The Bank of Agriculture (BoA) has said farmers must take insurance on every loan retrieved through the bank, no matter the amount involved for risk management.
Its Managing Director, Alwan Ali Hassan, encouraged farmers to take insurance on any loan accessed as the premium is low and affordable.
Hassan noted for the small loans up to N1 million, the borrower will need to provide two guarantors as collateral, while for amounts over N1 million, the bank will take property security or bank guarantee.
He urged the farmers to go into cooperatives, as lending to cooperatives poses less risk of defaulting. Noting that the bank would continue to attend to individual smallholder farmers.
However, it is easier and faster for legitimate registered groups to get the bank’s assistance.
“The group members are made to sign guarantees whereby if one of the members cannot pay, the association has to pay for everyone.
“For the smallholder farmers, we intend to use the traditional rulers in the society to mediate between us and be able to enforce repayment on these facilities if the farmers have any problem.
“If we do it this way, more farmers will always have access to finance, and there will be sufficient food for the country,” he said.
Hassan added, “These monies that these farmers are taking from the bank are not grants; it is the capital of the bank that is being used to give to farmers to do their business if they don’t pay back, that is where the capital will be eroded, and that is when the bank will start having challenges in meeting her obligations.”
“They should also look at it from another perspective, that if they pay back, somebody else will be able to take that loan, it is supposed to be a circle where you take your own money, the other person takes and pays, so eventually, everybody will benefit from this exercise.
“The idea of taking a loan or access to finance is that you only take it when you need it; a true farmer will take a loan and payback.”
The Managing Director elucidated that the bank’s loan has the lowest interest rate farmers can access. The insurance issue won’t be any problem as the insurance companies would pay back every money spent on the farm if there is an issue of flooding, drought, and others.
He said. “For the farmers, this is a good thing. No matter how small the loan is, insurance should be taken.
Formerly, they don’t take insurance on the smaller loans, but I think they need to take that now.”
