Windhoek-Namibia’s agricultural bank is looking towards the horizon for greener pastures in pursuit of diversifying its financing for the loan book, thereby reducing reliance on the Treasury.
Agribank’s quest to find its El Dorado has seen the bank plugging seepages in expenditure, employing efficient measures to generate new business for loan disbursements and collection of what is owed.
Ultimately the bank wants to portray an image of a reliable development financing institution that, while playing its socio-economical role of agro-financing, is able to attract external funding.
To get there the bank has already rolled out a financing product that does not require collateral for communal farmers. That product alone brought in N$13 million worth of business since its launch in April and is expected to perform well in the coming months.
Already the finances for the 2016/17 fiscal year ended March 31, 2017 indicates that the bank was able to turn in a whopping N$138.3 million in profits. The caveat though is that N$76.2 million of the profits were only reflected in the financial books, because of the new accounting provisions used to cater for bad debts.
For the 2017 financial statements, Agribank adopted a change in the method of provision of advances from a general provision based on outstanding loan balances, to a specific method based on individual loan accounts.
This individual account provisioning is in line with the Bank of Namibia’s guidelines for commercial banks, says Agribank chief executive officer Sakaria Nghikembua.
However, the N$62.1 million profit is still a sizeable sum when compared to the N$7.3 million profit registered in 2015/16 and N$47.4 million registered in 2014/15. Profits for 2013/14 stood at N$88,6 million.
Nghikembua says the rise in profits this year compared to the last two years was due to “focusing on the right things, such as expenditure management, ensuring that expenditures do not run away.”
There is also focus on business generation to have timely disbursements of funds and collection of earnings from loans disbursed.
The collection of outstanding of loans has also helped – despite early and misplaced fears of a backlash after the bank procured the services of debt collectors in mid-February.
To date, the bank has collected N$56 million of the arrears through debt collectors, while the internal legal collection department recouped N$30 million.
The bank says it could collect between N$70 million and N$100 million in the next trimester.
Meanwhile, going forward Agribank is looking to roll out its non-collateral loan products to emerging farmers. Currently, the products are available to communal farmers that earn a salary.
They are required to pay back the loan using their salaries.
The N$13 million worth of loans were used to buy fertiliser, seed, livestock, farming equipment, including tractors, and fencing.
Further, the other aim is to “implement a new loan book funding strategy”, whilst continuing to embed a high performance culture in the business.
“The bank is currently in the process of re-engineering critical business processes in order to improve customer service. Identified data integrity issues will also be addressed,” Nghikembua said.