This document discusses creating critical mass in warehouse receipt finance in Nairobi, Kenya. It provides an overview of Zambia National Commercial Bank (Zanaco), the largest bank in Zambia. Zanaco has experience providing financing to smallholder farmers through programs like the Lima Credit Scheme. Currently, warehouse receipt financing faces limitations like poor infrastructure and low skills. Possible solutions proposed include developing skills and tools for warehouse receipt finance, leveraging partnerships along value chains, and encouraging group marketing and advocacy to address challenges.

1. Ephraim C. Mwefyeni
Head – Agribusiness Emergent & Smallholder
17th July 2014
Creating Critical Mass in
Warehouse Receipt Finance –
Nairobi Kenya
Zambia National Commercial
Bank Plc.

2. Contents
 Zanaco on one page
 Zambia – Agricultural Financing Landscape
 Experiences working with Smallholder farmers
 Current Status/Limitations or Challenges
 Possible Solutions – Creating Critical Mass

3. 3
Zanaco Overview
• Largest Bank in Zambia; Top 1 - 3 positions (19 banks)
• # 1: Clients, Distribution, Cards, Assets, Deposits, Revenue
• # 2: Profits; Capitalization , #3: Lending
• 1969: Combined the National Bank and the Commercial Bank
• State-owned; sold 49% and Management Rights to Rabobank 2007
• IPO in 2008: Rabobank 46%; Government 25%; ZNFU 3%
• Strong Retail Bank with excellent Corporate and Treasury capabilities
• Full product range in Payments, Collections, Lending & Savings
• Innovative: First to market with ATM’s, Mobile Banking, Xapit Cards
• Distribution: 67 Branches & Agencies, 166 Zanaco Xpress offices
• Cultiv8 product was launched in November 2013 (with Airtel’s Agents)
• Largest customer base: > 645,,000; Largest Card base: > 750,000
• 172 ATMs and 574 Merchant POS terminals
• 1,321 employees & 175 Direct Sales Agents; >3,500 shareholders
• 2013 PAT: US $ 33.8 mln; Equity: US $ 158 mln; Assets: US $ 1.25 bn
Zanaco on a Page
Source: Internal MIS & IFRS Fin as at 31 Dec

4. 4
M
Source: Internal MIS
Distribution: Branches and Agencies
 Over 233 Branches, SME Agents, & Zanaco Xpress locations (Zampost); starting with Airtel
 Presence in 74 of 102 Zambian districts
Zanaco Branches
Zampost Outlets
Zanaco ATM’s
Zanaco SME Agents

5. 5
Agribusiness Financing Segmentation
Food and Agriculture is a key focus areaFood and Agriculture is a key focus area
Agri.
Corporates
Commercial
Farmers
Emergent Farmers
Smallholder Farmers
Bankable
Un-Banked
Bilateral Contracts Bilateral Contracts/Farmer Groups

6. 6
Lima Credit Scheme (Smallholder Farmers)
Season Participating
DFAs
No. of
farmers
Hectarage
cultivated(Ha)
Utilized Limit
USD
Yield
ton/ha
Avg.Ha
/
Farmer
(ha)
2008/09 2 600 600 61,800 1.75 1
2009/10 10 1,334 2,229 590,000 2.5 1.7
2010/11 18 1,511 3,320 1,090,000 2.5 2.2
2011/12 25 4,026 10,088 3,362,313 2.7 2.5
2012/13 37 10,596 21,508 7,635,162 3.2 2.1
2013/14 42 16,500 45,000 14,000,000 *
Growth of the scheme since inception in 2008

7. 7
Our Experiences with smallholder farmers
Food and Agriculture is a key focus area
Through working with smallholder farmers;
• Timely access to inputs
• Skills transfer
• Improvement in farmer productivity
• Market linkages
• Enhanced group marketing/aggregation
• Improvement in farmer repayment ability
• Disbursed new seasonal facilities based on Good Received Notes (GRNs)
• Developed key partners with common objectives

8. 8
Current Status
Food and Agriculture is a key focus area
• Traditional financing products – Overdrafts, medium term loans, stock financing etc.
• Some banks are providing stock financing by way of FAWR’s
• Collateral managers issue non negotiable WHRs, stock monitoring
• Collateral Management costs can be prohibitive for farmers/traders to benefit from stock financing under CMA.
• Insurance required include multiperil insurance for input finance & all risks insurance covering stock financing.
• WHR presented to the bank is discounted to account for price volatility etc.
• Tenor agreed, information obtained from CRB before disbursement assignment of receivables.
• Sale & release of stock is against cash payment in collection account.
• Commodities include maize, soya, wheat.
• No comingling of stocks financed (easy identification in case of diff financiers).
• WHR offers the bank control over the goods and maintain control until released/liquidated

9. 9
Limitations
Food and Agriculture is a key focus area
Challenges
• Poor infrastructure (road network, weak/fragmented storage/warehouses
• Low post handling skills
• Mindset change (existing gaps) – farmers, traders, & financiers
• Limited linkages to the market via a commodity exchange
• Low skills sets to drive WHRs
Opportunities
• Can increase access to finance especially for smallholder farmers
• Can provide opportunities for farmers to unlock cash flows
• Can encourage flexibilities in sales
• Can increase commodity processing i.e. meets working capital requirements for a commodity
processors while raw commodities await processing & processed products await sale

10. 10
Possible Solutions
Food and Agriculture is a key focus area
• Smallholder finance as one of the key focus areas
• Develop skills sets /tools/knowledge within banks/among farmers
• Leverage on partnerships with key private sector value chains
• Encourage group/cooperative marketing to achieve aggregation
• Work with Farmers’ Unions to increase advocacy with policy makers
• Exploit growth potential that exists

11. Thank You!!