Run Your Farm Like a Business Says Standard Bank

NAMIBIA’S small-holder farmers need to view themselves as businessmen rather than emerging food producers to fully leverage the support of the financial services industry and create sustainable, profitable enterprises.

“The journey of transformation in the farming sector must start with an understanding that you are running a business,” says Gerhard Mukuahima of Standard Bank Namibia’s Business Banking Agriculture Division.

“Banks have some fantastic financial solutions to help small-holder farmers’ move from a traditional to commercial operation, but there has to be paradigm shifts that will see farmers adopt a more business-like approach.”

Mukuahima says that the first step towards operating like a small enterprise is to open a business current account to establish a financial track record, which enables banks to gauge the business strength of farming activities.

“A bank can’t form a view on a farmer’s business strengths through a personal bank account cluttered with non-business related expenditure like school fees,” says Mukuahima. “With no financial track record specific to their farming activities, it is very difficult for a bank to establish whether the business entity is viable which has implications for the ability to extend finance.”

Many new businesses in Namibia, across various sectors, fail within the first three years due to poor accounting knowledge and a lack of awareness of the role of financial management in establishing a sound business.

The success rate of small holder-farmers is likely to be even lower due to a lack of financial oversight, poor technical know-how and inadequate knowledge of best agricultural practices.

Standard Bank Namibia can help bridge this gap by providing access to relationship managers and mentorship, business development support, as well as short and medium-term lending facilities.

“A proper business current account can give farmers access to a variety of financial solutions to help them achieve their goals,” says Mukuahima. “It also enables Standard Bank Namibia to lend to farmers who wouldn’t normally qualify for a loan in the normal commercial sense.”

Mukuahima says the four most crucial considerations when extending a loan are:

1. A borrower’s financial position

2. The ability to repay their debt

3. Their capacity to manage unforeseen risk (e.g. droughts in the case of farmers)

4. Security against which the loan is granted.

Where a farmer does not meet one of these requirements, Standard Bank Namibia will still consider granting a loan provided the borrower has taken certain proactive steps to help mitigate the lender’s risk.

Mukuahima says this may take the form of a mentoring agreement in which a small-holder farmer undertakes to receive guidance and aice from someone with a successful agricultural track record.

“Even if you don’t meet all of these requirements there is still an opportunity for us to finance you,” says Mukuahima.

“However, the starting point is to open a business account and build a financial track record to enable us to extend the necessary finance.”

Source : The Namibian