Mr. Issaka Nicholas, Global Lead, Supportive Business Ecosystems, at Solidaridad, has revealed that agribusiness small and medium enterprises need concessionary financing to thrive.

Mr. Issaka made this call at the launch of Kosmos Innovation Center’s ‘Business booster learning event and launch’ themed “Access to finance by agri-MSMEs; the challenges, and approach to building financial resilience.”

“Agri-micro, small and medium enterprises (Agri-MSMEs) need long-term and concessionary funding. We need more and more instruments to broaden the pool of options available for everyone. Concessionary loans are extended on terms substantially more generous than market loans. Concessional loans typically have long grace periods, and that’s what Agri-preneurs need to build financial resilience.”
Mr. Issaka

Banks do not only give loans based on collateral

Mr. kwasi korboe of GIRSAL, adding to the discussion, spoke on what agribusinesses should do to access loans from the banks. After talking about GIRSAL, Mr. Korboe said that banks do not only give loans based on collateral but rather assess the feasibility, both technical and financial, before giving out loans. This vigorous process has always scared away farmers and other Agri-preneurs

Mr. Korboe refuted the ideology that ‘Banks are unwilling to lend to people in the agriculture space.’ He explained that agriculture comprises so many sectors, including manufacturing and service providers, and not only farmers. The agri-value chain is really broad.

“Banks don’t give out loans solely because of collateral. Banks lend money because the projects can pay off and are technically feasible. Banks tend to give to businesses because it’s easier to collateralize their assets. For instance, in establishing a rubber plantation, the bank cannot collateralize the land because farmers don’t have land title documents; making the farmers always not access loans easier as expected.”
Mr. Korboe

However, Mr. Korboe revealed that the narrative is changing as financial institutions are beginning to see the value and potential in agriculture and are willing to lend out credit to the people in the space.

“Looking at the entire agricultural value chain, a lot of the services fall under manufacturing or service provider. But the majority of these are agric-related businesses. Of all the sectors in the economy, agriculture saw growth even during the Covid; for instance, hotels and tourist centers were closed, and many banks are now beginning to see the real potential in the agriculture space.”
Mr. Korboe

Demand and supply-side challenges in accessing finance by MSMEs

After accessing loans from financial institutors, Mr. Korboe disclosed that many agri-preneurs refuse to pick up the bank’s calls. He noted that most farmers always take money from the banks and use it for other purposes. Such behavioral reasons have created additional challenges for the majority of agribusiness operators. On the supply side, Mr. Korboe said most banks also lack an understanding of the nature of the business that agri-preneurs seek to venture into.

He, therefore, advised the financial institutions to understand the cycle of business. He also suggested Agri-preneurs should communicate with the bank, know their bank and apply early. Apply six months before time of project enrollment date, he suggested.

“How many banks have asked clients for soil testing results? Knowledge of this thing is critical. We have CSIR made up of a cluster of 13 institutions, but nobody goes to them for advice. The bank itself doesn’t have people to critically assess the needs of the projects presented to them as proposals.”
Mr. Korboe

He further advised that farmers and Agri-preneurs are price takers; hence, it is good to search the market before investing in any project.

KIC accomplishments and goals

Speaking at the event, the Executive Director of KIC, Mr. Gyan Kesse, welcomed the participants at the launch and shared the vision of KIC with the participants.

“KIC’s vision is to turn young graduates into entrepreneurs and not job seekers.” he noted. He shared some successes KIC has chalked over the past six years throwing light on the number of people KIC has trained and supported.

“KIC has trained over 600 young entrepreneurs in the agribusiness space. Thirty-two startups have been trained, with 24 having received funding from KIC to commence their projects. KIC has an ambitious goal of Impacting 900 agribusiness firms from now until 2025.”
Mr. Gyan Kesse