BY Lanre Shodimu
Concerns have been raised by Bank of Agriculture (BOA) which disclosed recently that more than 70 percent of loans by farmers are yet to be returned due to the fragmentation of the agricultural sector that stalls proper tracing.
This was made known at BusinessDay’s Foundation Trade and Investment Series, themed ‘Innovative Capital Architecture for Resilient Agricultural Value Chain’ on Friday, where, Ilelaboye Segun, divisional head, Risk Management and Control of BOA, said that the traditional lending model has failed the Bank because it gave loans to farmers directly, and it backfired.
When the BOA gave loans to farmers directly, Segun noted that it was difficult for the Bank to trace these loans, making them eventually become ‘bad debts’. “As I speak to you, we have over 70 percent default loans.”
“For the Bank of Agriculture, traditional lending has actually failed us,” he said.
Speaking further he said “What we used to do before was disburse directly to the farmers without going through associations in the value chain. However, some of these people have poor implementation if you give them loans,” he stated.
However, this shortcoming has forced the Bank into a new loan disbursement model where associations and aggregators are given loans on behalf of farmers.
The way forward according to Segun is that, “There is now a total transformation. What we do now is to ensure that we involve different value chains in our disbursement. We now disburse loans and farming equipment not to individual farmers, but to service providers, who will pay 25 percent to the bank, and the farmers will pay them,” he added.
He also made it known that BOA currently gives loans to only registered cooperatives. “This model has been helping us and we have been getting back our money so far.”
But for defaulters, with the aid of digital lending, the Bank is able to withdraw the loan directly from the defaulters’ accounts.
“We try to attach your bio-data to your loans, we call it global standing instructions. We just get your information. Whether you like or you don’t like it, they will just be deducting that source,” Segun noted .
