collect monthly as opposed to yearly, we will have a credit life cover against dead and disability for such loan and qualifying ages will only be from 21-55 years of age,” he explained.
This product will only cater for loans from N$5 000 to N$500 000 only.
Following the adoption of its new five-year strategic plan (2016/17 – 2020/21) which is aligned to the Harambee Prosperity Plan, the bank has five focus areas namely, the Customer, Financial Sustainability, Employees, Governance as well as Socio-Economic Transformation which are supportive of its vision and strategy. Service Excellence, Innovation and Excellence in Execution will be the building blocks in executing the new strategy. The plan also outlines various key initiatives under each of the focus areas.
Key initiatives under the customer focus area include understanding market insights through ongoing research activities, offering relevant products and ensuring the bank’s accessibility through increased footprint and digital platforms. Other innovative initiatives include the development of products for communal farmers in order to broaden financial inclusion and ensure food security at a household level.
Nghikembua explained that loan book growth, interest income growth, cost containment, arrears management as well as non-interest income growth, will be amongst the core initiatives which are being implemented to ensure the bank’s financial sustainability and thus enhance its ability to fulfil its developmental mandate in the long term.
“It is against this background that the bank is pursuing an intensified arrears collection strategy. The bank has total arrears of just over N$500 million of the total loan book of N$2.4 billion, which represents an arrears-to-total advances ratio of 21 percent, whilst the benchmark ratio for development financing institutions is 15 percent. The sustained high levels of arrears would threaten Agribank’s financial sustainability and its ability to deliver on its mandate in the long-term. As part of the arrears collection strategy, the bank has appointed debt collectors to assist it in collecting outstanding repayments from clients with effect from this month,” he said.
Nghikembua further stated that, despite the challenging operating environment, Agribank has maintained credible financial performance in the year so far. He expects the bank to meet or exceed its key financial targets for the full year to the end of March.
The Agribank chief explained that the bank’s operating environment continues to be characterised by increased regulation and intensified competition, while the volatile weather cycles also pose their own challenges. According to him, this calls for considered strategic focus to achieve growth, maintain relevance and ensure sustainability. He said income-growth and cost-containment strategies are necessary in achieving the strategic objectives of the bank.
Confidente. Lifting the Lid. Copyright © 2015