agricultural development bank - product and services eng

PRODUCTS AND SEVICES AVAILABLE TO PRODUCTS AND SEVICES AVAILABLE TO

SUPPORT THE CASHEW SUBSUPPORT THE CASHEW SUB--SECTOR SECTOR -- ADBADB11

AGRICULTURAL DEVELOPMENT AGRICULTURAL DEVELOPMENT BANKBANK

““PRODUCTS AND SERVICES PRODUCTS AND SERVICES AVAILABLE TO SUPPORT THE AVAILABLE TO SUPPORT THE

CASHEW SUB SECTORCASHEW SUB SECTOR””

A PAPER PRESENTED BY THE A PAPER PRESENTED BY THE AGRICULTURAL DEVELOPMENT BANKAGRICULTURAL DEVELOPMENT BANKAT THE NATIONAL CASHEW WEEK AT THE NATIONAL CASHEW WEEK

CELEBRATION CELEBRATION ALISA HOTEL ON APRIL 18 2007ALISA HOTEL ON APRIL 18 2007



INTRODUCTIONINTRODUCTION

The one week celebration of a crop which The one week celebration of a crop which

ranks third in world production of edible ranks third in world production of edible

tree nuts has come at an opportune time tree nuts has come at an opportune time

and we feel very and we feel very honouredhonoured to be invited to to be invited to

participate.participate.



Focus of the BankFocus of the Bank

�� The focus of the Bank is to provide The focus of the Bank is to provide financial support for the development and financial support for the development and modernization of agriculture and its modernization of agriculture and its related sectors within the economy. related sectors within the economy.

�� Since its inception, the bank in pursuance Since its inception, the bank in pursuance of Governmentof Government’’s development agenda has s development agenda has supported a number of activities in the supported a number of activities in the agricultural sector including financing of agricultural sector including financing of export crops. export crops.



THE BANKTHE BANK’’S SUPPORT FOR THE CASHEW S SUPPORT FOR THE CASHEW INDUSTRYINDUSTRY

��Our massive support for the Our massive support for the

cashew industry over the past cashew industry over the past

years is as follows:years is as follows:



Lending Budget and Approvals for Cashew Lending Budget and Approvals for Cashew Production (2004Production (2004--2006)2006)

53.7 53.7 74.4 74.4 200.5 200.5 % %

Approved Approved

8,059,400,000.00 8,059,400,000.00 7,814,907,000.00 7,814,907,000.00 8,021,167,000.00 8,021,167,000.00 Approvals Approvals

15,000,000,000.00 15,000,000,000.00 10,500,000,000.00 10,500,000,000.00 4,000,000,000.00 4,000,000,000.00 Budget Budget

200620062005200520042004



2007 BUDGETARY ALLOCATION FOR THE SECTOR2007 BUDGETARY ALLOCATION FOR THE SECTOR

In 2007 a budgetary allocation of In 2007 a budgetary allocation of

�� ¢¢18.0 billion has been made for cashew 18.0 billion has been made for cashew

production andproduction and

�� ¢¢1.2 billion has been made for cashew 1.2 billion has been made for cashew

processing.processing.



TYPES OF FACILITIES AVAILABLE TO THE TYPES OF FACILITIES AVAILABLE TO THE CASHEW SUBCASHEW SUB--SECTORSECTOR

�� Credit for primary ProductionCredit for primary Production

�� Credit for marketing (Short Term)Credit for marketing (Short Term)

�� Credit for processing equipment Credit for processing equipment (Medium and Long Term)(Medium and Long Term)

�� Working capital for processing (Short Working capital for processing (Short Term)Term)

�� Marketing and Distribution (Short Marketing and Distribution (Short Term)Term)



WHO IS ELIGIBLE FOR CREDITWHO IS ELIGIBLE FOR CREDIT

�� IndividualsIndividuals

�� Sole ProprietorshipSole Proprietorship

�� PartnershipsPartnerships

�� Limited Liability CompaniesLimited Liability Companies

�� Registered CoRegistered Co--operative Societiesoperative Societies

�� OrganisedOrganised Groups involved in Micro Small Groups involved in Micro Small

and Medium Enterprise activitiesand Medium Enterprise activities



WHAT TO DO TO ACCESS CREDIT WHAT TO DO TO ACCESS CREDIT FROM THE BANKFROM THE BANK

FOR NEW VENTURESFOR NEW VENTURES

Prepare and present:Prepare and present:

1.1. A Business Plan for the Project andA Business Plan for the Project and

2.2. A Marketing Plan and OpportunitiesA Marketing Plan and Opportunities



WHAT TO DO TO ACCESS CREDIT WHAT TO DO TO ACCESS CREDIT FORM THE BANK (contFORM THE BANK (cont’’d)d)

FOR GOING CONCERNSFOR GOING CONCERNS

Prepare and present:Prepare and present:

1.1. Business Plans containing all the Business Plans containing all the necessary information as regards start necessary information as regards start upsups

2.2. Statement of Accounts for at least three Statement of Accounts for at least three (3) years for going business concerns(3) years for going business concerns

3.3. BudgetsBudgets

4.4. Cash flow ProjectionsCash flow Projections



SECURITIES ACCEPTABLE TO THE SECURITIES ACCEPTABLE TO THE BANKBANK

Acceptable security include:Acceptable security include:

�� Cash Collateral in blocked AccountsCash Collateral in blocked Accounts

�� Group Executives Guarantee /Warranty Group Executives Guarantee /Warranty

(Especially for Micro Loans)(Especially for Micro Loans)

�� Personal GuaranteesPersonal Guarantees



SECURITIES ACCEPTABLE TO THE BANK SECURITIES ACCEPTABLE TO THE BANK (cont(cont’’d)d)

�� Stocks, bonds, Treasury BillsStocks, bonds, Treasury Bills

�� Life PoliciesLife Policies

�� IndemnitiesIndemnities

�� Immovable/Landed PropertiesImmovable/Landed Properties



CONCLUSIONCONCLUSION

Mr. Chairman, we are all aware that Mr. Chairman, we are all aware that

�� the cashew sub sector is an important the cashew sub sector is an important generator of foreign earnings for many generator of foreign earnings for many countries and countries and

�� a major source of job and wealth creation a major source of job and wealth creation for rural communities. for rural communities.

�� Indeed the support given by the Brazilian Indeed the support given by the Brazilian Government has resulted in the crop being Government has resulted in the crop being a driving force of that economy. a driving force of that economy.



CONCLUSION (contCONCLUSION (cont’’d)d)

�� The potential of the sub sector is The potential of the sub sector is

immense.immense.

�� There is therefore the need for creating There is therefore the need for creating

awareness on quality nut productionawareness on quality nut production

�� to increase yields to increase yields

�� to ensure availability of nuts for processors to ensure availability of nuts for processors

�� to enable maximum gains in the sector. to enable maximum gains in the sector.



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THE BANKTHE BANK’’S GOALSS GOALS

As a development bank our main goals among As a development bank our main goals among others include:others include:

�� To generate sustained increases in foreign To generate sustained increases in foreign exchange earnings through rapid expansion of exchange earnings through rapid expansion of particularly nonparticularly non--traditional agricultural export traditional agricultural export cropscrops

�� To generate productive employment and poverty To generate productive employment and poverty reductionreduction

�� To promote profitable valueTo promote profitable value--addition to addition to agricultural produce through investment in agricultural produce through investment in agricultural marketing and processingagricultural marketing and processing



TENOR OF CREDITSTENOR OF CREDITS

Financing the broad activities could take one of the Financing the broad activities could take one of the following:following:

�� ShortShort--Term Loan/Credit Term Loan/Credit -- typically granted as typically granted as working capital to meet production, transportation and working capital to meet production, transportation and marketing of produce/products for up to 18 months.marketing of produce/products for up to 18 months.

�� Medium Term Loan Medium Term Loan -- granted for such purposes as the granted for such purposes as the purchasing of farm equipment, processing equipment, purchasing of farm equipment, processing equipment, manufacturing equipment and other production activities manufacturing equipment and other production activities with gestation periods between 18 months and 5 years.with gestation periods between 18 months and 5 years.

�� LongLong--Term Loans Term Loans -- For new and existing projects that For new and existing projects that require heavy capital outlay and/or long gestation require heavy capital outlay and/or long gestation periods, usually beyond 5 yearsperiods, usually beyond 5 years



MODES OF CREDIT DISBURSEMENTMODES OF CREDIT DISBURSEMENT

�� NonNon--Cash Disbursement Cash Disbursement --The Bank may The Bank may disburse in kind or by making payment on behalf disburse in kind or by making payment on behalf of the beneficiary customer according to invoices of the beneficiary customer according to invoices submittedsubmitted

�� Cash Disbursement Cash Disbursement -- the Credit is given the Credit is given outright to the beneficiary to finance the outright to the beneficiary to finance the approved activityapproved activity

�� Cash and inCash and in--kind Disbursement kind Disbursement --Applicable Applicable where disbursement requires all the two above where disbursement requires all the two above stated forms of disbursement.stated forms of disbursement.



ELIGIBILITY CRITERIAELIGIBILITY CRITERIA

�� Risk AssessmentRisk Assessment

�� Past Credit Records if applicablePast Credit Records if applicable

�� Technical ViabilityTechnical Viability

�� Financial Viability and ability of the Financial Viability and ability of the

project/business to generate enough cash project/business to generate enough cash

to repay facility with interestto repay facility with interest



ELIGIBILITY CRITERIA (contELIGIBILITY CRITERIA (cont’’d)d)

�� Management strength and succession Management strength and succession

�� Owners stake in project/EquityOwners stake in project/Equity

�� Market for produce/products (very Market for produce/products (very

important)important)

�� Security CoverageSecurity Coverage

�� Environmental ImpactEnvironmental Impact



BUSINESS PLANS FOR NEW VENTURES BUSINESS PLANS FOR NEW VENTURES (START(START--UPS)UPS)

The Business Plan should include the The Business Plan should include the

following details:following details:

�� Technical and financial viability of projectTechnical and financial viability of project

�� Management profile and Experience in the Management profile and Experience in the

Business Business

�� Suitability of Location for projectSuitability of Location for project



BUSINESS PLANS FOR NEW VENTURES BUSINESS PLANS FOR NEW VENTURES (START(START--UPS) contUPS) cont’’dd

�� Availability of raw materials, utilities and Availability of raw materials, utilities and

labourlabour

�� Identified Risks in the Project and Mitigation Identified Risks in the Project and Mitigation

FactorsFactors

�� Proposals of Equity in ProjectProposals of Equity in Project



MARKETING PLAN AND OPPORTUNITIES FOR NEW MARKETING PLAN AND OPPORTUNITIES FOR NEW VENTURESVENTURES

This should include the following:This should include the following:

�� A detailed description of how Micro Small A detailed description of how Micro Small

and Medium Enterprises (and Medium Enterprises (MSMEsMSMEs) would ) would

compete in the market as it delivers its compete in the market as it delivers its

services. i.e.services. i.e.

�� The target marketThe target market

�� Price structure, objective, procedures and Price structure, objective, procedures and

policypolicy

�� Competitor AnalysisCompetitor Analysis



MARKETING PLAN INFO RMARKETING PLAN INFO R’’QD (contQD (cont’’d)d)

�� A detailed description of the produce/productsA detailed description of the produce/products

�� PromotionPromotion

�� LocationLocation

�� There should be a target to provide excellent There should be a target to provide excellent

service delivery to meet customersservice delivery to meet customers’’ needneed



SOME FACTORS THAT PREVENT BUSINESSES SOME FACTORS THAT PREVENT BUSINESSES FROM ACCESSING THE FACILITIESFROM ACCESSING THE FACILITIES

1.1. Lack of requisite experience and Lack of requisite experience and knowledge about the businessknowledge about the business

2.2. Most businesses not properly registeredMost businesses not properly registered

3.3. Lack of training of operators and Lack of training of operators and employeesemployees

4.4. MisMis--matching, using shortmatching, using short--term funds for term funds for long term projects e.g. working capital long term projects e.g. working capital for the acquisition of fixed assetsfor the acquisition of fixed assets



SOME FACTORS THAT PREVENT BUSINESSES SOME FACTORS THAT PREVENT BUSINESSES FROM ACCESSING THE FACILITIES (contFROM ACCESSING THE FACILITIES (cont’’d)d)

5.5. Employment ProblemsEmployment Problems--having round pegs in having round pegs in square hole either because they are relation or square hole either because they are relation or friends to ownersfriends to owners

6.6. Succession Plans not made, death of key staff Succession Plans not made, death of key staff collapses businesscollapses business

7.7. Overtrading of owners, do not nurture Overtrading of owners, do not nurture business to grow but immediately divert funds business to grow but immediately divert funds into new businessinto new business

8.8. Poor Financial Management, use business Poor Financial Management, use business funds for funds for ““Highlife AccountsHighlife Accounts””

9.9. Inaccurate or lack of records on businessInaccurate or lack of records on business



SOME FACTORS THAT PREVENT BUSINESSES SOME FACTORS THAT PREVENT BUSINESSES FROM ACCESSING THE FACILITIES (contFROM ACCESSING THE FACILITIES (cont’’d)d)

10.10. Poor Supervision and monitoring Poor Supervision and monitoring

mechanismmechanism

11.11. Inability to have a good market shareInability to have a good market share

12.12. Inadequate or difficulty in acquiring Inadequate or difficulty in acquiring

quality raw materials quality raw materials

13.13. Lack of credible certificationLack of credible certification

agricultural development bank - product and services eng

Documents

cashew subsector sector

cashew subsupport

cashew production

sevices available

cashew s support

cashew lending budget

past cashew industry

services available