Agribank pursues quality whilst chasing loan book growth
By Fillemon Nangonya |
Agribank is a development finance institution whose mandate is to lend money to individuals, business entities or financial intermediaries for the promotion of agriculture and related activities.
- In its business of lending, Agribank undertakes to pursue quality whilst chasing growth in advances, in order to achieve optimal returns rather than the pursuit of volumes at the expense of prudence and shareholder value maximization.
- To ensure prudent lending, the primary consideration in the assessment of any lending transaction is the borrower’s financial position and the ability to repay from their own and/or project sources.
For some products, borrowers are required to provide collateral to protect the Bank against the effects of unforeseen circumstances, but it should be noted that collateral is not a justification for lending, and neither is the lack of collateral a reason to decline a credit application.
- The Bank, like all development finance institutions, assumes substantial risk in the natural pursuit of its business objectives. As such, risk is an inherent part of its business and activities.
However, as a responsible lender, Agribank has a credit risk assessment framework within which it operates to enable the Bank to assess credit on merits, on a consistent basis, and in a structured way.
- Additionally, from time to time the Bank reviews its risk appetite by setting credit limits.
The limits are primarily premised on the percentage of exposure to the Bank’s capital, single counterparty, group of connected counterparties, agricultural sub-sector, and high-growth start-up projects.
- Thus, credit risk becomes the major part of the Bank’s overall risk and in ensuring that the institution remains financially sustainable, and is therefore able to achieve its objectives, managing this risk takes precedence.
- Lastly, the Bank will continue to shape the future in the best interests of the societies, farming communities, stakeholders, while safeguarding its financial sustainability.
– Mr Fillemon Nangonya is Agribank’s Public Relations Officer.
