Context
Agriculture and the rural world are underfunded
There are three main constraints with regard to agricultural and rural area financing:
Logistical constraints due to the geographical dispersion of customers and their remoteness from urban areas
Specific risks that are not clear for the majority of financial institutions and that traditional guarantees cannot cover
Specific financing needs of agricultural and rural players, requiring the development of adapted financial products
Operational support provided to Financial Institutions is one of the most effective ways of creating sustainable change
Operational support helps develop approaches tailored to the context of the institution and to strengthen the latter’s capabilities in this field. This approach is entirely suitable for healthy financial institutions whose strategy includes the development of financial services for agriculture and rural areas.
Our Approach
The key success factors for development of an agriculture finance activity at a financial institution are: (i) a strategic commitment from the FI; and (ii) a good integration in the business environment. On this basis, HORUS’s two main fields of support are the following:
Building the institution’s capacity with regard to the specificities of agricultural credit, and integrating these features in its methods and procedures at all levels, in a process of change management: adapted product design, methodology for putting and analyzing loan files, mechanisms for securing loans, risk management, MIS, communication, HR (training, setting objectives for loan officers and developing a suitable portfolio performance-based bonus system), etc.
Defining mechanisms for securing loans, by setting up partnerships. The forms these partnerships can vary widely depending on the context and value chains concerned. It can be as simple as transmission of information or capacity building and structuring of borrowers. It is sometimes possible to implement integrated mechanisms, such as revenue-based loans, disbursement of credit to the supplier who releases the loan in kind to the borrower, quasi-leasing or warrantage.
Development of an agricultural finance activity
Our Experience
Studies and technical assistance for FUCEC-Togo to help strengthen its credit offer to agricultural clients (AFD/FUCEC-Togo financing, 2015).
HORUS designed products, services and innovative financing schemes – based on in-depth understanding of client needs, agricultural value chains and their environment – in order to support FUCEC-TOGO in developing its activity towards the agricultural sector. More specifically, HORUS provided the following services:
- Preliminary analysis of agriculture in Togo
- Support in selecting high-potential value chains
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Thorough analysis of selected value chains, including identification of possible partners within the value chains
- Analysis of FUCEC’s strengths and weaknesses in agricultural finance
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Recommendations on products, securing mechanisms, partnerships, and methodologies to serve agricultural segments
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Design of methodological tools and guides
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Design of an action plan.
Technical assistance to Advans Cameroun to diversify its offer in rural areas: market studies (Advans funding/REGMIFA, 2011) followed by implementation support (AFD financing, 2012-2013).
Supporting the launch of agricultural and rural financial services includes the following activities:
- Rural customer segmentation (needs, risk profiles, features, etc.)
- Development of an agricultural credit policy
- Definition of an appropriate range of products (credit and savings products, group credits, and individual loans)
- Support in setting up the products and reports in the MIS
- Definition of a risk management methodology, adjustment of procedures, development of operational guidelines and tools for analysis and credit monitoring
- Recruitment, training and coaching of rural credit agents and a future manager of the Rural Financial Services unit
- Training of all other agents involved in the process (including branch managers and their deputies, training staff, and auditors)
- Pilot phase implementation and results evaluation
- Development of external partnerships (suppliers and buyers in the sectors concerned, insurance companies, non-financial service providers, etc.) to improve the security of loans
- Carrying out a feasibility study on innovative distribution channels (including Mobile Banking)
- Preparation of the rollout across the whole network (market studies, regional adjustments, etc.)
Technical assistance to BNDA (Mali) to help improve its range of financial services to agricultural and rural SMEs (World Bank/Gates Foundation Agrifin Program, 2012-2014).
BNDA is the main funder of rural areas, with an activity that is highly concentrated on the financing of cotton and the other crops in the cotton system rotation. Against the backdrop of sector liberalization, which has led to a decline in commitments, and of strong development of its universal banking activities, particularly to SMEs - with the support of HORUS, the bank wanted to boost its lending activity to agriculture on a new basis, through its SME department. HORUS is assisting the bank in this context, on four pillars:
- Development of financial services to agricultural SMEs
- Implementation of a specific risk management system
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Implementation of technical partnerships
- Training and coaching at all levels
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