Daily Trust - ‘Over 90% smallholder farmers can’t still access bank credit

Lola Marsha, Executive Director, Babban Gona Farmer Services

 

‘Over 90% smallholder farmers can’t still access bank credit in Nigeria’

Lola Marsha is the Executive Director for Corporate Services at Babban Gona Farmer Services, an organisation engaged in providing finance, business intelligence, and other services for rural farmers in Northern geo-political zone of the country.

In this interview, she speaks on the experiences of her organisation on funding support and other empowerment efforts for the about 60,000 smallholder farmers reached so far and future plans.

Eight years down, how would you describe your experience dealing with largely unorganised rural poor farmers in the country?

Through these 8 years, I’m happy to say as a social enterprise, Babban Gona has contributed significantly to improving the lives of the rural poor in Nigeria. Our journey has not been without its challenges, but we have adopted a stance of constant improvement that keeps us innovating and changing strategies to achieve the highest impact. We have achieved a consistent year-on-year increase in the earnings of smallholder farmers and created thousands of jobs. By 2016, we had become Nigeria’s largest maize producing entity. We have not achieved this all on our own, but have leveraged strategic partnerships to help us develop and scale. Currently, we offer our services to small holders across five Northern states and nine hubs in Katsina, Kano, Kaduna, Bauchi and Plateau States. We have organised these smallholders into Trust Groups, providing the missing element of professional management, and enhanced their access to training, quality inputs and access to markets at harvest. This impact creates a ripple effect not only in the lives of our members but extends to their families and communities as well. For instance, we have developed schemes to support female relatives of our Trust Group members, putting them on a path towards financial independence through innovative programs such as our Last Mile Retailer.

 Your organisation franchises thousands of mini farmer cooperatives called ‘Trust Groups’ across Northern Nigeria. What informed this, how does it work and how effective has this been?

We realised that smallholder farmers, despite their critical contributions to the agricultural sector were held back by structural forces that kept them in a cycle of poverty. To this end, we developed the Babban Gona Agricultural Franchise Model to support them, first by placing them into grassroots farmer cooperatives called ‘Trust Groups’. The average trust group has 3-5 members who grow staple crops (e.g., maize and rice) with an average farm size of 0.7 hectares. Babban Gona provides a suite of end-to-end services to them from the beginning of the planting season to the very end, giving them access to technology, inputs, and services that have proven to improve their yields and incomes by 2 and 2.5x the average Nigerian farmer. Furthermore, we also improve their access to markets by providing storage services, enabling delayed sales and the attainment of a premium on the sale of their grains relative to the prevailing market price at harvest. These profits are transferred to our farmers in the form of future bonuses paid to them quarterly.

In most cases, lenders say the Nigerian agribusiness is highly risky and refuse to lend to many farmers who need loans to expand. How do you de-risk farmers in your programme?

It is a known fact that rain-fed agriculture is by an inherent nature risky. As an organisation, we identified this early on and developed a comprehensive risk mitigation system that has allowed us to maintain repayment rates of up to 99%. These risks vary from the naturally occurring such as flooding, drought or pest attacks, to others such as price fluctuations, which affect the final profit for a smallholder.

What are the financing options you provide to the farmers under your platform and at what interest rate?

We finance groups of grassroots smallholder farmers, placing them into groups of 3-5 farmers, and providing them with credit in the form of training and development, quality agricultural inputs, harvest support and access to markets. We offer this credit to our members at a significantly discounted interest rate compared to traditional micro-finance, which delivers credit between 30% to 60% APR.

In 2017, Babban Gona piloted the Women Economic Development Initiative (WEDI) to address women empowerment challenges. How has this initiative fared?

WEDI has fared very well and recorded a significant level of impact. It was created to recruit female relatives of our member farmers to retail fast-moving consumer goods (FMCG) such as bouillon cubes, noodles, pasta and other products. Our sole aim with WEDI was to put these women on the path of financial independence and by implication improve the living conditions for their families. We revamped the programme in 2019 to improve on our service delivery and package. Since our re-launch, the LMR programme has successfully recruited 2,100 women.

Your organisation is currently operating in five Northern states in Nigeria. Do you have plans expanding to other states? If yes, when?

Our vision is to reach a million farmers by 2025 and we are not restricted to the region. We will expand to other states and regions once we have our systems in place to accommodate the expansion.

What critical challenges have you identified while dealing with rural farmers?

Rural farmers have for long essentially produced for subsistence. The rural farmers we work with undergo a mandatory training session, which we execute via our Farm University. Through this platform, we bring about a paradigm shift from farming for subsistence, to farming to make significant profit. Apart from providing access to critical knowledge in best agronomic practices, we also ensure that these farmers are equipped to effectively lead and manage their grass root cooperatives and collectively succeed during the season.

What are the real issues the three tiers of government need to focus on to help the rural poor farmers optimise their opportunities?

Empowering rural poor farmers is key to the agricultural revolution we desire to see in this nation. At Babban Gona, we have come to realise that it is not a task that can be accomplished by the public sector alone. Through concerted efforts, the public sector, the private sector and philanthropic organisations are paving a path to success for the rural poor.

Smallholders are the backbone of the agricultural sector, and the keys to unlocking and maximising their potential is summarily three folds, namely improving their access to low-cost finance options, which will drive on-farm investment; enabling their on-farm productivity through training and development on good agronomic practice and providing enhanced access to quality inputs which directly impacts their yields; and by improving their access to markets at harvest.

If you are so successful dealing with local farmers and earning some profits, don’t you think banks’ skepticism about investing in rural poor is a bit misplaced?

Studies have shown that up to 93% of smallholders are unable to access the finance they need to farm profitably. Our organisation is unique because we are helping to close this financing gap and deploy low-cost credit to those who need it the most. In Nigeria, Agriculture’s contribution to the GDP is on the rise, recording a 2.36% year-on-year growth from 2018. This changing narrative around agriculture and the growing number of individuals and agro-firms doing profitable businesses along various value chains will, we believe, be the catalyst for commercial banks to focus more on catering for this growing and thriving segment.

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Lola Marsha, Executive Director, Babban Gona Farmer Services

 

‘Over 90% smallholder farmers can’t still access bank credit in Nigeria’

Lola Marsha is the Executive Director for Corporate Services at Babban Gona Farmer Services, an organisation engaged in providing finance, business intelligence, and other services for rural farmers in Northern geo-political zone of the country.

In this interview, she speaks on the experiences of her organisation on funding support and other empowerment efforts for the about 60,000 smallholder farmers reached so far and future plans.

Eight years down, how would you describe your experience dealing with largely unorganised rural poor farmers in the country?

Through these 8 years, I’m happy to say as a social enterprise, Babban Gona has contributed significantly to improving the lives of the rural poor in Nigeria. Our journey has not been without its challenges, but we have adopted a stance of constant improvement that keeps us innovating and changing strategies to achieve the highest impact. We have achieved a consistent year-on-year increase in the earnings of smallholder farmers and created thousands of jobs. By 2016, we had become Nigeria’s largest maize producing entity. We have not achieved this all on our own, but have leveraged strategic partnerships to help us develop and scale. Currently, we offer our services to small holders across five Northern states and nine hubs in Katsina, Kano, Kaduna, Bauchi and Plateau States. We have organised these smallholders into Trust Groups, providing the missing element of professional management, and enhanced their access to training, quality inputs and access to markets at harvest. This impact creates a ripple effect not only in the lives of our members but extends to their families and communities as well. For instance, we have developed schemes to support female relatives of our Trust Group members, putting them on a path towards financial independence through innovative programs such as our Last Mile Retailer.

 Your organisation franchises thousands of mini farmer cooperatives called ‘Trust Groups’ across Northern Nigeria. What informed this, how does it work and how effective has this been?

We realised that smallholder farmers, despite their critical contributions to the agricultural sector were held back by structural forces that kept them in a cycle of poverty. To this end, we developed the Babban Gona Agricultural Franchise Model to support them, first by placing them into grassroots farmer cooperatives called ‘Trust Groups’. The average trust group has 3-5 members who grow staple crops (e.g., maize and rice) with an average farm size of 0.7 hectares. Babban Gona provides a suite of end-to-end services to them from the beginning of the planting season to the very end, giving them access to technology, inputs, and services that have proven to improve their yields and incomes by 2 and 2.5x the average Nigerian farmer. Furthermore, we also improve their access to markets by providing storage services, enabling delayed sales and the attainment of a premium on the sale of their grains relative to the prevailing market price at harvest. These profits are transferred to our farmers in the form of future bonuses paid to them quarterly.

In most cases, lenders say the Nigerian agribusiness is highly risky and refuse to lend to many farmers who need loans to expand. How do you de-risk farmers in your programme?

It is a known fact that rain-fed agriculture is by an inherent nature risky. As an organisation, we identified this early on and developed a comprehensive risk mitigation system that has allowed us to maintain repayment rates of up to 99%. These risks vary from the naturally occurring such as flooding, drought or pest attacks, to others such as price fluctuations, which affect the final profit for a smallholder.

What are the financing options you provide to the farmers under your platform and at what interest rate?

We finance groups of grassroots smallholder farmers, placing them into groups of 3-5 farmers, and providing them with credit in the form of training and development, quality agricultural inputs, harvest support and access to markets. We offer this credit to our members at a significantly discounted interest rate compared to traditional micro-finance, which delivers credit between 30% to 60% APR.

In 2017, Babban Gona piloted the Women Economic Development Initiative (WEDI) to address women empowerment challenges. How has this initiative fared?

WEDI has fared very well and recorded a significant level of impact. It was created to recruit female relatives of our member farmers to retail fast-moving consumer goods (FMCG) such as bouillon cubes, noodles, pasta and other products. Our sole aim with WEDI was to put these women on the path of financial independence and by implication improve the living conditions for their families. We revamped the programme in 2019 to improve on our service delivery and package. Since our re-launch, the LMR programme has successfully recruited 2,100 women.

Your organisation is currently operating in five Northern states in Nigeria. Do you have plans expanding to other states? If yes, when?

Our vision is to reach a million farmers by 2025 and we are not restricted to the region. We will expand to other states and regions once we have our systems in place to accommodate the expansion.

What critical challenges have you identified while dealing with rural farmers?

Rural farmers have for long essentially produced for subsistence. The rural farmers we work with undergo a mandatory training session, which we execute via our Farm University. Through this platform, we bring about a paradigm shift from farming for subsistence, to farming to make significant profit. Apart from providing access to critical knowledge in best agronomic practices, we also ensure that these farmers are equipped to effectively lead and manage their grass root cooperatives and collectively succeed during the season.

What are the real issues the three tiers of government need to focus on to help the rural poor farmers optimise their opportunities?

Empowering rural poor farmers is key to the agricultural revolution we desire to see in this nation. At Babban Gona, we have come to realise that it is not a task that can be accomplished by the public sector alone. Through concerted efforts, the public sector, the private sector and philanthropic organisations are paving a path to success for the rural poor.

Smallholders are the backbone of the agricultural sector, and the keys to unlocking and maximising their potential is summarily three folds, namely improving their access to low-cost finance options, which will drive on-farm investment; enabling their on-farm productivity through training and development on good agronomic practice and providing enhanced access to quality inputs which directly impacts their yields; and by improving their access to markets at harvest.

If you are so successful dealing with local farmers and earning some profits, don’t you think banks’ skepticism about investing in rural poor is a bit misplaced?

Studies have shown that up to 93% of smallholders are unable to access the finance they need to farm profitably. Our organisation is unique because we are helping to close this financing gap and deploy low-cost credit to those who need it the most. In Nigeria, Agriculture’s contribution to the GDP is on the rise, recording a 2.36% year-on-year growth from 2018. This changing narrative around agriculture and the growing number of individuals and agro-firms doing profitable businesses along various value chains will, we believe, be the catalyst for commercial banks to focus more on catering for this growing and thriving segment.

texem
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