Lending to farmers is particularly challenging. It has been a concern of governments for a long time as they recognise the importance of agricultural development in their economies. Banks, however, are wary of dealing with small farmers as they perceive this to be high risk and likely to reduce the quality of their loan portfolio. Newer microfinance institutions, anxious to extend their activities in rural areas, also worry about how to lend safely to farmers.
This self study guide is aimed at loan officers in financial institutions which seriously wish to engage in agricultural finance and manage this in such a way as to avoid loan losses and an increase in non-performing assets. It takes the reader through the loan cycle from application, to appraisal, disbursement and recovery, giving examples of how to deal specifically with farm households. The final lesson is aimed at more senior personnel who have responsibility for setting overall lending policies and managing the whole loan portfolio.
The lessons are based on the Agricultural Production Lending toolkit published by FAO and GTZ in 2004 and written by Bankakademie Micro Banking Competence Centre.