KBA CEO CHAT - Agribusiness

CEO | Sammy Langat, Transnational Bank, CEO
MONTH | February 2015
Angela Ngethe
Good morning
Elizabeth Mwashuma
Good morning
Chat Admin
Good morning and welcome to the first CEO Chat session of 2015 - Happy New Year
Chat Admin
Today's chat session will be hosted by Sammy Langat CEO of Transnational Bank and the topic is Agribusiness
ENOCK BETT
Good morning
Chat Admin
As we await the start please update your profile to include a profile picture
Chat Admin
Also, feel free to check out some of the past chat sessions at http://chat.kba.co.ke/index.php?r=chat/archives
Chat Admin
https://www.youtube.com/watch?v=ZNW1j5sImfA
Tadeo Tito
Morning all
Angela Nyabera
Morning everyone
paul KABUI KARIMI
eagerly waiting for i am in the very initial stages to do angribusiness
Brian Mong'are
Good Morning everyone. Hope you're all well.
Chat Admin
Morning all great to see you all online and looking forward to this mornings session.
paul KABUI KARIMI
looking forward to learn the best way of financing
nuru mugambi
good morning all
nuru mugambi
looking forward to channeling my inner farmer
Chat Admin
We are almost ready to start. Please start preparing your questions so that we can start promptly at 10am
CHRISTINE VULIMU
Good morning every one.I am glad to be on this team Happy new year,
Chat Admin
Good morning Ladies and Gentlemen, we welcome Mr Sammy Langat to the Chat
Sammy Langat
Good morning everyone...good to be with you this morning
BRIAN ANUSU
Thank you bwana CEO.Karibu
Oscar Maina
Good morning Bwana CEO.Ready for the Chat.
Sammy Langat
Welcome everyone...agribusiness is key in driving the economy and that is what we will be discussing today and especially from the bankers point of view
Sammy Langat
Brian...Oscar thank you for joining in
BRIAN ANUSU
Bwana CEO,how big is agribusiness potential in kenya
Tadeo Tito
Hi, Karibu sana Bwana CEO, let me shoot the first question Sammy, there has been a lot of talk of Agribusiness being a a key player in the economy, what aspect of agribusiness are we talking about, is it production, is it value addition and what is the key focus for you as a banker?
Sammy Langat
Brian thank you for getting us started
CHRISTINE VULIMU
Glad to be with you Bwana CEO.I am all ears.Just to learn.
Sammy Langat
Agribusiness is all business involved in agricultural production including farming, contract farming, seed supply, Argo chemicals, farm inputs, wholesale distribution, marketing, packaging and branding...
Sammy Langat
...so it is a considerable sector which accounts for more than 25pct of the gdp
Sammy Langat
it is estimated that seven out of 10 Africans are engaged in farming in one way or another
Sammy Langat
Karibu Christine...let's talk farming!
paul KABUI KARIMI
Bwana CEO, How much do you require to venture in agribizz
Shiques Simatwa
Mr CEO, thank you for your time to shed some light on agribusiness, I would like to ask; with the increase of youth interest in farming what are the banks doing to aid in either expanding / starting or giving the necessary push this venture?
Sammy Langat
Tadeo...thank you for your question...today we are talking about the entire value chain...from seed to mouth...from a financiers perspective
BRIAN ANUSU
Bwana CEO,from a bankers perspective,what kind of solutiins do you have for those in value addition
Sammy Langat
I would like to share about va
ENOCK BETT
Mr CEO, what are you doing to cut the cost of accessing to agricultural finance to engage in agribusiness especially for the youth who could not be having any collateral?ter
Sammy Langat
value addition...about 91 percent of the total agricultural exports are in raw or semi processed form so in my view the country looses billions of shillings through lack of value additiion
paul KABUI KARIMI
Mr CEO, do the financial sector have Agribusiness mentorship program and if there are please site example
CHRISTINE VULIMU
This has forever been the backbone of this country. I am glad we are back there.Does this include the population with small gardens in their backyard?
Nicholas Chepkwony
Hello Sir, therevis usuallyba disconnect between marketing by the banks and risk assessment. Most of the farmers or agribusiness entrepreneurs may not be keeping proper record to the satisfaction of banks to qualify for credit. What is TNB doing to bring many on board?
Job Kavoya
Dear Mr Langat, I'm a business analyst in the public sector. Operational efficiency (the pace with which to access credit) the banking industry is hindering credit growth in agribusiness industry, what is the industry's response to this issue?
Brian Mong'are
Mr. CEO, the number of people involved in farming is quite high in Kenya and Africa as a whole. The biggest problem I think we face as farmers, is that farming is not considered as economicaly viable especially in small scale. How can we change this perception especially in our youth and how can financial instituions play a role in this?
Emma Wacira
Mr. Langat, i totally conjcur with you on value addition. if we worked harder on the value addition element as opposed to over concentrating on raw exports, then we will surely create much more income.
Ken Kobia
Good morning all? It's funny that 7 out of 10 Africans are engaged in farming in one way or another yet hunger is a constant, chronic pain in Africa. What exactly is the problem?
Wangui Muturi
Good morning Mr.Langat, I am also keen to know what solutions the bank offers those who are in the middle of the chain i.e. Wholesalers, marketers, Distributors etc. I suppose it is not entirely advisory?
paul KABUI KARIMI
In line with what Christine Valimu asked....when venturing to farming what is the recommended size of land to ensure economic of scale hence break even in the investments made
Alexander Kimani
Bwana Lagat.can the banks use legally owned land as collateral for improvment in likes of drilling water for irrigation for sustainable growth and making repayment friendly
Tadeo Tito
The problem in Kenya is that there lacks innovative financing arrangements where young agripreneurs who have very good innovations that would enhance value addition. Most of the young people lack 'literate' capacities to convince banks to support them. Is there a way the banks can support such people?
CHRISTINE VULIMU
Brian That is my question too?How much can the banking institution bab
Sammy Langat
Enock...thank you for your question...agricultural financing based on value chains will need to consider who buys what and when within the value chain...and everyone in the chain must be presented at the time of financing. Youth who are engaged within the value chain are advised to aggregate (form groups) so as to be able to enhance their credit worthiness
CHRISTINE VULIMU
Reach out to the small scalers who do a great job in the background?
Sammy Langat
Further to Enock's question...I advise youth to seek supplier contracts before approaching financiers or initiating production...that way the supply contract becomes the collateral for the bank
Patrick Kiao
Good Morning everyone. Mr. CEO. My question revolves around the failing of some of the bank products that are supposed to energize and shape up agribusinesses by providing the much needed innitial investment capital. Are Banks failing in this quest by providing products (i.e agric loans) that are not flexible enough to accomodate the dynamic agricultural enviroment? What is the remedy to this? Is there a positive impact that Brokers / Middle men play in enhancing Agri Businesses?
Eric Omondi
As already noted by Brian,very many Kenyans are involved in farming,however,our view of farming as a pillar of economic growth has not been positive,how is the bank promoting not just financing for the established farmer but also reaching out to the small scale farmer who may improve their living standard through appropriate farming techniques?
Sammy Langat
Christine...you raise a point which is very important and speaks to the small holder (backyard) farmer...agribusiness considers only what goes into the market, so if it is to the market, even if that market is your neighborhood, then you are in agribusiness
Sammy Langat
I see a question from Paul Kabui about how much is needed to start an agribusiness
Franklin Wanjala
Good Morning Sir,what tailor made financial products are available for agri-prenuers in comparison with products that are tailor made for women,youth,people with disability in accessing credit keeping of finanial records in regards to best practices
Sammy Langat
...first and foremost, we dont look at money first in agribusiness...the most important thing is the market for the product (demand).
Charles Odida
Are banks willing to overlook farmers ability to repay their loans faster n promptly for the sake of long term sustainability of their agribusiness?
Emma Wacira
in the practical sense, if i have a small parcel of land and i am looking for capita, i walk up to the nearest branch, sell my idea that i wish to plant say potatoes for sale, what are the documents/requirement likely to be asked from me as collateral? also can a bank take collateral against expected harvests?
Sammy Langat
...once you establish demand, you must have the capacity to sustain the supply and level of output quality for the long term...also as just as with any other business venture, you would want to ensure that you are profitable
CHRISTINE VULIMU
Could we then add a positive voice by removing fear of the loans and making the small scalers know that it is safe to enter the banks for help?
Alvin Mokaya
Morning all.With regards to agribusiness,I feel as Kenyans we have divided the country in agricultural and non agricultural zones. Some areas such as northe eastern Kenya have been abandoned by the agriprenuers due to weather issues.However,fact is there are some countries like Spain which are drier than our NorthEastern province but they are feeding Europe. Are banks keen on tapping and enhancing potential opportunities in such areas and offer tailor made packages for agriprenuers willing to invest in these regions? Otherwise,agribusiness growth will stunt at some point if we don,t expand this space.right?
CHRISTINE VULIMU
Who will do this?
Sammy Langat
Job i see your question about what are banks doing to finance agribusiness
OCHIENG LINUS GERALD
As a young person, I have much interest in agribusiness but just as many of my peers the challenge is capital. Title deed has lost its value and majority of banks now turn it down. how can one go about this?
Tadeo Tito
i agree with Alvin, if only there was support, i can bet you there are a number of young and even older people who are willing to venture even in the arid zones and make money there. Financial support is the main issue i suspect
CHRISTINE VULIMU
Is it possible for the banks to encourage mentor ship programmes.Allowing those who have walked the journey to hold other hands
Keziah Mutua
Charles, I think that banks structure loan repayment according to the source and frequency of income. Let's say your tea proceeds are paid twice a year, the loan installments coincide with those payments. However, if your farming is supplementes/supported by another business such as a wholesale shop or supermarket, then maybe monthly instalments are better. Isn't that so Bwana Lang'at?
Emma Wacira
but the government and devolved governments has to play a large role in creating the necessary support and irrigation infrastructure in these arid areas.
Peter Mbiyu
Where do you see the next growth frontiers in the agribusiness sector?
EVANS TUITOEK
Morning Mr. Langat, what do banks take as security or collateral when financing agri business? And can the bank use milk/maize deliveries to KCC or NCPB to get payments in your institution
Sammy Langat
....to respond I would like to address some of the issues in agriculture, I mentioned before the need for value addition which must be addressed by the agribusinesses.
Keziah Mutua
Alvin Mokaya,
Keziah Mutua
I believe it would be fine to move to the agriculture in the arid regions once as a country we have fully harnessed the potential in 'agricultural' zones
Sammy Langat
A financial institution wants to be assured of loan repayment, hence a farmer is more likely to be financed if he/she can demonstrate that they have a market (demand); that they are operating within a value chain; and that the risk issues (loss risk, etc) have been addressed. A bank also will be looking for the returns, i.e. that the business is profitable for the long term
Sammy Langat
Welcome Wangui,
Sammy Langat
For those operating in the middle of the value chain, i.e. wholesalers, financiers will use different kinds of instruments for lending, such as LPO financing, invoice discounting, asset finance, and working capital.
Emma Wacira
in terms of the bit to demonstrate demand, is the bank asking for a market/feasibility study from a recognised data collection company or how can a prospective borrower provide for such a requirement
Brian Mong'are
The rapid growth in technology has seen many aspects of the world change, the least affected by this is agriculutre, If the instituions that help finance and incubate tech startups and were to play a bigger role in encouraging Agritech innovations, maybe this would help change perceptions and bring in new techniques in farming like hydroponics.
Sammy Langat
Alexander i would say yes, banks do use legally owned land for collateral...if you would like to clarify the point...please do
Sammy Langat
Eric Omondi, it is true, many Kenyans are involved in small scale farming.
CHRISTINE VULIMU
Mr.Langat,this will forever lock out those who are not on their feet. programme to pick up those who want to start but are steel in teething stages?
waliggo david
what are banks doing to facilitate the three tier system as in banks finance stock brokerages find the markets and insurance firms insure but all this is money intensive
Alvin Mokaya
I agree with you Keziah....my only concern about that doing that way is we leave these 'non agricultural' zones to the mercy of foreign nationals (read Chinese). When the President toured China last year with some of our local business men,they were shocked to find an organised group of Chinese people worrying about Africa.Out of these around 140 of them were focusing on purely on Kenya and the opportunities in tourism and agribusiness in some of these arid regions. Do we want to wait until foreigners show us the way?Are banks tapping into the devolved government structure to enhance growth of agribusiness across all Counties?
Sammy Langat
There are quite a number of small holder farmers, who are also suppliers of commercial entities. There are quite a number of organisations which support capacity building for these farmers. Banks also undertake similar capacity building programs for their clients.
joyce lesham
Hi. Glad to be here.
Keziah Mutua
Christine Vulimu, your idea to have mentorship of youth in agribusiness is splendid. As the agric experts teach us the ropes on agric, then networking sessions with others in the agribusiness value chain both in & out of AfricA would ensure better success rates for our agribusiness ventures
Hillary Kiboro
I am joining thi chat late, but from the some of the questions and answers given I understand you to say that a farmer can use a contract document as collateral. I have done farming for the last three years on a small scale and I have received consitent returns. Would such a record be used in lieu of a contract as the basis of financing?
Sammy Langat
Charles Odida, I agree with Keziah's point...banks can schedule your repayments according to the cash flow of the agribusiness venture...insurance for your agribusiness is highly advisable so as to mitigate possible risk
Sammy Langat
Nicholas Chepkwonyi...i see your question about how banks are helping farmers have good records
Sammy Langat
...one of the interventions is capacity building by financiers...also we have seen that digital platforms (mobile apps) are helping farmers keep track of their records -- credit records, payments, income, all of which bankers use to make a lending decision
Mureri Ntwiga
Yes, Sammy, I have seen apps like Farmdrive that are coming up to encourage record keeping...my question is, are the banks liaising with these providers to have some sort of history to act as security for lending?
Sammy Langat
Paul Kabui, Christine, I see your points about mentorship...we should always feel free to ask their bank for capacity building, networking and mentorship...for example Transnational Bank will be launching an agribusiness mentoring sessions starting in march...so watch out for that news...you can follow us on our Twitter handle (@tnblkenya)
Irene Mukiri
learning a lot
Dorcas Muturi
One more question from me: are there some farming ventures that the bank would not finance, and which ones?
Sammy Langat
Ken Kobia...that is a great observation that 7 of 10 africans are in farming yet we have chronic hunger...
CHRISTINE VULIMU
Mr.Langat,could support systems be taken seriously.I believe you are in a place to create something unique for those young people who don't have property to cover their backs.
Franklin Wanjala
this forum should be two hours ,really informative
Irene Mukiri
Franklin i agree it should be two hours
Sammy Langat
...in my view, a lot of farmers are operating outside of value chains resulting in post harvest losses, inaccessibility to the market, and poor prices...in Turkana for example they have the highest number of livestock...11 million i think...yet they have the highest poverty index
Stephen Kanili
The main issue that holds farmers back is market. I believe there is need for banks to go out there and link small scale farmers with the market. This will help sustain a longterm win-win situation between the banks and the farmers themselves.
Sammy Langat
...my view is that they do not consider the market value of their livestock and if they were to sell for example they would convert the livestock into monetary value...so i encourage farmers to always the monetary value of whatever it is they are producing, and see farming as a business
Barnabas Kimatoi
I suggest future extension to at least 3hrs; and 2 topics, 1.5 hrs each. It's quite informative.
Sammy Langat
Barnabas...we agree with you! one hour is too short! agribusiness is life!
Sammy Langat
Welcome Joyce...thanks for joining
Irene Mukiri
I think gone are the days when people would do farming for the sake of it..like buy a cow that only gives you 10 liters of milk yet you can invest in one that can give you 35 liters per day
Keziah Mutua
Hi Stephen, in my view, one should identify the market first before venturing into agribusiness. As Kenyans, we are quick to jump into schemes that promise quick returns but instead burn our pockets such as quail farming. If we started with the end in mind just like in other businesses, then we would deliver what would be in constant demand.
Peggy Kemei
We look forward to the mentorship program that Transnational Bank will be launching. It may answer many of the questions that we didn't get to ask in this very short 1 hour chat.
Sammy Langat
I see questions from Franklin and others about tailor made products for agri-preneurs
CHRISTINE VULIMU
True it should.How can I carry on this conversation.Mr.,Langat,is it possible to have a one on one .With due respect please.This is short.
Allan Muleji
3 Comments. 1. This has been a fruitful chat. 2. There are a lot of opportunities in agribusiness; the only problem is that we do not have accurate information. However, the comments made here form a good starting point. 3. My appreciation to everyone.
KEN MWANGI
What kind of agribusiness loans are you offering to potential investors?
Sammy Langat
In financing agriculture a bank will use different instruments, different tenors, different disbursement methods, and different risk management techniques (including insurance, price sensitivity), it is important then that an entrepreneur who is considering starting an agribusiness venture to visit a bank for a tailor made solution because this is a specialised sector that requires tailor made solutions
Sammy Langat
Christine and all karibu to Transnational bank
CHRISTINE VULIMU
Thank you.I will sir.
Tadeo Tito
Thanks a lot Sammy, wish there was more time to hear from you and everyone here
Keziah Mutua
I hope we will all be invited to network and learn more during the Transnational Bank agribusiness forum in March. Thank you Mr. Lang'at for breaking down the whole agribusiness topic from the financier's perspective
Sammy Langat
Paul Kabui raises a point about how much land one needs to start an agribusiness...i would say that first, let us not look at the sector from a production only point of view...i.e. ukulima...there are many more opportunities in the value chain, especially the route to market, which includes bulking (i.e. buy from many farmers and supply); value addition (i.e. processing); local sales and distribution; packaging and branding products; there is also technology prospecting -- looking at ways to mechanize the farming process
CHRISTINE VULIMU
Please let us have a face to face.It sinks more.God bless.
Dorcas Muturi
This is an interesting conversation. Thank you Mr.Langat for engaging us.
joyce lesham
Interesting i have never considered "the route to market" as an opportunity
Sammy Langat
I also would say that it is not the size of land that should limit you...for example, if your product is maize, you will need a sizeable amount if you will be supplying on contract; but if it is mushrooms the land would be much smaller
Sammy Langat
Patrick, thank you for your point about flexibility, we raised earlier the need for customers to discuss with their banks...i think brokers can have a positive impact because they play a key role in aggregation / bulking which improves the pricing on the product and also availability in the market
Hannington Otieno
Are banks flexible in grace period, eg a pig farmer takes atleast six months for piglets to mature and sell. Can banks accomodate grace periods that long?
Sammy Langat
Emma...i see your question about what to do when you are at the idea stage...to increase your creditworthiness i shared earlier the need for first determining and demonstrating your market (demand); i advised that one way is to secure a supply contract as a collateral before investing; another way is to start small...build a track record with the capital that you have, and as you grow seek alternative financing
Athman Mohamed Athman Ali
Good morning. Are facilities for this sector available in multiple currencies? Could I take out a USD loan, for example, to benefit from the relatively low interest rates for USD loans. And what would be the requiremetns?
Sammy Langat
Ochieng Linus, and all the youth, I encourage you to get together, start an investment group (chama) through which you can start saving; explore business opportunities and a market for your agribusiness
Sammy Langat
I agree with Emma on the point that the devolved governments have a role to play in creating the necessary support...the infrastructure and building capacity...
Sammy Langat
Peter I think the next growth frontiers are in value addition; and innovation
ADAM MUTHAMA
Morning, Mr. CEO...The major challenge for farmers is to understand the gross margin on the activity to be able to rationally compare with the cost of borrowing. Many farmers, especially smallholder producers, don't know their costs or realized returns, so they can't reasonably judge whether borrowing costs are high or low relative to their capacity to repay the debt.
Sammy Langat
I agree with Mongare on the insightful point
Sammy Langat
Waliggo...thank you for your point...there is an initiative underway to set up a commodities exchange to address the point you raise
Peter Mbiyu
Thanks Sammy, will start my scouting and when it is ripe i will come for the money. thanks for all the insight
Patrick Kiao
General suggestion:- Am of the opinion that we be emailed the chat transcripts after the session is closed. would be helpful.
Sammy Langat
Mureri...thank you for the example of Farmdrive, banks are using the information from these systems
Chat Admin
Hi Patrick, the full transcript of all chats are posted on the archives page along with a podcast shortly after the chat completes.
Patrick Kiao
@Admin. Great, thank you.
Chat Admin
You can find the transcripts at http://chat.kba.co.ke/index.php?r=chat/archives
Athman Mohamed Athman Ali
Just to add on to the last point by Mr. Langat, on the commodities exchange, there is an initiative I learnt about yesterday from the Grameen foundation that seeks to set up an e-warehouse so that farmers can be paid upfront or access finance without having to wait for the right time/right price to sell their goods... but reap from future projected prices in the market. The grameen foundation is at the Greenhouse Ngong road if you need more information.
Athman Mohamed Athman Ali
Also, as another point of information, there is a grant fund (www.lift-fund.com) that the members here could look at. If the agribusiness will lead to the reduced costs of goods or will create employment through value-adding services or has an innovative way of getting products to the export market therefore innovating logistics... it could get funded.
Sammy Langat
Athman, there are other currencies, primarily US Dollar and Euro...basically any major currency provided that the earnings are in the same currency
Athman Mohamed Athman Ali
Thank you for the response on the currencies.
Sammy Langat
Evans your example about a bank using milk or maize deliveries is acceptable collateral, depending on the bank policy
Sammy Langat
Adam, I agree with your view, we always advise farmers to watch their costs. If farmers are able to track their costs, then perhaps their returns are higher than they know, and therefore their ability to meet the loan repayment is assured
Sammy Langat
Thank you Athman for sharing this information
Sammy Langat
Ladies and Gentlemen, this has been awesome...a very interactive forum...and I want to invite you all for another session hosted by the bank in march...please follow us for more updates on Twitter
Sammy Langat
Thank you all for your time. I have learned from you a lot and I hope you also have learned something about agribusiness
Sammy Langat
my parting shot...farming is cool...agribusiness is better!
Chat Admin
Allow me to thank Mr Sammy Langat for his time and insights I think we all agree it has been very useful and informative.
OCHIENG LINUS GERALD
Thanks for the insights
Chat Admin
We look forward to seeing you all online next Friday when we will be discussing Oil and Gas with Joyce-Ann Wainana CEO of CitiBank
Chat Admin
Have a great day and a relaxing weekend
Sammy Langat
Thanks Ochieng
Sammy Langat
Karibu Athman
Sammy Langat
Have a good day
paul KABUI KARIMI
sorry i stepped out...the discussion was cool..Asante sana Bwana CEO'Sammy' for your informed response. and to the other participants too...