The National Development Bank (NDB) has ambitious plans to develop into an agriculture development bank to streamline the agriculture sector credit processes, which will see the sector transformed.
The bank is looking to the July parliament for approval of legislation enabling it to transform into a commercial bank. Once passed, the transition bill will repeal the 49-year-old NDB Act and allow the development finance institution to apply to the Bank of Botswana for a commercial banking licence.
Over five years, the NDB serviced farmers and has acquired the much needed expertise. At present, agriculture comprises more than 50 percent of the institution’s loan book.
“We are the first point of call for a lot of people looking for financing in agriculture projects,” said Lorato Morapedi, the Chief Executive Officer for NDB. The NDB expects to be commercialized by March 2014.
“Farmers have been crying for this and, as NDB, we decided to leverage on this and take advantage of the fact that there’s no agricultural bank in the country,” she said. The creation of a bank intended primarily to finance agriculture could reduce imports, through a revival of domestic production.
The NDB is already procuring a banking solution which will provide the platform for its deposit-taking and lending activities. The institution is also reporting to the Bank of Botswana for guidance on restructuring while working on compliance with Basel II.
In addition, Morapedi unveiled initiatives the institution plans to use to carve market space in the highly competitive banking sector. The plans are part of the 2011-2014 Thobo Strategy, a blueprint for a fully commercialised and privatised NDB.
Another part of its strategy as it enters the commercial banking arena will be its agency role, which has seen it contracted to handle government programmes. Over the past decade, the NDB has conducted government’s Agricultural Credit Guarantee Scheme, the Citizen Contractors’ Fund, the Integrated Support Programme for Arable Agricultural Development (ISPAAD) and the Foot and Mouth Disease Relief Fund.
“Government knows that we have the capacity to do this and going forward, we will have a division that will focus on this agency business, but being both government and the private sector,” she said.
In the private sector, this would be especially for those entities wishing to deal with SMMEs. The NDB is establishing advisory services internally and also in collaboration with the Local Enterprise Authority and farmers’ associations.
“We know that we are competing with the banks for clients, but we have decided to keep our scope on development finance services,” she said. “NDB should be seen to be creating employment, diversifying the economy, alleviating poverty, promoting food self-sufficiency and boosting market and infrastructure development.”