INTERGRATED RISK MGT ABDUL KYANIKA NSIBAMBI CENTENARY BANK UGANDA 2 nd April 2009

Location

Mission Statement To provide appropriate financial services, especially microfinance, to all people of Uganda, particularly in rural areas, in a sustainable manner and in accordance with the law

Centenary Bank – History First Years ( 1982 – 1993) 1983 – Formed as a Credit Trust with the name Centenary Rural Development Trust, by the Uganda National Lay Apostolate, 1985 – Began providing financial services 1993 – Registered as a Commercial Bank with only 8 branches,

Centenary Bank Ownership

CENTENARY BANK TO DATE One of the fastest growing Commercial Banks in Uganda – over 700,000 depositors and over 90,000 borrowers Pioneered Microfinance in the Banking sector, serving mainly Micro and SMEs Actively involved in Agricultural lending, the backbone of Ugandas economy Large branch network with 32 branches networked countrywide, 52 ATMs and employing over 1,300 staff

Centenary Bank – Branch Network

Centenary Bank – Loan Portfolio As at 31 st December 2008 Loan Clients 92,611 Volume is $ 144,000,000 funded by a deposit base of $ 172,272,000 74% of the LP are micro loans, with minimum loan amount of $ 50 NP Loans = 1.5%, The Agricultural LP is 13% – 14% of the Total LP,

PERFOMANCE FOR THE LAST SEVEN YEARS

Agricultural LP Growth.

Proposed H/q OF THE BANK

Why Agricultural Lending? The mission statement of the bank is to extend financial services to rural economically active poor, 80% of Ugandan population stay in rural areas and main activity is Agriculture. Uganda has conducive climate for agricultural production and fertile soils, The national economy is entirely dependent on agriculture, There is increased demand of agricultural commodities in the region,

Agricultural Lending – History Started in 1998 as a pilot test targeting small farm holder farmers Focus was mainly on commercially oriented farmers located in rich agricultural regions,

Agricultural Enterprises Financed Crop/animal production, processing & marketing, Crops financed: maize, vegetables, rice, coffee, bananas, oilseed crops Animal production including cattle fattening, and dairy production, poultry, and piggery,

Risks in Agricultural Lending Purely dependent on nature, Crop and animal diseases and pests, Market & price risks, Poor loan management by credit officers and institutions in the following areas; loan evaluation, Structuring, Documentation, Monitoring, Recovery.

Risks in Agricultural Lending Contd….. Perishability of the agriculture produce, Loan Collateral Limitations, Poor Credit Culture in some parts of the country, Lack of entrepreneur skills by farmers, Bad policies and Instability.

Risk Mitigation Measures by the Bank, Focus on commercially oriented farmers, Holistic approach in credit appraisal by considering all sources of income of the household, Combination of securities/collateral approach, Using well trained credit officers with a background of agricultural academic qualifications,

Risk Mitigation Contd…….. Quick and timely loan processing Proper structuring of loan payments depending on the farmers cash flows, Diversification of the agricultural portfolio, Using an efficient back office credit mgt system to monitor the portfolio growth and quality,

Risk Mitigation Contd…….. Networking with other partners in the agribusiness industry which include farmers association, government, processors, NGOs, FIs. Increasing outreach by coming up with new products, opening more branches and lending offices,

Challenges of Agricultural Lending Lack of credit history, Lack of farm records, Heterogeneity of farming, Seasonality of agricultural production & Loan Term Structure. Clients are widely dispersed with inadequate rural transportation facilities,

Challenges ctnd Poor physical and institutional infrastructure, Lack of production statistics from the farmers,

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