RISK SHARING PARTNERSHIPS
Prepared for Client Name
Your name here
Date
AgriSETA Conference
Presentation by Diale Mokgojwa, Manager: AgriBEE
15th September 2011
Exposure to the possibility of loss; a chance or situation
involving such a possibility.
Types of Agricultural Risks
External
Internal
•Natural
•Human
(location, weather, etc.)
•Price
(market/sales prices, inputs
prices, discounts)
•Legislative
liabilities)
(Policies, taxes,
resources (dependability,
quality of work)
•Product
•Management
•Admin
RISK SHARING
Risk management method in which the cost of the consequence of RISK
is distributed among several participants in an enterprise.
The Power of PARTNERSHIPS
BANK
PRODUCTION MANAGEMENT
Access to finance
Credit application
Pay out
Financial services
Capacity building
Marketing
(50% of business)
Production risk management
Financial management and
admin
Capacity building, skills dev
& transfer- technical, business
Measurable milestones
FARMER
COMMODITY ORG
Gate keeper
Facilitator
Access to land
3 year track record
Willingness to partake
Full disclosure of financial position
MARKETING MANAGEMENT
(50% of business)
Product
Off-take contract (price risk
management)/
hedging/
export
Support
INSURANCE
Mitigates
risk
INPUT SUPPLIERS
Quality seeds/ breed
Capacity building
GOVERNMENT
Grant funding
Infrastructure
Mechanisation
1st loss guarantees
Partnership Opportunity
•
Leverage the Bank’s balance sheet to lend across the value chain
•
Amount of Risk Sharing facilities enable the Bank to leverage that amount
10 times the guarantee facility
•
Private & Public sector entities with similar goals
•
DE-RISK THE MARKET
FINANCING OVERVIEW
Purpose of finance
Kind of finance
Business
Revolving
Medium
Business
Overdraft Credit
Term
Term Loan
Plan
Loan
(BRCP)
Agricultural
Vehicle and
Production
asset finance
Loan
Working Capital
Yes
Yes
No
No
No
No
Input costs, crops, livestock
Yes
Yes
No
No-
Yes
No
Implements, machinery and
other capital equipment
No
Yes
Yes
Yes
No
Yes
Office equipment
No
Yes
Yes
Yes
No
Yes
Vehicles
No
No
No
No
No
Yes
Property
No
No
Yes
Yes
No
No
CREDIT EVALUATION
Factors affecting credit evaluation
Repayment ABILITY
Financial position
•Historic income & cost:- Income
statement;
Projected income & cost:- Cash flow;
Income:- Price & yield assumptions;
Loan value v/s repayment ability.
Risk Management
Nature of business;
Key risks (product, production, price,
people, cash flow and capital);
Management expertise;
Risk mitigation (hedging, insurance, etc.).
Own capital contribution;
Capital & funding position and requirements;
Solvency and liquidity ratios;
Interest coverage ratio.
Security
1.
2.
3.
4.
5.
6.
7.
Pledge
Secondary source of repayment;
Mortgage bonds on property;
Notarial bond over loose assets;
Cession of crop income;
Cession of insurance;
Guarantees & suretyships.
Reasons loans are declined
•
Business is unsound, risk is too high, bank cannot determine risk – business is
not sustainable
•
Insufficient security or lack of collateral
•
Lack of owners commitment, often indicated by his/her contribution to the
business
•
Business plan does not provide adequate information
•
Purpose of the finance required is not justified
•
Character or suitability of owner
•
Passive investment – owners not involved in the business
•
Adverse behaviour on existing credit facilities
Business Plans – see www.standardbank.co.za
Business >> Starting a business >> Getting started >> Starting a business >> How to draw up a business
plan
Wisdom
“If you are looking for a helping hand you will find it at the end of your arm”.
Chinese Proverb
“After all
Unknown
is said and done, usually more is said than done”.
KE A LEBOGA
CONTACT:
Diale Mokgojwa
011 636 8713
diale.mokgojwa@standardbank.co.za
www.standardbank.co.za
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2016-03-12