Farmers should borrow responsibly
Understand loan products and repayment conditions
The growing focus on agricultural sector development has led to a higher demand for access to financial institutions like Agribank to establish, expand, or reinvest in agribusinesses.
Borrowing responsibly and being committed to honouring financial obligations in the agriculture sector enable financial institutions to extend credit to farmers.
Agribank’s technical advisor for crops and poultry, Hanks Saisai, says that this helps to grow the agricultural sector and ensure food security for every Namibian.
He says that the rising focus on the growth of the agricultural sector in the country has sparked an increasing need to gain access to lending institutions such as Agribank to set up, upscale, or re-invest in their agribusinesses.
"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 understand agricultural venture funding dynamics."
Prepare carefully
Saisai says that when an aspiring farmer intends to borrow funds from an institution such as Agribank, which specialises in the funding of agricultural value-chain activities, it is very important to plan carefully.
He says in order to do this, one should first understand the different loan products that Agribank offers to finance various agricultural 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 to fund smallstock or start a poultry enterprise, the loan is classified as a medium-term loan with a six-year repayment period.
Saisai says that a farmer must be aware of this and ensure that production can cater for the loan repayment over the loan period.
Understand the numbers
Another aspect that must be considered is that interest rates on loans range from 4% to 9% according to different farming types.
Given current hikes in repo rates, that can make loan repayments unaffordable, he says.
"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," he explains.
This offers the farmer sufficient time to focus on production and be in a position to repay the loan with ease.
Additionally, farmers are offered various repayment options, such as monthly, quarterly, every three months, bi-annually, or as an annual payment.
"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."
Repayment terms
Saisai says that once an option is selected by the farmer, it is essential to be aware of the instalment due date and ensure that part of the proceeds from the sales of the product cover 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 the farmer to remain up to date with their loan repayment regardless of the challenges they face."
Farmers must also adopt a reliable record-keeping mechanism, as records will serve as an added advantage when approaching financial institutions for money, he says.
He adds that aspiring farmers are advised to equip themselves with basic knowledge, understanding and experience related to the agricultural enterprise they intend to set up.
"Using your limited resources to start an agricultural business will give you hands-on experience before you borrow large sums of money to upscale the business."
Agribank’s technical advisor for crops and poultry, Hanks Saisai, says that this helps to grow the agricultural sector and ensure food security for every Namibian.
He says that the rising focus on the growth of the agricultural sector in the country has sparked an increasing need to gain access to lending institutions such as Agribank to set up, upscale, or re-invest in their agribusinesses.
"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 understand agricultural venture funding dynamics."
Prepare carefully
Saisai says that when an aspiring farmer intends to borrow funds from an institution such as Agribank, which specialises in the funding of agricultural value-chain activities, it is very important to plan carefully.
He says in order to do this, one should first understand the different loan products that Agribank offers to finance various agricultural 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 to fund smallstock or start a poultry enterprise, the loan is classified as a medium-term loan with a six-year repayment period.
Saisai says that a farmer must be aware of this and ensure that production can cater for the loan repayment over the loan period.
Understand the numbers
Another aspect that must be considered is that interest rates on loans range from 4% to 9% according to different farming types.
Given current hikes in repo rates, that can make loan repayments unaffordable, he says.
"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," he explains.
This offers the farmer sufficient time to focus on production and be in a position to repay the loan with ease.
Additionally, farmers are offered various repayment options, such as monthly, quarterly, every three months, bi-annually, or as an annual payment.
"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."
Repayment terms
Saisai says that once an option is selected by the farmer, it is essential to be aware of the instalment due date and ensure that part of the proceeds from the sales of the product cover 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 the farmer to remain up to date with their loan repayment regardless of the challenges they face."
Farmers must also adopt a reliable record-keeping mechanism, as records will serve as an added advantage when approaching financial institutions for money, he says.
He adds that aspiring farmers are advised to equip themselves with basic knowledge, understanding and experience related to the agricultural enterprise they intend to set up.
"Using your limited resources to start an agricultural business will give you hands-on experience before you borrow large sums of money to upscale the business."
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