Planning for Agricultural Loans

The rising focus on the growth of the agricultural sector in the country has sparked an increasing need for individuals, entities and small and medium enterprises (SMEs) to access instruments from lending institutions, such as the Agricultural Bank of Namibia, to set up, upscale or reinvest in their agribusinesses.

In a nutshell, engaging in agriculture provides a good source of income that can sustain agribusiness ventures for generations to come.

However, to reach such milestones, it is essential that one understands agricultural ventures’ funding dynamics.

When an aspiring farmer intends to borrow funds from an institution such as Agribank that specialises in the funding of agricultural value chain activities, it becomes very important to know the following to plan carefully:

Firstly, one should understand the different loan products Agribank offers to finance various agri enterprises.
This is crucial for a farmer planning to apply for financial assistance.

Once loan products are understood, it is essential to know the different loan terms.

Agribank has short, medium, and long-term loans.

For example, if one borrows funds to purchase small stock or to set up a poultry enterprise, the loan is classified as a medium-term loan with a six-year repayment period.

The farmer must be aware of this and ensure that production can cater for the loan repayment over the period of the loan.
Another aspect that must be noted by farmers is that interest rates on loans range from 4% to 9% according to different farmer types.

Moreover, when planning loan repayments, farmers are urged to be cognisant of interest payable on a loan, especially given current hikes in the repo rate which can make loan repayments unaffordable.

Agribank remains a good lender for farmers who are already vulnerable to high input costs.

Furthermore, when one is successfully granted a loan by Agribank, it is worth noting that a grace period of about 12 months is accorded to farmers to engage in production before the first instalment is due.

This offers the farmer sufficient time to focus on production and be in a position to pay the loan with ease. Additionally, farmers are offered various repayment options – monthly payments, quarterly payments, biannual payments (twice a year), or an annual payments (once a year).

This assists farmers to evaluate their financial position during production and select the option that would best suit them.

Once an option is selected by the farmer, it is essential to be aware of the instalment’s due date and to ensure that part of the proceeds of product sales covers the required instalments.

Moreover, when production goes well, farmers are urged to set aside a small amount for unforeseen circumstances such as drought, as this may enable them to remain up to date with their loan repayments, regardless of the challenges they are faced with.

Furthermore, farmers must adopt a reliable recordkeeping mechanism as records related to your agricultural business would serve as an added advantage when you approach financial institutions such as Agribank for money.

Finally, aspiring farmers are advised to equip themselves with basic knowledge, understanding and experience related to the agricultural enterprise they intend to set up.

‘Start small but dream big’ is an old but wise adage which can be applied to farming.

To this end, using your limited resources to set up an agricultural business will give you hands-on experience before you borrow large sums of money to upscale the business.

This minimises the risk of failure as you are more equipped to manoeuvre challenges you may face along the way.

In conclusion, always remember preparedness remains key when one intends to seize the opportunity to venture into agribusiness.

• Hanks Saisai is the technical adviser for crops and poultry at Agribank Namibia.

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