Access to finance for agricultural businesses by Sombreiro Kapital Ltd/Gte (SK) is an initiative pioneered by the Foundation For Partnership Initiatives in the Niger Delta (PIND) and MADE, which offers numerous benefits that contribute to the sustainable economic development and empowerment of smallholder farmers and SMEs in the Niger Delta region. This innovative financing model, through partnership, catalyzes the flow of finance and resources as well as address specific needs within the agricultural value chain in the Niger Delta region.
Since agriculture has been a primary source of livelihood in the Niger Delta region, offering sustenance and economic opportunities to its residents, the potential of this vital sector has been stifled by persistent challenges inhibiting access to finance into the agricultural industry. The systemic constraints, such as existing laws, infrastructural deficits, and knowledge gaps, have long created barriers that hinder the productivity and growth of agricultural businesses in the region.
Sombreiro Kapital aims to mitigate lending risks, thereby unlocking the flow of finance to intended beneficiaries in the priority value chains of aquaculture, poultry, cocoa, oil palm, and cassava across the focal states of Delta, Edo, Bayelsa, Imo, and Ondo, facilitating lending to businesses by providing initiating financial products to incentives partner commercial banks, and fostering lending into the flow of funds into agricultural value chain, thereby bolstering economic growth in the region.
Explaining this, Stella Jamgbadi, PIND’s SK Manager, reveals that they employ innovative strategies to develop and integrate target focal crops/livestock value chains by issuing partial credit risk guarantees and other financial products to partner financial institutions. This serves as a de-risking mechanism against credit default by smallholder farmers (SHFs) and SMEs. This approach incentivizes and stimulates the financial institutions, unlocking the flow of funds along the various value chains.
Over three years, SK has facilitated the disbursement of loans worth 456 million to 1259 beneficiaries, including 570 women. In addition, SK’s risk management strategy sustains the default rate on guaranteed loans at 5%, within the industry-approved benchmark.
“We have received loan applications worth over N1.5 billion for intervention in the last three years. We’ve also maintained sustainable relationships and created enduring linkages with our partners (Unity Bank and Sterling Bank Plc), thus ensuring continuity in the relationships between the banks and beneficiaries in the region”, Stella added.
SK has demonstrated effectiveness in implementing the agric value chain financing initiatives with the support of the PIND Foundation since its inception in 2020, contributing to sustainable development, empowerment, and well-being of the beneficiaries in the focal states of the Niger Delta region. Through strategic measures such as supporting the formalization of self-help groups, enhancing risk management capabilities, restructuring partner deliverables, directing funding through key players, and reducing risk exposure, SK has facilitated access to finance for smallholder farmers and MSMEs.
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