Nedbank Namibia’s commitment to strengthening Namibia's agri sector
Namibia's agriculture sector is a cornerstone of its economy, yet it faces a myriad of challenges that threaten its sustainability and growth.
Agriculture contributes over 8% to Namibia's gross domestic product (GDP), with about 70% of the population dependent on it for income and food security. Despite its economic significance, the agriculture sector received only 4% of the total loans and advances from private banks between 2017 and 2021.
John-James Tromp, head of business banking at Nedbank Namibia, highlights this discrepancy, noting the disparity in credit allocation to agriculture when compared to its significant contribution to the country’s GDP.
"There is a clear need for increased financial support in this sector, which is a common issue across Africa, where many agricultural small and medium enterprises (SMEs) struggle to access bank loans and are too large for microfinance," says Tromp.
"This has resulted in a US$100 billion gap in unmet financing demand. Bridging this gap is crucial for reviving the agriculture sector and, in turn, ensuring future food security."
Credit challenges
A survey of small and medium enterprise farmers in northern Namibia done by Harvard’s Growth Lab, as part of a research project undertaken in collaboration with the government of Namibia from 2020 to 2023, highlighted the challenges faced when it comes to accessing finance.
These included unclear information about formal credit availability and conditions, burdensome and difficult-to-meet requirements, and the insufficient presence of regional officers to understand local needs.
"In response to this pressing need, Nedbank has introduced a new agribanking offering by employing a decentralised operating model," says Tromp. "Credit managers, equipped with a comprehensive understanding of the Namibian agricultural landscape, aim to visit selected clients to gain deeper insights into their risk environments."
Loans such as Nedbank’s agribanking solutions are available to individuals, partnerships, companies, close corporations and trusts. At Nedbank specifically, these solutions cater to both full-time and part-time farmers who derive more than 50% of their income from sustainable agricultural activities, game farming, land-based environmental preservation and timber and forestry activities.
"Any financial services company aiming to support agriculture in Namibia must grasp the unique challenges faced by farmers navigating Namibia's unforgiving landscape," cautions Tromp.
Understand cycles
Tromp says given the unpredictable weather and uncertainty surrounding crop and livestock performance, cash flows for farmers often fluctuate. This underscores the importance for banks to comprehend industry cycles that may impact their repayment ability.
"Our agribanking products are tailored to the seasonal income of businesses, offering flexible capital repayment options, including monthly, quarterly, biannual or annual repayment," he says.
These financial products include short-term finance, providing working capital through overdrafts that are repayable within one year or a seasonal cycle, asset-based finance for procuring equipment and machinery, and medium-term loans for purchasing equipment, livestock, seed and other necessary farming inputs.
"Nedbank's renewed commitment to Namibia's agricultural sector aims to align the country with global agricultural trends," says Tromp.
The bank also provides renewable energy loans specifically tailored to green energy initiatives. These loans could assist farmers in financing solar panels, wind turbines, hydroelectric systems, biomass energy production and geothermal heat pump installations.
"Access to this type of funding aims to bolster agricultural productivity and sustainability in Namibia, bringing the country in line with global agricultural standards and mitigating the impacts of climate change on local farming communities," says Tromp.
Agriculture contributes over 8% to Namibia's gross domestic product (GDP), with about 70% of the population dependent on it for income and food security. Despite its economic significance, the agriculture sector received only 4% of the total loans and advances from private banks between 2017 and 2021.
John-James Tromp, head of business banking at Nedbank Namibia, highlights this discrepancy, noting the disparity in credit allocation to agriculture when compared to its significant contribution to the country’s GDP.
"There is a clear need for increased financial support in this sector, which is a common issue across Africa, where many agricultural small and medium enterprises (SMEs) struggle to access bank loans and are too large for microfinance," says Tromp.
"This has resulted in a US$100 billion gap in unmet financing demand. Bridging this gap is crucial for reviving the agriculture sector and, in turn, ensuring future food security."
Credit challenges
A survey of small and medium enterprise farmers in northern Namibia done by Harvard’s Growth Lab, as part of a research project undertaken in collaboration with the government of Namibia from 2020 to 2023, highlighted the challenges faced when it comes to accessing finance.
These included unclear information about formal credit availability and conditions, burdensome and difficult-to-meet requirements, and the insufficient presence of regional officers to understand local needs.
"In response to this pressing need, Nedbank has introduced a new agribanking offering by employing a decentralised operating model," says Tromp. "Credit managers, equipped with a comprehensive understanding of the Namibian agricultural landscape, aim to visit selected clients to gain deeper insights into their risk environments."
Loans such as Nedbank’s agribanking solutions are available to individuals, partnerships, companies, close corporations and trusts. At Nedbank specifically, these solutions cater to both full-time and part-time farmers who derive more than 50% of their income from sustainable agricultural activities, game farming, land-based environmental preservation and timber and forestry activities.
"Any financial services company aiming to support agriculture in Namibia must grasp the unique challenges faced by farmers navigating Namibia's unforgiving landscape," cautions Tromp.
Understand cycles
Tromp says given the unpredictable weather and uncertainty surrounding crop and livestock performance, cash flows for farmers often fluctuate. This underscores the importance for banks to comprehend industry cycles that may impact their repayment ability.
"Our agribanking products are tailored to the seasonal income of businesses, offering flexible capital repayment options, including monthly, quarterly, biannual or annual repayment," he says.
These financial products include short-term finance, providing working capital through overdrafts that are repayable within one year or a seasonal cycle, asset-based finance for procuring equipment and machinery, and medium-term loans for purchasing equipment, livestock, seed and other necessary farming inputs.
"Nedbank's renewed commitment to Namibia's agricultural sector aims to align the country with global agricultural trends," says Tromp.
The bank also provides renewable energy loans specifically tailored to green energy initiatives. These loans could assist farmers in financing solar panels, wind turbines, hydroelectric systems, biomass energy production and geothermal heat pump installations.
"Access to this type of funding aims to bolster agricultural productivity and sustainability in Namibia, bringing the country in line with global agricultural standards and mitigating the impacts of climate change on local farming communities," says Tromp.
Comments
Namibian Sun
No comments have been left on this article