Windhoek-Farmers have the highest ever default of just over N$500 million with Agribank but the bank says when all avenues are exhausted legal action will be taken against them.
Communal farmers contribute three percent of the total in arrears while the remainder of 97 percent is with commercial farmers.
Addressing the media on Friday following the adoption of the bank’s new five-year strategic plan (2016/17-2020/21), Agribank CEO Sakaria Nghikembua said the bank has listed total arrears of over N$500 million of the total loan book of N$2.4 billion.
He said this represents an arrears-to-total-advances ratio of 21 percent, whilst the benchmark ratio for development financing institutions is 15 percent.
“As part of the arrears collection strategy, the bank has appointed debt collectors to assist the agricultural bank [Agribank] in the collection of outstanding repayments from clients with effect of this month,” he said.
According to Nghikembua, the sustained high levels of arrears would threaten Agribank’s financial sustainability and the bank’s ability to deliver on its mandate in the long term.
Further, he said, despite the challenging operating environment, the bank has maintained a credible financial performance in the year so far.
Nghikembua, formerly a CEO of Nampost and a top executive at Old Mutual, says he expects the bank to meet or exceed its key financial targets for the full year to the end of March 2017.
The Agribank boss explained that the bank’s operating environment continues to be characterized by increased regulation and intensified competition, while the volatile weather cycles also pose their own challenges.
According to him, this calls for considerations on strategic focus to achieve growth, maintain relevance and ensure sustainability. He said income-growth and cost-containment strategies are necessary in achieving the strategic objectives of the bank.
Furthermore, he said, introducing a high-performing culture, embedding customer-centricity, attaining financial inclusion, improving service efficiencies as well as leveraging technology and constant innovation, are some of the prerequisites to make the bank a winning institution.
Additionally, Nghikembua said, due to the nature of the bank’s operations, the institution is placing a lot of emphasis on risk management and compliance as part of its governance focus area.
He said to this end, compliance and risk specialists have already been recruited whilst the recruitment of a governance executive is underway.
“Upcoming initiatives include the company-wide roll-out of risk and compliance awareness sessions, the implementation of a compliance testing plan that has recently been developed, training of the board and senior management on governance-related matters and the roll-out of risk management, while enhancing audit and forensic capacity will also receive priority under the governance focus area,” he said.
Nghikembua concluded by listing some of the focus areas for the remainder of this financial year as, among others, ensuring disciplined execution across business, readiness to implement the training and mentoring division by April 1 and delivering financial performance in respect of revenue, expenses, profit and collection.