#1The Roles of Agent Networks In Reaching The Last Inch of The Last Mile Presentation by MR. ALIYU A. ABDULHAMEED MD/CEO NIRSAL PIC July 11, 2017 0 00 762.67 3 + 205 31142.45 3542.55 59.14 312.25 1352.14 954.36 2100.36 874.48 854.94 689.45 38992.44 30589.68 NIRSAL THE NIGERIA INCENTIVE-BASED RISK SHARING SYSTEM FOR AGRICULTURAL LENDING De-Risking Agriculture Facilitating Agribusiness 2 EFINA Breakfast Session July 2017 14092 1445. 1204 2008. 1804#2Contents 1. The Agent Network: A Nigerian Economic Imperative 2. Nigerian Agriculture & Agribusiness Landscape 3. NIRSAL PIC: Relevance and Experience in the Agricultural Value Chain 4. Global Framework For Universal Financial Access 6. The Roles of Agent Networks in Reaching the Last Inch of the Last Mile 8. Opportunities for Agent Networks in NIRSAL's Interventions 9. What NIRSAL Aims to Achieve 10. Conclusion NIRSAL#3. Agent Network: A Nigerian Economic Imperative Agent Networks represent the frontline of branchless banking services that enable customers to transact - often by turning cash into e-money and back again through. appropriate technology, products and channels thereby integrating remote actors into the formal economy Food Security Driven by Small Holder, economically active primary producers • Demography >60% of the Nigerian population involved in agriculture Spread NIRSAL • Highly dispersed rural enterprise Infrastructure Limited or zero access to infrastructure#4Nigerian Agriculture and Agribusiness Landscape The Nigerian Agricultural Sector is underperforming Cereal yields Tons per Hectare TONS PER HECTARE Tons per ha 5.00 3.80 3.50 2.10 1.70 1.60 +121 % Nigeria's share of world trade for selected crops % of world market (three year moving average) Share of world market (%) 70 60 50 40: 30 20 10 Groundnuts Groundnut oil Palm nuts & kernel Palm oil Cocoa Egypt South Africa World Zambia Average Cote Nigeria 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 d'ivoire SOURCE: IFPRI report: Walkenhorst (2007), from UN Comrade Database NIRSAL#5Factors Affecting Agribusiness Development in Nigeria NIRSAL Socio Political Government Policy challenges [CATEGORY NAME] 23% [CATEGORY NAME] 28% [CATEGORY NAME] 49% Demographic factors Services Poor Research & Innovation Industries Agriculture Environment Challenges Infrastructure Deficit Inadequate Financing#6Available resources, The Value Chains and Potentials for Agribusiness Development • Land Assets: 82million Ha. arable Market Size: 183million (70% urban) • Value Chains & Potentials: ✓ Fish production potential: 3.2m MT (20% local supply) ✓ Dairy production: Current import status= N100bn p.a. ✓ Cassava: Bread flour substitution c. N254bn p.a.; Estimated sectoral net worth of $8.5bn by 2020 ✓ Sheep & Goats: 5th Highest producer in the world, with high potentials for growth ✓ Rice: 6m MT annual demand; 17 Rice Mills with combined capacity of 210,000 MT NIRSAL#7NIRSAL PIC: Relevance and Experience in the Agric Space NIRSAL PIC, The Nigeria Incentive-Based Risk Sharing system for Agricultural Lending (NIRSAL) ✓ incorporated in 2013 as a Non-Banking Financial Institution, designed to appropriately Define, Measure, Price and Share agribusiness related credit risk ✓ a $500Million public liability company wholly owned by the Central Bank of Nigeria ✓ operates as an autonomous private sector institution with a distinct governance structure outside of the CBN; governed by a Board of Directors. NIRSAL is a public private initiative of the following partners: The Central Bank of Nigeria Bankers Committee NIRSAL Federal Ministry of Agriculture and Rural Development#8NIRSAL's Strategy Our focus is to raise agriculture's share of commercial bank lending portfolio to about 10% (c.$6Bn USD) by 2026 through: Technical Support to key actors along the agricultural value chain Credit guarantees on loans made to agribusiness investors, farmers, companies and other related actors. O Strategic interventions and advice to governments on agricultural matters. Investment support and advisory to value chain actors. NIRSAL NIRSAL Agriculture Financial Institutions#9Strategic Positioning STRATEGIC ENGAGEMENTS OF NIRSAL Investment advice to farmer groups and other value chain operators Strategic advice to state governments, local governments and Institutions on how to create an enabling business environment for agriculture Work with local & international partners (AfDB, UNDP, AFRACA, FG) to enhance agric value chain efficiencies afraca [Since 1977) Empowering Rural Africa ZENITH FirstBank access FCMB Diamond Bank Skye Bank FIDELITY GTBank UBA Ecobank The Pan African Bank Stanbic IBTC Bank NIRSAL ALL IN ONE FARM SASSOCIATION OF NIGERIA UN DP AFRICAINE DE L ANQUE DEVELOPPER AFRICAN DEVELOPMENT BANK C -#10Corporate Governance Board of Directors •CBN, Banker's Committee, FMARD, Organized Private Sector, (Chairman: CBN Governor) Executive Management •MD/CEO, ED Technical, ED Operations, Line Management . 8 Mission-Critical Business Units: • Agric Value Chain Finance & Investment; • Value Chain Development & Services; • Collaborations, Partnerships, Project Development & Support; • Risk Management (ERM); • CRG OPS & Portfolio Management; • Research, Strategy Innovation & Results Measurement/Outcomes/Impact; Relationship Management & Technical Assistance; • · Field Services (ePMS, PMROs) Business Structure NIRSAL ⚫3 Strategic Business Support Units: Field ICT Services; Business Dev Services; Consulting, International Finance & Investment Advisory Services ⚫ Corporate Business Support Units: Internal Audit; Finance & Accounts; HCM & Admin; IT; Legal Services; Corporate Communications#11NIRSAL: A Game Changer The integration is driven by NIRSAL's 5 pillars, particularly the Risk Sharing and the Technical Assistance pillars . . . 1 Risk Funds are applied along the 5 pillars of NIRSAL to stimulate lending Sharing Facility $300M 2 Insurance Facility $30M 3 Technical Assistance Facility $60M 4 Agricultural Bank Rating Scheme$10M 5 Bank Incentive Mechanism $100M ■ Shares lending risks with banks (e.g. 50% of any loss incurred) Links insurance products to the loan provided by banks to loan bene- ficiaries Builds the capacity of banks, micro- finance institutions ■ Builds the capacity of agricultural value chains ■ Expands financial inclusion ■ Rates banks according to effective- ness of their lending to agriculture. ■ Rates AVC Actors According to Financial, Agribusiness Growth, Tech. Adopt Performance Provides incentives that: move banks to a long term, strategic position and commitment to agricultural lending Reward Performances by AVC Actors Goal Expand bank lending in agricultural value chains GOAL NIRSAL Objective De-risk agriculture finance value chain Build long-term capacity Institutionalise incentives for agriculture lending & AVC Performance NIRSAL#12NIRSAL: A Game Changer ...cont'd NIRSAL integrates end-to-end, the agricultural value chain with the financing value chain. Agricultural Value Chain Industrial Input Agro Farmers producers Dealers Agro processors Trade manu- facturers and exports Loan Product Dev. 1 Agricultural Financing Value Chain Loan Distribution origination Credit Assessment Managing and pricing for risk Loan Disbursement Infrastructure Credit bureau Policies NIRSAL Enablers Extension services Price guarantee boards NIRSAL Agriculture Financial Institutions#13Specific VC-Based Interventions of NIRSAL 1 Fertilizer Financing Framework - $80Mill •A unique arrangement to ensure timely delivery of fertilizer to farmers Mechanization Financing Framework 3 . Guaranteeing commercial financing of tractor service providers - TOHFAN, SWOFON CBN Anchor Borrowers Programme 5. Disbursing and administering the Anchor Borrowers Programme Loans to small holder farmers towards enhancing primary production. NIRSAL 2 4 • NIRSAL/SEEDAN Model for Seed Development NIRSAL to fully finance and control Early Generation Seeds (Breeder and Foundation Seeds) in collaboration with SEEDAN and NASC Grains Production Financing Framework • NIRSAL to facilitate finance for production of 2.3million Metric tonnes of Maize, Rice and Soybean.#14NIRSAL's Operations (Activities to-Date) 541 Credit Risk Guarantees (CRG) with a total face value of $320 Million Provided GAP training to 152,000 farmers in the following value chain; Cotton, Cocoa, Tomatoes & rice Supported CBN and DMB's in establishing Agric. Desk in all 24 commercial Banks Developed the Curriculum and Trained 184 Middle Management and Agric Desk Officers of Banks Providing guidance on the establishment of RSF models for African Countries under the aegis of AfDB NIRSAL's Mechanization financing model provided finance for 447 tractors worth $12.5 Million for TOHFAN & SWOFON NIRSAL#15NIRSAL's Activities to-Date cont'd. LOGISTICS Fixing the logistics of commodity transportation • Outcomes: Launched the Farm to Market Scheme: •North to South Movement of Cattle by Rail 2,000 cattle by rail from Gusau (Zamfara State) and Nguru (Yobe State) to Lagos and Port Harcourt • Grains by Rail from Funtua (Katsina State) to Lagos. • Facilitated the refurbishment of 20 wagons for the Nigeria Railway Corporation NIRSAL#16Risk Management Tools Deployed By NIRSAL PMRO NIRSAL's Project Monitoring, Reporting & Remediation Offices ePMS Cluster-Based Embedded Project Management Services Data, ICT GIS Near Real-Time Project Reporting, GIS, Satellite & Drone Mapping, Multi-Spectral Remote Sensing INPUT CONTROLS MARKET Accredited Suppliers, ePMS-Controlled Input Q&Q Assurance, Post Delivery/Confirmation Payment, PMS- Controlled Input Release, Near-Zero Cash Handling, Provision of Mechanization As A Service (MaaS) Guaranteed off-take through Aggregators, Processors, WFP, other Structured Markets NIRSAL#17What NIRSAL aims to achieve • Leverage the NIRSAL Risk Sharing Fund to grow bank lending to agriculture within 10 years from 1.4 to 10 percent. Increase lending to the small scale farmers (the "pooled" segment) to 50% of aggregate commercial banks' lending to agribusiness. Expand insurance coverage from 0.5 million to 3.8 million agricultural producers. • Increase lending to 3.8 million farmers by 2026 through pooling mechanism using value chains and cooperatives. NIRSAL#18Global Framework for Universal Financial Access FOUNDATIONS: Critical Enablers PILLARS: Drivers of Access NIRSAL Expand Digital Payment Instruments Achieve Scale Diversify Access via Social Points Transfers Ramp up Payments/ICT Infrastructure Build Regulatory Environment Strengthen Political Commitment 18#19The Roles of Agent Networks in Reaching the Last Mile • Deposit Mobilization • • Personal Savings Mandatory cash collateral for rural credit Proceeds from sale of farm produce to off-takers Group contributions and thrifts • Credit disbursement in kind- agric inputs and services Credit Distribution • Cash disbursements- cash out • Loan Administration • Market Information NIRSAL Credit documentation Credit Monitoring Remediation Loan work-out Access to Market Price Discovery#20The Roles of Agent Networks in Reaching the Last Mile Insurance Data . • • Farmer data capture for policy proposal Area Yield Data Weather and price index Farming Calendar and schedule of cultural policies Financial Identity Virtual Asset Title (VAST) NIRSAL • • . . BVN generation • Account creation Land asset delineation and mapping Movable Assets, Livestock and Produce registration Remediation • Loan work-out#21Actual Opportunities in NIRSAL's Interventions: ABP 400,000 MT Expected total Metric Tones of grains - rice, maize and soybeans - from the Wet Season Anchor Borrower Program (ABP) N16 billion Total credit NIRSAL could channel through Commercial Banks/ Agent networks under the CBN Anchor Borrower Program/On Balance sheet Lending for smallholder farmers. 300,000 Number of smallholder farmers that could receive banking services through Commercial Banks agent networks under the ABP. NIRSAL#22Overall Potential Opportunities in NIRSAL's Interventions: 2.8m MT N126bn 500,000 NIRSAL NIRSAL's Expected Gross output of Carbohydrates & Protein Sources – rice, maize and soybeans, Livestock, Poultry, Fishery - for 207/18 Farming Season-Regular OBS & ABP if fully financed Total credit that NIRSAL could enable through commercial bank/agent networks to Small holder farmers in 2017/18 to achieve above metric Number of smallholder farmers that will receive banking services through commercial bank/Agent Networks agent networks to achieve the above metric#23NIRSAL's Value Proposition To Last Mile Players Market Market Size: 3.8million metric tonnes of Gross output targeting 750,000 SHF,s with estimated investment of 126Bn in addition to other AVC Investments of N30Bn for 2017/18 Farming Season Telcos/IT Agric Sector NIRSAL Agent Networks Stakeholder Platform & Bespoke Systems: Provide the platform for Synchronization/alignment of Stakeholders & Process Coordination; Support Through Geo- Mapping SHFS to Actual Assets beyond BVN; Creation of VASTS > Monitoring Through Remote Sensing Technologies (Satellite & Drone-based systems) and RFID Tagging/Tracking of mobile assets, Distribution Channels: Support for identification & development of effective distribution Channels. Banks & Insurers PAYMENT Pa Value Creation: Creation of agribusiness opportunity in rural areas for Institutions and last mile/Last last inch players NIRSAL#24Conclusion ✓ NIRSAL's goal of reaching 3.8million agricultural producers by 2026 is just 27% of the existing farming population of 14million, excluding operators in other segments of the value chain ✓ Total private sector credit by Banks as at Q4, 2016 was N16.117Trn of which N525.95Bn (3.26%) was for the Agriculture sector. At the desired 10% share of private sector lending, agriculture's share will be N1.6Trn. At that level of investment, agriculture can propel phenomenal economic growth ✓ Potential exists for doubling agric sector contribution to GDP and economic growth, but "no one eats potentials" (Dr. Akin Adesina) NIRSAL#25Conclusion ✓ Agent networks are critical to reach the millions of highly dispersed players in the agribusiness space, and to integrate them into the formal financial system ✓ NIRSAL PIC seeks the collaboration of all stakeholders in the financial inclusion ecosystem to secure the desired collaboration between the financial system and agribusiness for the benefit of millions of smallholder farmers who constitute 80% of Nigeria's Labor Force and 65% of its population. ✓ NIRSAL is willing to collaborate with Financial Institutions, Telecoms and IT infrastructure providers to identify rural sites with concentration of small holder primary producers in order to create the backbone of a virile agent network that reaches the last inch of the last mile in, and the first inch of the first mile out. NIRSAL#26Thank You ■ Contact Us ■ Corporate Head Quarters: Plot 1581 Tigris Crescent, Maitama, Abuja ☐ ■ NIRSAL Project Monitoring Recovery & Remediation Offices: Located in All State and Zonal Offices of the Central Bank of Nigeria NIRSAL THE NIGERIA INCENTIVE-BASED RISK SHARING SYSTEM FOR AGRICULTURAL LENDING De Hislong Agriculture Facilitating Agribusiness NIRSAL