African Agribusiness Academy Regional Event Presentation from CRDB BANK PLC on SME Agribusiness Financing Alpha Wilson Magubila Relationship Manager SME 14 th November 2011 1
Content Introduction Bank s Vision & Mission Bank s Coverage Bank s Financial Position Bank s Agriculture Financing SME Agribusiness Products Financed SME Agribusiness Projects Achievements Challenges Future Developments Lesson learned 2
Introduction CRDB Bank PLC originates from former Cooperative Rural Development Bank (100% Government owned) following privatization, recapitalization and restructuring in 1996 DANIDA played a significant role in restructuring the new institution and is among current owners of the new Bank Now the bank is listed at Dar Stock Exchange and last week (09/11/2011) shares were traded at Tshs.175 3
Introduction The Bank is owned by institutions and private individuals as detailed in the table below: S/No. NAME OF OWNER % AGE OF OWNERSHIP 1 Private Individuals via DSE 39.3 2 DANIDA 21.5 3 Tanzania Cooperatives 7.4 4 Private Companies 13.3 5 Government of Tanzania Parastatals 18.5 TOTAL 100 4
Vision & Mission Statements Vision: The leading Bank in Tanzania To be a leading bank, which is customer need driven with competitive return to shareholders. Mission: Quality Banking Service To provide quality and competitive financial services with a strong focus on retail banking, customized corporate and institutional services while ensuring confidence and trust from stakeholders.
Country Coverage Number of Branches: 63 Number of SACCOS: 472
BANK S HIGHTLIGHTS ON AUDITED ACCOUNTS 2010 7
Indicators 31.12.2008 31.12.2009 31.12.2010 Dividend per share (Tshs) Basic earning per share (Tshs) 2 7 8 19 22 22.22 Dividend yield 1.33% 6% 7% Dividend pay out ratio 11% 33% 36% 8
DATA FOR OTHER LISTED BANKS (SELECTED) IN EAST AFRICA 31 st DECEMBER 2010 INDICATOR/BANK CRDB NMB EQUITY COOP KCB STANBIC Tshs Tshs KY Kshs KY Kshs KY Kshs UGANDA Ugs Shareholders funds/net assets (billions) 240.922 230.519 27.204 20.477 39.130 230.087 Number of Shares 2,177mn 500mn 3,702mn 3,492mn 2,600mn 5,119mn Share price 115 650 19 9.65 17.00 170 Share book value 95.46 462 6.19 4.63 10.29 41.26 Profit after tax (billions) 48.373 53.981 7.131 4.581 7.178 72.082 Dividend per share 8 36 0.80 0.4 1.02 7.03 Earnings per share 22.22 108 1.93 0.850 2.76 14.08 Dividend yield 7% 5.5% 4.2% 4.2% 6% 4.14% Dividend pay out ratio 36% 33% 42% 30% 37% 50% 9
Details Comparison with other Banks 31 st Dec 2010 in Tshs. Billions CRDB NBC NMB SCB BARC LAYS EXIM Position Deposits 2,019 1,218 1,804 821 389 530 1 Loans 1,123 711 858 458 211 329 1 Total Assets 2,305 1,471 2,107 1,072 527 692 1 PBT 66 5 78 29-4.8 26 2 10
BANK S HIGHTLIGHTS ON 3 rd QUARTER FINANCIAL PERFORMANCE 2011 11
Bank s Position as at 30/09/2011 Description Tshs. US$ Deposit 2.3 Trillion 1,352,941,176 Loans & Advances 1.3 Trilion 764,705,882 Profit Before Tax 63 Billion 37,058,824 12
BANK S CONTRIBUTION TO AGRICULTURE SECTOR Agriculture sector is a leading sector in Bank s portfolio 28% of the bank s portfolio is agriculture loans Bank finances the sector through three windows: Corporate, SMEs and Micro Finance, where Corporate loans takes more than 60%. But now the bank s strategy is to boost SME contribution in the portfolio as well as Agriculture sector because of its economic importance Bank conducts trainings to SME customers on different aspects including trading, warehouse receipt system, collateral and loan management
Bank s SME Definition Income Sales Turnover US$ 11,700 US$ 590,000 Capital Invested US$ 2,900 US$ 295,000 No. of Employees 1 100 peoples including family members Loan Amount US$ 600 US$ 177,000 14
BANK S SME PRODUCTS On providing services to our Esteemed SME Customers; the bank has designed two types of Loans: 5.1 Working Capital Loan 5.2 Investment Loan These loans are branded as BIDII Loans.
Bank s SME Products. Working Capital Loans This is normally used to increase stock of merchandise Own Capital (Stock) Plus Working Capital (Additional Stock) = Stocks owner Financed Stocks Financed By Bank More Stocks 16
Bank s SME Products Investment Loans 17
Bank s SME Products Bank provides credit facilities to SMEs businesses in the agriculture sector (including those in the agricultural value chain and enterprises linked to agriculture). Customers engaged in primary Agriculture production, and agriculturally linked businesses like following activities: Contract farming, Outgrower schemes, Processors of agricultural products, Buyers, and traders of agricultural products. Also those engaged in Agricultural input supplies, Suppliers of support services to agriculture, advisory roles in the sector and related businesses. 18
Financed SME Agribusiness Projects 1. Former Extension Officer 2. Employed for 10 Years until 1997 3. In 2006 borrowed Tshs.5M cultivated 40 acres of Irish potatoes 4. 2010 Borrowed Tshs.50M cultivated 140 acres 19
Self Employments in Agriculture 20
Since 2006; the Bank started financing SME Agribusiness on Coffee to small growers. In 2007, the bank ventured on cashew nuts on inputs loans and crop purchase financing. On Cashew nuts; Warehouse- Receipt System backed lending was used for the First time. Pre-Season: Farmers were assisted in reviving Agriculture Marketing Cooperative Society (AMCOS) through training (Toolkit Training). Financed SME Agribusiness Projects
Financed SME Agribusiness Projects. Cashew Nuts Financing: Usually the Bank disburses 70% of farm gate price for 50 tons to AMCOS AMCOS pays 70% of farm gate price to farmers (Average farm gate price in 2009 season Tshs. 800/Kg) 2010 Farm gate price was Tshs.1,000/Kg Bank takes 100% risk on initial stock of up to 50 tons Subsequent purchase financed at 65% of bonded stocks
Financed SME Agribusiness Projects Sunflowers: The bank have financed sunflower business working capital loans to 16 AMCOS from three regions and 49 individual sunflower oil processors The arrangement is under collateral management because most of them do not have adequate security to cover the loans Farmers used to sell at Tshs.20,000 to 30,000 per bag but after bank financing; the prices have gone up to Tshs.50,000
Financed SME Agribusiness Projects Sunflower business under collateral management system have proved successful
Financed SME Agribusiness Projects Status of Cashew nut Business Total amount of Tshs. 24billion was approved during the Cashew nut season 2010 All loans were liquidated and AMCOs recorded profit for the 1 st time in history Bank granted Tshs.29 Billion as new loans for 2011 season
Financed SME Agribusiness Projects Livestock keeping Bank have financed cattle fattening is small and large scale Supported privately owned ranches on Construction of Cattle Dip and Water Dam The sector have created more jobs and food availability Cattle fattening financing has repayment record of 100%
Financed SME Agribusiness Projects Livestock.. Poultry projects are also enjoying bank financing Local breeds, Layers and Broilers are among businesses ran by SMEs Due to perceived risks and high management cost; some development partners have supported the bank through guarantee schemes (DANIDA, AfDB/USAID).
Summary of Financed Loans SME Financing on Agriculture as at 31st October 2011 CROPS AMOUNT (Tshs.) AMOUNT (US$) Coffee 18,714,000,000.00 11,008,235.29 Cashewnuts 29,000,000,000.00 17,058,823.53 Sunflowers 8,000,000,000.00 4,705,882.35 Simsim/Sesame 11,680,000,000.00 6,870,588.24 Paddy 11,680,000,000.00 6,870,588.24 Subtotal 67,394,000,000.00 39,643,529.41 LIVESTOCK 1,138,640,000.00 669,788.24
Achievements Bank reaching out to agriculture projects Bank venturing in warehouse receipt system confidently Bank increased its agriculture lending knowledge CRDB paved the way for other lenders Customers especially farmers gained confidence in agriculture activities Improved social welfare amongst farmers, they managed to pay school fees for children, built better houses, bought small tractors and Trucks Increased confidence amongst association leaders they gained knowledge in agro-trading and banking Associations managed to purchase tractors, trucks, build warehouses/godowns, weighing scales e.t.c.
Challenges Bank Challenges: High costs of monitoring and supervision due to long distances (remote areas) High cost of training Lack of resources for supervision Limited agriculture lending knowledge amongst staff Collateral is still a challenge, many peasant do not have security Unfavorable infrastructure i.e. roads it takes longer traveling time hence costly External Challenges: Farmers are not focused in commercial and modern agriculture Lack of storage facilities in some areas Lack of extension officers to assist farmers Lack of modern farming equipments Lack of reliable Market of farm produce Political challenges Unfavorable Government policies
Near Future Developments The bank is under way designing special women Agricultural products After noting the rate of un-employment in our country; bank has gone further by designing special product for University Graduates, The bank will start with Sokoine University of Agriculture on December 2011, by granting startup loans to graduates ready for self employment, So far the bank is processing 40 applications The success will be replicated to other universities and colleges.
Lesson learned It is possible to create wealth through agriculture Farmers are trainable It is possible to increase food security Value addition in primary agriculture produce is vital Farmers are bankable population Poverty alleviation is possible through rural financing CRDB bank have tried and managed to recovery the depositors money!!!!
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Thanks for Your attention and Contributions. Warm Welcome to CRDB Bank Plc for Business and Owning shares 34