Planning for agricultural loans
The rising focus on the growth of the agricultural sector in the country has sparked an increasing need for individuals, entities and SMEs to access instruments from lending institutions such as the Agricultural Bank of Namibia to set up, upscale or re-invest in their agribusinesses.In a nutshell, engaging in agriculture provides a good source of income that can sustain agribusiness ventures for generations to come. However, in order to reach such milestones, one must understand agricultural venture funding dynamics.
When an aspiring farmer intends to borrow funds from an institution such as Agribank that specializes in the funding of agricultural value chain activities, it becomes important to know the following to plan carefully:
Firstly, understand the different loan products that Agribank offers, to finance various agri-enterprises. This is crucial for a farmer planning to apply for financial assistance. Once loan products are understood, it is essential to know the different loan terms. Agribank has short, medium, and long-term loans.
For example, if one borrows funds to purchase small stock or set up a poultry enterprise, the loan is classified as a medium-term loan with a 6-year repayment period. The farmer must be aware of this and ensure that production can cater for the loan repayment over the period of the loan.
Another aspect that must be noted by farmers is that interest rates on loans range between 4 % and 9 % according to different farmer types. Moreover, when planning loan repayments, farmers are urged to be cognisant of interest payable on a loan.
Remain responsible
Given current hikes in repo rates that can make loan repayments unaffordable. Agribank remains a good lender for farmers who are already vulnerable to high input costs.
Furthermore, when one is successfully granted a loan by Agribank, it is worth noting that a grace period of around 12 months is accorded to farmers to engage in production before the first instalment is due. This offers the farmer sufficient time to focus on production and be in a position to pay the loan with ease.
Additionally, farmers are offered various repayment options: Monthly, quarterly (every after 3 months), bi-annually (two instalments a year) or annually (once a year). This assists farmers to evaluate their financial position during production and select the option that would best suit them.
Once an option is selected by the farmer, it is essential to be aware of the instalment due date and ensure that part of the proceeds from the sales of the product cover the required instalments. Moreover, when production goes well, farmers are urged to set aside a small amount for unforeseen circumstances such as drought as this may enable the farmer to remain up to date with their loan repayment regardless of the challenges they face.
Furthermore, farmers must adopt a reliable recordkeeping mechanism as records related to their agricultural business will serve as an added advantage when you approach financial institutions for money.
Equip yourself
Finally, aspiring farmers are advised to equip themselves with basic knowledge, understanding and experience related to the agricultural enterprise they set up. “Start small but dream big” is an old but wise adage that can be applied in farming. To this end, using your limited resources to set up an agricultural business will give you hands-on experience before you lend large sums of money to upscale the business. This minimizes the risk of failure as you are more equipped to manoeuvre around challenges you may face along the way.
Always remember preparedness remains key when one intends to seize the opportunity to venture into agribusiness.
In conclusion, farmers are reminded that borrowing responsibly and being committed to honouring financial obligations enables financial institutions to extend credit to other farmers. This helps the nation to grow the agricultural sector and ensure food security for every Namibian.
*Hanks Saisai is AgriBank’s Technical Advisor: Crops & Poultry.
**Opinion pieces and letters by the public do not necessarily reflect the opinion of the editorial team. The editors reserve the right to abridge original texts. All newspapers of Namibia Media Holdings adhere to the Code of Ethics for Namibian Media, a code established jointly with the Media Ombudsman.