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Agrifinance

Due to population pressures, rising living standards and urbanisation, food scarcity has become a growing problem. With appropriate access to finance, the agricultural sector can make a significant contribution to global food security. With almost 150 years of experience of operating in Africa, we have a deep-rooted understanding of agriculture funding opportunities and local financing requirements.

For example, our African Commodity Traders and Agribusiness team provides financing solutions to commercial farmers, small-scale outgrowers and agricultural traders in 13 countries in Africa. Due to a lack of collateral, farmers often struggle to obtain loans needed to finance the purchase of input materials such as seed, fertilisers and pesticides, which can lead to reduced yields. To address this issue, we have developed an innovative input financing solution by using a farmer’s crop (soya, corn, wheat, etc.) as collateral.

Our contract managers also provide hands-on precision farming and agronomic expertise on topics such as fertiliser application, tillage practices and crop rotation to help farmers increase the quality and quantity of their crops while promoting best practices in water and soil preservation.

Another key aspect of the input financing solution is the provision of multi-peril insurance, which reduces the farmer’s exposure to potentially devastating climate and disease risks, thereby ensuring the farmer’s livelihood in times of drought, floods or related perils.

The success of this solution, and our integration of all aspects of sustainable farming, recently led us to expand into a similar model for the financing of export fruit production, as well as for calves in feedlots and open pasture. Our approach to livestock financing; guards against overgrazing, which leads to soil erosion, by carefully assessing animal concentration and specific livestock viability on soil type.

Our regional agricultural financing portfolio in Africa is valued at over USD2 billion. By assisting farmers to grow their businesses with financing, advice, insurance and sound marketing of their produce, we protect and enhance our investments. We are also using our experience to deliver USD130 million of financial support to Africa’s agriculture sector over the next three years, in partnership with the German Development Bank (DEG).

Agrifinance: Case study

Landmark agricultural loan in Zambia

In October 2010, Standard Chartered, working in partnership with Zambia’s Food Reserve Agency (FRA), was the Mandated Lead Arranger and main financier for a landmark agricultural loan of up to USD140 million.

The loan enabled the FRA, a Zambian government agency, to purchase in excess of 470,000 tonnes of maize from around 300,000 small-scale farmers. Despite producing approximately 80 per cent of Zambia’s maize crop, small-scale farmers are often marginalised. The loan helped the farmers secure a fair market-related price for their crops. The facility also contributes to Zambia’s food supply and GDP, by facilitating the export of surplus stock. The Zambian government has guaranteed 30 per cent of the value of the loan.

The largest ever agricultural deal of its kind in Zambia, the initiative has enabled the FRA to deliver on its mandate to administer national strategic food reserves, manage grain storage facilities and provide a transparent market to local small-scale farmers, especially those based in disadvantaged remote areas.

The funding coincided with a bumper harvest of about 2.7 tonnes of maize, compared with national consumption of 1.2 million tonnes. After purchasing the maize, the FRA will sell it to local millers, with any surplus being exported to neighbouring African countries.

Zambia’s Minister of Agriculture, Mr Peter Daka, commented: “This facility enables the FRA to entrench its role in supporting the growth and development of Zambia’s agricultural sector, as well as empowering our valuable small-scale farmers to sell their produce at a fair market-related price. This generates income for the farmers, enabling them to plant a new crop in the interests of continuity, sustainability and food security. We value Standard Chartered’s role in a successful public-private partnership that will deliver sustainable benefit to the Zambian community and economy at large.”

Our achievements in 2010

  • We committed USD100 million in a Structured Finance Warehouse facility to Nyiombo Investments Ltd, the largest fertiliser supplier in Zambia, to import fertiliser from the Middle East and Asia. The facility – which benefits over 300,000 small-scale farmers by providing them with fertiliser, thereby increasing yields – has enabled Zambia, formerly a net importer of maize, to become a net exporter of the crop
  • We were a Mandated Lead Arranger in a USD120 million structured soft commodity syndicated loan for Export Trading Group, one of the largest integrated agricultural supply chain companies in Africa. The loan will be used to finance the trade of soft commodities in India, China and multiple markets in Africa, and will support economic growth and food security
  • We provided facilities of USD150 million in Nigeria to finance the import of various agricultural inputs (eg, seeds, fertilisers) and staple foods to increase yield and enhance food security
Annual Report and Accounts 2010