People ask questions, especially Smallholder Farmers, about how NIRSAL can be beneficial to them. It is a very valid question, and NIRSAL is happy to receive such questions, because it shows that Nigerian farmers are eager to engage with NIRSAL and produce more food for our people and grow our economy.
Does NIRSAL Give Out Loans?
Quite a lot of people think that NIRSAL gives out loans. That is not NIRSAL’s mandate. Commercial Banks give out loans; other lending institutions give out loans too; NIRSAL does not. NIRSAL’s mandate is to x-ray the possible reasons why these lenders do not lend enough to Agriculture, and devise strategies that will enhance lending to the Sector.
In other words, the challenge of Agriculture in Nigeria today is not about the absence of funds that farmers can borrow, but the fear of lenders that the monies they lend to farmers may not return. So, it has always been a question of risk. NIRSAL is absorbing a large chunk (up to 75%) of the risk, so that banks and other lenders can lend to Agriculture more frequently and comfortably.
NIRSAL Smoothens the Relationship Between Lender and Borrower Banks need the business of lending, because they gain interests from it; and farmers need to borrow, because they can grow their agribusinesses with more money. Therefore, wherever and whenever the interests of the lender (Bank) and the borrower (Farmer) match, it is NIRSAL’s job to ensure that both parties can build a secure business relationship.
NIRSAL has apparatuses with which it aids the borrower (Farmer) to enable him succeed. That, in a nutshell, is NIRSAL’s mandate.
There is More…
In this Lender-Borrower-Guarantor engagement, there is a feature called Interest Drawback (IDB). For a borrower that repays his capital and interest as and when due, they regain (from NIRSAL) up to 40% of the interest charged by the lender after every 90 days cycle, effectively reducing the cost of the loan. This is to encourage faithful repayment of loans which will foster the entrenchment of a fluid relationship between Lenders and Borrowers in the Agricultural Sector.
NIRSAL’s communications are geared towards urging banks to be more open and welcoming to farmers and other actors in Agricultural Value Chains as their funds will be safe with NIRSAL’s Guarantee. Also, NIRSAL is urging farmers to approach their banks and specifically request for loans backed by NIRSAL’s Guarantee so that NIRSAL can come in and play its role.
It is important that loan seekers prepare themselves to meet the basic requirements for accessing loans, such as: a registered business, past cash flow statements, verifiable land or business premises, etc.
At NIRSAL we believe that in the short term, as lenders and borrowers prepare themselves to take advantage of NIRSAL’s Credit Risk Guarantee (CRG), they would efficientize their business processes and carve niches for themselves in the Agricultural Sector, and that will generally change the face of Agriculture in Nigeria.
Lastly, beyond its role in helping farmers access loans from banks, NIRSAL continues to conceive field innovations that will spur the growth of rural economies through the aggregation of Smallholders and the formation of Geoclusters. Geoclusters allow for easy farm mechanization, easy input supply, and easy transition of produce from primary production to other layers of activities in the value chains.