As part of the "Activities for Enhancing the Capacity of the Agriculture Lending Team", Casper Ngorima, Agriculture Credit Supervisor and Vasco Nunes, Agriculture Consultant for Banco Oportunidade de Mozambique (BOM) visited the AgriFin project partner, Access Banque Madagascar (ABM) in Madagascar to learn about its agriculture lending approaches.
The key learning lessons for BOM participants were the agriculture lending products and the agricultural household cash flow analysis methodology. Preparation of the warehouse loan product by ABM was also an important aspect of the learning visit.
During the visit, the role of BOM’s agriculture team in business development and intensive client support at the time of production were recognized by ABM.
While visiting ABM’s agricutlure clients, BOM team discovered an innovative rice weeding device which can be replicated by local artisans and used in BOM’s rice production areas, mitigating the very high cost of weeding in Mozambique rice systems.
1. ABMs portfolio and loan products
ABM's agriculture production portfolio constitutes about 4% of the bank portfolio, about the same as BOM, but when including the financing of peri agriculture activities (transport/trading/processing) the percentage of agriculture is 16%. This is quite remarkable considering that very few or no value chain actors are involved in the aggregation of clients, every client is a fruit of a single loan origination process.
2. Cash flow analysis, multipurpose loans, and repayment method
ABM's fundamental tool of credit analysis is the household cash flow, which includes all income sources, several crops, salaries, business, and analysis of monthly available funds. This allows setting up a repayment plan and shaping installments. These complete analyses allow an effective credit follow up and prevent loan diversion.
BOM team noted that the credit analysis tool will be hard to replicate in BOM due to limited technical capacity of staff to conduct such level of assessment and also lack of less divers cash flow in most agriculture households. Yet, BOM recognized the need to build up staff capacity in the area of cash flow assessment.
3. Warehouse loan
ABM is starting a warehouse loan which comprises setting up warehouses owned and managed by the bank and offering loans to clients against a deposited commodity in the warehouse. BOM obtained a comprehensive insight to all operational aspects of the facility and the logistics involved. Trading finance has been a great breakthrough for BOM but the team noted that an additional product such as the warehouse loan would increase the direct impact of finance on farmers.
The value of knowledge exchange:
"Within a year and half we have participated in three AgriFin learning events and, we have gained enormous amount of knowledge from our participation to build the agriculture finance business of BOM. The exposure to different country contexts of agriculture finance has definitely impacted the way we drive our program in Mozambique".
This report was prepared by Casper Ngorima, Agriculture Credit Supervisor and Vasco Nunes, Agriculture Consultant for Banco Oportunidade de Mozambique (BOM). The BOM team is grateful for the ABM team namely, Phillip Acton(CEO), Friedericke Moellers (Head of Credit) and Janick Razafintsalama (Head of Agriculture Credit) for orgnaizing a very productive learning visit and sharing their agriculture lending experiences in Madagascar.