Banks Cite Risks and Infrastructure Issues in Agri Lending

Banks in Nigeria are attributing the low levels of agricultural lending to high risks and weak infrastructure, as stated by Rashe Bolarinwa, the President of the Association of Corporate Affairs Managers of Banks. Despite acknowledging the critical role of agriculture in ensuring food security and economic growth, banks remain cautious due to the sector's unique challenges, including climate-related risks such as floods and droughts, pest outbreaks, and market uncertainties.

Although initiatives like the Agricultural Credit Guarantee Scheme aim to mitigate risks, they do not completely shield banks from losses. The article highlights that traditional collateral requirements and the operational risks associated with lending to smallholder farmers further complicate the situation.

Banks are increasingly exploring alternative financing models that do not rely solely on conventional collateral, such as cash flow-driven lending and partnerships with digital financial institutions to improve farmers' access to finance. However, the agricultural sector continues to face structural challenges, including market volatility and weak data availability.