Agribank is owed N$500 million in arrears out of a total loan book of N$2, 4 billion, sparking a collection drive by the financial institution, which fears that its sustainability is under threat.
Agribank Chief Executive Officer, Sakari Nghikembua, said recently that the arrears-to-total-advances ratio currently stands at 21 percent, while the benchmark ratio for development financing institutions is 15 percent.
“The sustained high levels of arrears would threaten Agribank’s financial sustainability and its ability to deliver on its mandate in the long-term,” Nghikembua said last week, while unveiling a new five-year strategic plan for the institution, which will run until the 2020/21 financial year.
According to Nghikembua, the bank has already hired debt collectors.
However, those in arrears are still welcome to make arrangements with the bank.
“Our objective is not to repossess materials and property, but when you lend money out, you need to get it back. This money will then be given to those who have not yet had this opportunity. We want to make sure that everybody in this industry benefits from the program. ”
Nghikembua said that despite the challenging operating environment, the agriculture lender has maintained credible financial performance in the financial year so far, and he expects it to meet or exceed its key financial targets. He explained that the bank’s operating environment continues to be characterised by increased regulation and intensified competition, while the country’s volatile weather cycles also pose challenges.
According to Nghikembua, this calls for a considered strategic focus to achieve growth, maintain relevance and ensure sustainability.
He said income growth and cost-containment strategies are necessary, in order to achieve the strategic objectives of the bank.
Highlighting some important aspects of the new five-year strategic plan, the bank CEO said it had five focus areas: the customer, financial sustainability, employees, governance, as well as socio-economic transformation.
Key initiatives under the plan include understanding market insights through ongoing research initiatives, offering relevant products and ensuring the bank’s accessibility, through an increased footprint and digital platforms.
Other innovative initiatives include the development of products for communal farmers, in order to broaden financial inclusion and ensure food security at a household level.
Nghikembua explained that loan book growth, income growth, cost-containment, arrears management, as well as non-interest income growth, are among the core initiatives that are being implemented, to ensure the bank’s financial sustainability.
“It is against this background that the bank is pursuing an intensified arrears collection strategy.”
Part of the arrears collection strategy will be the attraction and recruitment of staff, with the required competencies, attitude and potential, while concerted efforts will be made to improve leadership and managerial capacity of the bank’s employees, through appropriate training.