A Nigerian cocoa firm, Tulip Cocoa Processing Company, has clamoured for single-digit interest loans to be given to cocoa farmers in the country.
The firm’s Sustainability Manager, Dr Taiwo Osun, urged all banks and financial institutions to come to the aid of these farmers in order to boost their productivity as well as the income of the cocoa farmers.
The need for single-digit interest loans: Speaking at the 2019 Farmers’ Day celebration in Akure, Dr Osun identified finance as one of the major challenges confronting cocoa farmers in the country. This is why the role of banks and financial institutions is critical.
If single-digit interest loans are implemented to long-term credit at nine percent and a minimum tenor of seven years, it will be better off for the farmers in terms of productivity.
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In the meantime, Dr Osun noted that his organisation is collaborating with other interested partners towards ensuring that Nigerian cocoa meets globally-acceptable standards for exportation. He also stressed the importance of farmers and buyers in the distribution chain.
“We don’t only buy cocoa from the farmers, we are equally training them on the need for them to have cocoa that will be sustainable not only for Nigeria but abroad. We don’t want over-use and under-use of cocoa for it to be acceptable in European markets.”
Dr Osun also advised the Government at all levels to provide good roads that will enable farmers to ensure easy movement of their products from the farm.
The feasibility of single interest loan for cocoa farmers: The firm’s suggestion for a single interest loan for cocoa farmers is coming barely a month after the Central Bank of Nigeria (CBN) offered loans to the creative sector in the country, at a single-digit interest rate in order to boost areas such as movie, music, fashion and information technology amongst others.
If this could work for the creative industry, it can definitely work for the agric sector; most specifically cocoa farmers.
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CBN finances agriculture through the banks at single digit interest rate. Unfortunately, many commodity financing by banks almost always go bad. Since the banks are ultimately the ones taking the risk (must pay CBN back whether the customer repays or not), they tend to shy away from such loans. So the issue is not about availabiliity of single digit financing but about the low apetite for such loans by banks, due to the historical delinquency rate.
A diagnostic review of the cause of the prevalent bad loans in the agric sector financing (commodity produce and export financing in particular) is key to re-igniting bank’s interest in funding cocoa farmers.