The Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) has activated its Rating and Incentive pillars to further stimulate the flow of finance and investment into the Agribusiness sector.
This is part of NIRSLA’s broad mandate to fix broken agricultural value chains.
A statement yesterday by NIRSAL said the “rating facility seeks to assess the performance of key stakeholders such as financial Institutions and state governments on the effectiveness of their agricultural policies and programmes”.
It added: “The first phase of the ratings is targeted at banks, insurance companies and state governments.”
The pilot phase of the ratings was expected to begin yesterday with six financial institutions – Stanbic Bank IBTC, Ecobank, Sterling Bank, AIICO Insurance, AXA Mansard and LAPO Microfinance Banks – which have expressed interest in participation.
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At least, three state governments of Ekiti, Bauchi and Kebbi will also be assessed during the pilot phase.
The results of the pilot phase will be used to design a comprehensive roll-out of the ratings programme for interested stakeholders. The rating and incentive pillars represent the last two of the five pillars of NIRSAL to be activated.
The first three are: the risk sharing facility, the technical assistance facility and the insurance facility.
The five strategic pillars provide the funding basis for NIRSAL’s de-risking operations and interventions across the agricultural value chain.
To successfully activate its rating and incentive pillars, NIRSAL said it “has developed a scoring methodology for these three clusters to enable independent assessment of their agricultural activities”.
It added: “These scoring methodologies have been validated by the relevant stakeholders through a consultation workshop held in November 2018.”
The scoring methodology to be deployed for banks rates them according to their organisational commitment to agriculture, quality of their agricultural portfolio and recognises smallholder farmers’ inclusion and innovation in their agric lending activities.
Insurance companies will be rated on the basis of innovative agricultural insurance products developed, customer acquisition and satisfaction and timely processing of claims.
The rating of sub-national governments will assess the ease of doing agribusiness in the respective States with a view to improving access to critical factors of production and providing the enabling and regulatory environment necessary for agribusinesses to thrive.
The results of the ratings will also be used to develop a comprehensive incentives programme which will reward innovation and encourage healthy competition among financial institutions and state governments to support the Agribusiness sector and encourage smallholder farmers’ inclusion.