Relationships are Key to Building Sustainable Financial Ecosystem
USAID-FinGAP cultivates lucrative bonds between commercial and rural banks and agriculture clients
Builsa Community Bank, more commonly known as Bucobank, is the only bank in the predominantly agricultural Builsa district of the Upper East region in Northern Ghana. Farming is the mainstay of the Builsa community, producing large supplies of maize and rice for local consumption and for sale to processors across the country. For 19 years, Bucobank has been providing a wide range of financial services to its clients, including lending to agribusinesses. This important demographic of rural borrowers, with smaller financing needs and risky businesses, depends on Bucobank to finance their operations.
In early 2015, Bucobank’s major source of financing for on-lending fell through, leaving the bank with limited funds for loan disbursement to over 500 farmer-based groups seeking capital to invest in the upcoming harvesting season. To address this challenge, Bucobank engaged the services of Nunyuie Brothers Co., Ltd. (NBL), a business advisory service provider in the USAID Financing Ghanaian Agriculture Project (USAID-FinGAP) network.
USAID-FinGAP was established to stimulate financing for agribusinesses that improves the infrastructure along the maize, soy, and rice value chains. The project offers technical assistance for financial institutions and agribusinesses through a network of business advisory service (BAS) providers. These business advisors help organizations through a number of diverse services, on a pay-for-performance basis.
NBL helped Bucobank find and secure financing worth over $300,000 from Ecobank Ghana, a large commercial bank and participating USAID-FinGAP financial institution. NBL prepared Bucobank’s business profile and loan application, defining the borrower’s risk level, and negotiated favorable collateral terms and interest rate, allowing Bucobank to on-lend to its farming community at two to five points below the usual rate.
“Facilitation of the loan by NBL has turned our situation around and enabled us to lend to our customers as planned,” Awudu Hayatudeen, General Manager of Bucobank, said. “NBL helped us meet Ecobank’s rigorous due diligence and even represented us at negotiation and follow up meetings in Tamale. I will describe our relationship with NBL as phenomenal.”
The collaboration between NBL and Bucobank did not stop once financing was secured. As a participant in USAID-FinGAP’s performance-based incentive program, Bucobank had pledged $1.45 million in agribusiness lending in return for over $60,000 in grant awards. The grant enabled the bank to team up with NBL to train and motivate staff on risk management and loan monitoring. As a result, loan administration and recovery processes are easier for bank staff than in the past.
USAID-FinGAP BAS providers also offer services to agricultural enterprises. NBL identified credible businesses, including small women’s groups, for Bucobank to lend to and helped prepare their loan applications. These groups also received training from NBL to enhance their business operations and ensure loan repayment.
“I expect to increase yield from 800 bags to 3,000 this year.”
– Maxwell Akandem, after financing allowed him to purchase a tractor, a maize sheller, seed, and fertilizer
“NBL’s training has helped me to move from just farming rice to parboiling and milling,” Ayompok Ayarick, an outgrower of Akandem Farms who received training in good agronomic practices and business management, said. “These additional activities enable me to have money all year round.”
The quality of investment opportunities improved, and by year-end, Bucobank had disbursed over $800,000 as working capital to 235 agribusinesses, including 72 farmer-based organizations and 93 women’s groups, for the production and aggregation of maize, soybeans, and rice. Money is moving into the economy and repaid, creating a sustainable model of BAS-bank-farmer partnerships that can be easily replicated in other parts of the country.
“Our relationship with Bucobank from the point of helping them access a loan from Ecobank to identifying enterprises for on-lending has been very fruitful,” Prince Akoto-Adipah, Managing Director of NBL, said. “I liaised between the two banks to ensure that Bucobank met Ecobank’s requirements and got a good deal. Our collective interest in facilitating rural women’s access to finance has also paid off. With the training we give the women, they are able to minimize losses and make more money to service their loans. There is a 98% repayment rate among women’s groups who received financing to aggregate maize and rice.”
“Women in farming have learned to treat their farming activity as a business, gradually shifting from subsistence farming.”
– Prince Akoto-Adipah, Managing Director of NBL
“We are replicating the Bucobank experience in facilitating access to finance with another community bank in the Northern Region,” Akoto-Adipah added. As the relationships continue to flourish, so will the region.