0. Agricultural Banking Stanbic Bank Uganda
“Experiences in developing agricultural financial loans – the role of market information ”
September 2011.
25/03/2017

1. Outline Overview of Stanbic Bank (U) Ltd
Changing agriculture sector landscape and the improving market information : creates opportunity for Africa
Standard Bank Agricultural Banking
The smallholder farmers and Agribusiness funding scheme
Success Factors and Key constraints
Key message

2. Overview of Stanbic Bank
Section 1
Overview of Stanbic Bank

3. Stanbic Bank : African Roots with Global Reach
Stanbic Bank (U) Ltd– largest branch network
97 branches; over 60%upcountry
Extensive expertise and strong track record of operating in emerging markets, mainly in Africa.
The largest African bank by geographic spread, assets, earnings and market capitalization
Winner of the Development Finance Initiative of the year. Agribusiness Investment Award Africa Investor
Background
African Footprint
Key regional offices
Established in 1862
Listed on the JSE
Largest trader of African currencies in the world
17 African countries
Over 1,000 Branches & 7,500 ATMs across these geographic regions
Offices in key regional financial centre's including London, Moscow, New York, Hong Kong, Sao Paulo and Dubai

4. Out Africa footprint Notes * Trading as Stanbic Bank Country Branches
Corporate Banking
Retail Banking
South Africa
664 ✔
Botswana* 10
Swaziland 11
Namibia 44
Zimbabwe* 18
Zambia* 12
Malawi 19
Mozambique 34
Ghana* 21
Nigeria* 96
Kenya* 16
Lesotho 15
Uganda* 98
DRC* 2
Angola* 1 *
Tanzania*
Mauritius
Tunisia
Morocco
Algeria
Libya
Egypt
Western
Sahara
Mauritania
Cape Verde
Mali
Niger
Chad
Eritrea
Senegal
Sudan
Gambia
Guinea
Burkina Faso
Djibouti
Guinea Bissau
Benin
Somalia
Ivory
Coast
Togo
Nigeria
Central African Republic
Ethiopia
Sierra
Leone
Ghana
Cameroon
Liberia
Equatorial Guinea
Uganda
Kenya
Gabon
Congo
Democratic Republic of Congo (DRC)
Rwanda
Burundi
Tanzania
Seychelles
Angola
Malawi
Zambia
Namibia
Zimbabwe
Madagascar
Mozambique
Botswana
Mauritius
Swaziland
Lesotho
South Africa
* Trading as Stanbic Bank
Notes

5. Section 2:
Changing landscape in the agriculture sector: creates opportunity for Africa

6. Prices of agricultural Commodities at Key points in the value chain
The role of Market information in banking product development and offering
Market Information Plays a leading role in the Banks product development and offering;
Prices of agricultural Commodities at Key points in the value chain
Reliable Historical data gives an indication of future price movements and demand
Data on movement of prices and demand in agricultural commodities forms a strong basis in product development and offering

7. Changing landscape in the global agriculture sector
Some key trends
Global consumption of food & livestock to increase significantly by 2019 (by about 50% for developing countries)
Food prices increases (mainly due to increase in energy price)
Global food inflation increased sharply from (mainly for low and low-middle- income countries)
Africa realizing significant annual growth: > 5% GDP growth
Agricultural yields stagnated in spite of average per capita production increase
Opportunities
Africa has the potential to increase production and productivity to meet growing demand food demand
Establish functional and more lucrative supply chains
Agric commodity export opportunities for Africa
Import substitution that will arise from increasingly competitive African agribusinesses.
Sustained economic growth has resulted in a sea-change in patterns of demand for food on the African continent. It is fair to say that Most of Africa’s agricultural products are still kept out of the developed country export markets as a result of tariff and no-tariff barriers, farm subsidies and the high cost of exporting out of Africa because of poor infrastructure;
We are however witnessing Africans urbanising at a rapid rate; we see woman’s income raising faster than the average resulting in woman increasingly making independent purchasing decisions.
The result has been a shift in buying patterns, resulting in a rise of more modern supply chains that increasingly reach consumers through the medium of supermarkets.

8. Section 3
Agricultural Banking – Integrated value chain finance approach and product offering

9. Banking the Agricultural Value Chain: Needs and Products
Activities & Needs
Finance instruments
Risk* and Other Products
Input
and Logistics Suppliers
Fert and seed co’s aim to increase penetration by facilitating input finance
Need to manage raw materials cost, and price volatility for buyers
Capex for plant , equipment and infra
Repurchase Agreements
Warehouse financing
Project finance
Vehicle and Asset Finance (VAF)
Physical brokering
Price hedges (fertiliser, fuel?)
Currency and ex rate hedges, FX
Research
Farmers (small and commercial)
Need timely production finance for inputs to ensure yields
MTL to expand the businesses
Price hedges to mitigate price volatility risk
Crop insurance to mitigate risks
Input Finance
Crop Advance (prepayment for crop)
VAF
Physical brokering
Commodity price hedges, for own benefit and to facilitate financing
Crop and weather Insurance
Commodity Traders
Need finance to purchase crops (quality and quantity) at optimum time
Need risk mitigation instruments for margin payments and support for carry trades
Need finance for expansion and a acquisition targets
Commodity finance
Repurchase Agreements
Receivables Finance
Warehouse receipt finance
Leverage and acquisition finance
Physical brokering
Commodity price hedges
Currency and ex rate hedges, FX
Research
To secure control over raw material
Liquidity to buy at optimal time
Hedging of revenues where processed commodity tradeable
Need finance for expansion and acquisition targets
Commodity finance
Repurchase Agreements
Receivables finance
Leverage and acquisition finance
Physical brokering
Commodity price hedges
Currency and ex rate hedges, FX
M&A Advisory
Research
Primary Processors
Food & Beverage Companies
Need liquidity to buy at optimal time, but want to reduce w. capital and credit risk
Need finance expansion and acquisition targets
Commodity finance
Leverage and acquisition finance
VAF
[Physical brokering]
Commodity price hedges
Currency and ex rate hedges, FX
M&A Advisory
Research
Wholesales and Retailers
* Note, derivatives still restricted to SA (Safex) and some African imports and exports

10. Current product offering
Stanbic Bank in partnership with AGRA and Kilimo Trust set up the
Agri-Business Loan Scheme (Small holder Financing)
The Government Agric Facility
Vehicle and Asset Financing
Ware house receipt financing
Danida aBi Guarantee
Commercial Agriculture
“Flexible and Innovative Agric Financing”

11. Overview of the Agribusiness Scheme
The scheme is a three year program and will disburse up to $100 million targeting 750,000 smallholder farmers and agribusinesses in 4 African countries: Uganda, Tanzania, Mozambique and Ghana
Risk partners provide partial risk cover (1st loss guarantee and 50% risk participation)
The scheme relies on value chain finance to leverage on the interlocking arrangements among the value chain actors
The scheme leverage on partnerships to take the advantage of mechanization, TA support and precision agriculture to improve production efficiencies
The scheme financial instruments include:
Input finance and agricultural production loans,
Commodity finance,
Agricultural machinery/equipment finance

12. Our partners are: KILIMO Trust,
The Alliance for a Green Revolution in Africa (AGRA)
OPEC Fund for International Development (OFID)
Risk participation:
1st loss guarantee and
50%/50% risk sharing

13. The Small holder farmer funding model:
Risk sharing Partners
Bank
Co-ops
Smallholder Farmers
RSG
Off-taking agreement
Off-taker
Technical Assistance Provider
Contract and monitor TA providers
Agric input / equipment providers

14. Aggregate portfolio performance
Financed more than 70 projects
Total number of smallholder farmers benefiting from the scheme is about 5,000

15. Country Specific financing
Agricultural Production Crops
Agricultural production Livestock &poultry
Marketing including commodity trade
Processing and light industries

16. Success factors and key constraints
Section 5
Success factors and key constraints

17. Some success factors
Specialized Agricultural Banking: products and expertise
Structured finance approach:
Structured finance approach
Self-liquidating and cash flow based finance
Leverage on partnerships: lead firms, NGOs, etc
Legally binding contracts. e.g. tripartite agreements, TA provision agreement and joint liability guarantee
Increasing production efficiencies:
Agronomy services and crop husbandry
GIS mapping and soil testing
Agricultural production manual & guidelines
Mechanization: partnership with John Deere for the provision of agricultural equipment.
Upgrading the value chains. Example, enabling farmers access to market through partnership with WFP and large domestic, regional and international agribusiness
Cross selling opportunity: 55,000 smallholder farmers accessing finance through this scheme. How to bank them?

18. Some key constraints
Maximizing the value chain finance concept in a context where:
Inexistent/ underdeveloped value chains (mainly food crops)
Loans are generally high volumes but relative small values
Weak CBOs (producer groups, associations and co-operatives)
Climate change: heavy reliance on rain fed agriculture
Unorganised supply and demand
High post harvest losses
Erratic production due to weather shocks and seasonality
High transaction costs resulting from information asymmetry and poor information flow. (adverse selection and moral hazard)
Weak systems for contract enforcement (legally binding contracts)
Lack of legislation and/or regulations suitable to agriculture financial intermediation (e.g. commodity finance supporting instruments)

19. MIS requirements for appropriate Agric-financing
Agricultural produce pricing
Farm gate prices
Wholesale prices
Export / main off taker prices
Quantities and Quality
Price and quantity movements over time
Expected costs involved
Seasonality of crops and regional differences
Storage and processing capacities availability and location
Availability of markets and major market players
Ease of delivery to markets

20. Section 5
Key message

21. Key messages for conducive policy
Addressing market failures: information asymmetry
Appropriate policies and regulations
Avoid market distorting policies. e.g. government funding schemes, marketing and price control, etc
Strengthen CBOs (producer groups, associations and co-operatives) to enable access to farmers
Build climate change resilience and adaptation: e.g. investment in small and medium scale irrigation systems,
Investing in public goods and infrastructures
Adopting policies and strategies to re-risk agriculture sector: e.g. risk sharing and price hedging
Harnessing legal systems for contract enforcement
Harnessing legislation and/or regulations suitable to agriculture financial intermediation (e.g. commodity finance supporting instruments)

22. Contact Details Richard Wangwe Head, Agriculture Stanbic Bank (U) Ltd,

23. Thank you