Agribank disburses N$360m
In spite of a challenging environment and high levels of arrears, Agribank has managed to perform very well and also received a clean bill of health.
Agribank advanced N$358 million in new loans during the financial year ended 31 March 2018, up 18% on the N$304 million in 2017. This was one of the many achievements highlighted by CEO Sakaria Nghikembua at the bank's AGM held on 26 September 2018. The bank also received a clean bill of health, receiving an unqualified audit from its external auditors for the year. This achievement followed an intensive clean-up by the bank, after a qualified audit in 2017 because of legacy issues related to collateral securities records. Agribank is one of the few public enterprises in Namibia which produces audited annual financial statements within six months of its financial year-end.
At the occasion, Nghikembua informed stakeholders that the bank delivered on most of the promises made at the last AGM, despite a difficult operating environment. He said the bank grew its loan book by 6% year-on-year, from N$2.61 billion in 2017 to N$2.77 billion in 2018. Interest income on loan advances grew by a somewhat slower 4%, from N$167.5 million in 2017 to N$173.7 million in 2018. The slower growth in interest income, compared to the loan book growth, was as a result of the bulk of the disbursements for new loans occurring only in the last five months of the financial year. According to Nghikembua, the bank recorded a N$29.8-million overall surplus for the year. Whilst this remains a positive achievement, an increase in provisions for bad debts on loans advanced, reduced the surplus level compared to the N$99 million achieved in the prior year. This is because the level of arrears remains relatively high.
He noted that the bank had made good progress in slowing down the rate of increase in operational expenses over the past three years, moving from an annual increase of 17% in FY 2015/16 to 11.3% in FY 2016/17 and 7.5% in FY 2017/18.
According to Nghikembua, the biggest portion of the new loans went to farmland purchases, followed by large stock loans, consolidation of debt and seasonal production loans. Khomas received the highest allocation of loans at N$61 million, closely followed by Otjozondjupa (N$60 million), Hardap (N$40 million), Omaheke (N$39 million), with Oshikoto (N$31 million) completing the top five regions for collateral-backed loan disbursements. In contrast, the Zambezi Region received the highest disbursements for the newly introduced no-collateral loan product at N$6.5 million, followed by Omaheke (N$3.9 million), Kavango (N$2.7 million), Oshana (N$2.6 million) and Ohangwena (N$2.4 million) respectively. In total, N$26 million worth of no-collateral loans were disbursed during the financial year. The bank has experienced more impressive growth in this loan product subsequent to the financial year-end.
Statistics revealed at the AGM further show that the youth (up to age 40) received 27% of the total new loan funding from Agribank, while 36% of the funding went to people within the age group 41 to 60. The balance went to either clients above the age of 60 years or to registered legal entities.
“As a member of the Association of African Development and Finance Institutions, we rate ourselves in three core areas of governance guidelines, financial prudential standards and operational guidelines and I am pleased to announce that Agribank obtained an overall score of 78.4% in 2018, compared to 77.2% in 2017”, Nghikembua stated, adding, “this score is reviewed annually by our external auditor and has significantly improved from 64% in 2015/16 to current levels. The improvement means that the bank has been consistently enhancing its operational efficiencies, governance standards and financial management policies and practices.”
Nghikembua was also upbeat because the bank continues to make a consistent developmental impact in up-skilling and building the capacity of farmers, noting that more than 5 000 farmers benefitted from the bank's advisory services during the year, through training, mentorship, lectures and farmer information days. “We need to assist more emerging farmers to gain skills and knowledge to improve their productivity, increase production, employ more people and contribute to economic expansion,” Nghikembua enthused.
Meanwhile, he reiterated that the bank has to manage a tight liquidity situation because of the high level of arrears and declining treasury transfers, specifically over the past three years.
The high cost of funding when raising capital in the market is another challenge that is likely to impact on the developmental mandate of the bank as its interest rates will require ongoing upward reviews. Nghikembua, however, expressed confidence that these challenges can be addressed through a prudent mix of funding sources to keep Agribank lending rates affordable and sustainable in the long-term.
On his part, finance minister Calle Schlettwein commended the bank for its efforts to diversify its loan book, noting that the bank plays an important role in the land reform process. According to the minister, Agribank's role is to service the agricultural sector in order to realise its optimal potential to create jobs, improve productive capacity and create wealth.
Whilst commending the introduction of the agro-processing loan product, Schlettwein also encouraged the bank to further develop financial products that will create value chains other than livestock and horticulture. He further pledged his support to the bank, as it strives to fulfil its mandate in the land reform process in the country.
The Agribank AGM was attended by the shareholding minister, Agribank board members and management, as well as senior officials from the ministries of finance and public enterprises.
STAFF REPORTER
At the occasion, Nghikembua informed stakeholders that the bank delivered on most of the promises made at the last AGM, despite a difficult operating environment. He said the bank grew its loan book by 6% year-on-year, from N$2.61 billion in 2017 to N$2.77 billion in 2018. Interest income on loan advances grew by a somewhat slower 4%, from N$167.5 million in 2017 to N$173.7 million in 2018. The slower growth in interest income, compared to the loan book growth, was as a result of the bulk of the disbursements for new loans occurring only in the last five months of the financial year. According to Nghikembua, the bank recorded a N$29.8-million overall surplus for the year. Whilst this remains a positive achievement, an increase in provisions for bad debts on loans advanced, reduced the surplus level compared to the N$99 million achieved in the prior year. This is because the level of arrears remains relatively high.
He noted that the bank had made good progress in slowing down the rate of increase in operational expenses over the past three years, moving from an annual increase of 17% in FY 2015/16 to 11.3% in FY 2016/17 and 7.5% in FY 2017/18.
According to Nghikembua, the biggest portion of the new loans went to farmland purchases, followed by large stock loans, consolidation of debt and seasonal production loans. Khomas received the highest allocation of loans at N$61 million, closely followed by Otjozondjupa (N$60 million), Hardap (N$40 million), Omaheke (N$39 million), with Oshikoto (N$31 million) completing the top five regions for collateral-backed loan disbursements. In contrast, the Zambezi Region received the highest disbursements for the newly introduced no-collateral loan product at N$6.5 million, followed by Omaheke (N$3.9 million), Kavango (N$2.7 million), Oshana (N$2.6 million) and Ohangwena (N$2.4 million) respectively. In total, N$26 million worth of no-collateral loans were disbursed during the financial year. The bank has experienced more impressive growth in this loan product subsequent to the financial year-end.
Statistics revealed at the AGM further show that the youth (up to age 40) received 27% of the total new loan funding from Agribank, while 36% of the funding went to people within the age group 41 to 60. The balance went to either clients above the age of 60 years or to registered legal entities.
“As a member of the Association of African Development and Finance Institutions, we rate ourselves in three core areas of governance guidelines, financial prudential standards and operational guidelines and I am pleased to announce that Agribank obtained an overall score of 78.4% in 2018, compared to 77.2% in 2017”, Nghikembua stated, adding, “this score is reviewed annually by our external auditor and has significantly improved from 64% in 2015/16 to current levels. The improvement means that the bank has been consistently enhancing its operational efficiencies, governance standards and financial management policies and practices.”
Nghikembua was also upbeat because the bank continues to make a consistent developmental impact in up-skilling and building the capacity of farmers, noting that more than 5 000 farmers benefitted from the bank's advisory services during the year, through training, mentorship, lectures and farmer information days. “We need to assist more emerging farmers to gain skills and knowledge to improve their productivity, increase production, employ more people and contribute to economic expansion,” Nghikembua enthused.
Meanwhile, he reiterated that the bank has to manage a tight liquidity situation because of the high level of arrears and declining treasury transfers, specifically over the past three years.
The high cost of funding when raising capital in the market is another challenge that is likely to impact on the developmental mandate of the bank as its interest rates will require ongoing upward reviews. Nghikembua, however, expressed confidence that these challenges can be addressed through a prudent mix of funding sources to keep Agribank lending rates affordable and sustainable in the long-term.
On his part, finance minister Calle Schlettwein commended the bank for its efforts to diversify its loan book, noting that the bank plays an important role in the land reform process. According to the minister, Agribank's role is to service the agricultural sector in order to realise its optimal potential to create jobs, improve productive capacity and create wealth.
Whilst commending the introduction of the agro-processing loan product, Schlettwein also encouraged the bank to further develop financial products that will create value chains other than livestock and horticulture. He further pledged his support to the bank, as it strives to fulfil its mandate in the land reform process in the country.
The Agribank AGM was attended by the shareholding minister, Agribank board members and management, as well as senior officials from the ministries of finance and public enterprises.
STAFF REPORTER
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