The Nirsal Anchor Borrowers’ Programme is a Central Bank of Nigeria intervention scheme, that is a single digit Loan, established by the Federal Government, in 2015, for the purpose of boosting the agricultural sector of the economy.
It is designed to create an economic linkage between small holder famers and agro-processors/Anchors. The programme adopts a value chain approach that links Input to Production to Processing and to Market. The scheme is targeted at smallholder farmers in order to increase their access to quality agricultural inputs and, thereby, improve the quality of produce to meet international standards. The broad objectives of the ABP include:
- Improve access to finance
- Diversify the economy
- Create jobs and
- Inclusive growth.
The Anchor is that corporate entity or Association that presents a request for the funding of a group of smallholder farmers cultivating between 1 to 5 hectares of land who have been identified by him as the source of a certain quantity and quality of produce for their processing needs.
Models Available to Nirsal MFB?
There are four models of the ABP. They represent the channels through which the scheme can be accessed. The models are:
The Private Sector Model
Involves Bank, Anchor and Farmers. Banks do input distribution, anchor aggregates and offtakes commodity, while farmer is primary obligor. Arrangement is based on tripartite MoU between Bank, Anchor and Farmer.
The Prime Anchor Model
Agro-processors/anchors take full ownership of anchoring the farmers to access the loan and serve as an obligor and off-taker of the commodity produced. They access the funds on behalf of the farmers by providing collateral cover which may be in Landed Property or Cash collateral.
The Commodities Associations Model
State government acts as a primary obligor and off-taker of the commodity produced by the farmers. The states government provides Irrevocable Standing Payment Order to the PFI to cover 100% of Principal and accrued interest.
The Public Sector (State Government) Model
Commodity Association coordinates farmers, while farmer is primary obligor. They work with anchor to off-take.
The Anchor has the prerogative of selecting the commodity that he desires for the processing plant. Commodities such as Cassava, Cotton, Fish, Ground nut, Maize, Poultry, Rice, Soya Beans, Wheat, Cattle, Sorghum, Ginger, Castor Seed, Sesame, Tomato, Cocoa, Oil Palm, Pepper etc.
Tenor of the Loan?
The tenor of the loan is determined by the gestation of the commodity.
Loan Amount and Interest Rate?
Based on Economics of Production (EoP) of commodity. The Interest rate is 9% per annum (now 5% per annum to cushion the effect of Covid19 pandemic).
How to Repay?
The repayment of the loan is from the produce harvested.
How to apply
Submit an Expression of Interest (EOI)
The anchor (a company or cooperative/association) writes an Expression of Interest to the Bank to be their PFI (Participating Financial Institution), e.g. Expression of Interest for NIRSAL MICROFINANCE BANK to be the PFI in the Maize Farmers Project Under the CBN Anchor Borrowers Programme. When the EOI (Expression of Interest) has been received, we respond back to the anchor via an email. We request for the following:
- the commodity required
- the list of farmers required (numbers, names, BVNs)
- the processor’s capacity to offtake the produce from the farmers at harvest
- the choice of NIRSAL Microfinance Bank as the Participating Financial Institution (PFI) for the project etc.
When all documents required has been submitted by the anchor including title deed to be pledged as collateral, a due diligence search will be conducted by the legal team. If the search report is positive i.e. free from any encumbrances, an independent valuation exercise will be conducted and the legal team provides a checklist for creation of legal mortgage which the ABP team forward’s to the anchor. While all this is going on we expect the anchor to be holding town hall meetings, PMT (Project Management Team) meetings, Land Mapping and Land preparation of the farm lands.
Request to CBN
Fund request will be made to the Central Bank of Nigeria.
Offer Letter and Disbursement
The offer letter is given to the anchor and then execution of the tripartite agreement is being done. When the fund has been received from CBN, disbursement begins.