Enrique Díaz Ortega President of Agrobanco
What is the main role of Agrobanco? What are today’s key financing areas in the agricultural sector? Banco Agropecuario is a specialised development bank that promotes financial inclusion and partnering, playing a subsidiary role, which through a business model based on comprehensive knowledge of the industry, producers and their products, as well as mitigation of risks intrinsic to their business, seeks capitalisation and generation of sustainable revenues.
Its main segments are micro, small and medium producers, and in this respect, it is the largest provider of loans to the farming sector, with almost 100,000 loans of the 314,000 granted by the system. Furthermore, 58 percent of its portfolio is made up of investment loans to extend agricultural borders, implement new crops and procure equipment. Our aim is to meet the needs of the sector at all its different stages of evolution. Accordingly, when we talk about the farming sector, we include the agriculture, cattle, fishing and forestry subsectors, as well as producers, middlemen, processors and exporters of farming products, whether individuals or organisations, including associations and co-operatives, and native and countryside communities.
We have 80 branches serving 1,400 districts of the 1,845 in the country, and we are present in the remotest parts of the country, where finance is unavailable or difficult to access for producers.
What have been your biggest achievements as President of Agrobanco? We have consolidated a vision of a modern and efficient development bank, working towards financial sustainability but at the same time successfully meeting its government policy goals.
Banco Agropecuario has grown significantly in the last four years, from a portfolio balance equivalent to US$100 million and 21,000 customers in 2011, to US$600 million and almost 100,000 customers to date; and in the last 14 months, since I took over at the Presidency and with the backing of the current Board and involvement of management and all our people, we started a process to consolidate that growth, in addition to replicating the principles of development banking, such as granting long-term loans, subject to supervision, bringing in intermediaries, promoting technical support, access to outside resources, and creating innovative mechanisms.
In quantitative terms, we are approaching 100,000 customers, 62,000 of which are exclusive to us, in other words they only receive finance from us: 90 percent operate in poverty or extreme poverty areas; 31 percent are account holders; in gender terms, 20 percent are female, and in addition we look after 186 native communities and 606 countryside communities, as well as 203 cooperative associations.
Today we finance over 100 different crops, many of them native, such quinoa, camu camu, sacha inchi, maca, and others with huge potential in overseas markets.
In qualitative terms, we are driving principles of Good Corporate Governance, developing a financial education system for small producers, having received an international ALIDE award for the best financial inclusion product (‘Profundización Financiera’ or Financial Deepening) in Latin America, improving communication with stakeholders through meetings, decentralised events and bulletins, commencing a transformation process to become a Green Bank with the support of international institutions such as AFD, GIZ and BID, launching new financial products for the cattle farming subsector ('Ganamás Ganadero' or Cattle Farmer, Earn More!), strengthening our inhouse control and end-to-end risk management methodologies, expanding the infrastructure of our branches, training our people with high specialisation workshops and issuing debt in the country.
Furthermore, we have the lowest default rate (2.5 percent) in micro-finance, in this case farming, investment grade BBB from Standard & Poor’s and BBB+ from Fitch Ratings, and we have received visits from delegations from Tanzania and requests from Bolivia, Paraguay and Cuba to export our agricultural lending technology.
We have entered the money market by means of issues that provide us with greater financial discipline; and furthermore we are on the verge of launching liability products for better customer relations, and we have increased the cover of a farming insurance product to protect against climate risks for 23,000 producers, assuring them an investment equivalent to US$375 million.
In the challenge of fighting poverty, how important is it to include farmers in the financial system? Peru has reduced poverty by more than 30 points in the last 15 years, to levels of 22 percent; nevertheless, in rural areas there are still places with over 50 percent poverty. That is where our main challenge lies, and it has been shown that one of the most efficient ways to address this issue is financial inclusion, because it takes producers to the market and brings them into the 21st-century. I can cite several examples, such as producers in the district of Carmen Salcedo in Ayacucho; Caballococha in Loreto; Valle del Monzón in Huánuco; Anco Huallo in Apurímac, among others, which through credit are increasing their productivity and production and are contributing to a better standard of living for their inhabitants. We believe that insurance is also a way to achieve financial inclusion, and we are committed to greater dissemination and cover in this respect, and also to training of producers.
In Peru there are over 500,000 producers that do not have access to credit today, in spite of meeting the requirements to do so, either due to their informality, unawareness or location in areas where the system does not reach, which is why we seek to disseminate their strengths in order to attract banking to the sector.
Our product “Profundización Financiera” is designed precisely for this. It is a dynamic and speedy means to deliver loans in partnership with local government and stakeholder organisations, through cooperation agreements. In this segment, which promotes financial inclusion, special treatment is given to interest rates, which stand at 14 percent per annum, and customer response is positive, because the average default rate is barely 2.8 percent.
How has Agrobanco’s financial services and technical assistance benefitted small and medium producers in the agricultural sector in Peru? In the year 2000, the Peruvian financial system only had 26,629 loans in the farming sector, today this figure stands at 320,612. This growth is reflected in increased agricultural GDP (average 4 percent per annum during the last 5 years), and farming exports exceeding US$2,667 million in the last year.
Evidence of these benefits is the fact that of our almost 100,000 producers, 56,744 are return customers, in other words they continue to apply for loans, and of the S/.1,878 million in our portfolio, S/.968 million are investment loans that have allowed them to increase their equity.
Photo: Agrobanco?
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