Remarks by Dr the Hon Timothy Harris, Senior Minister and Minister of Agriculture and Marine Resources at a workshop on “Financing and Servicing of Agricultural Development Projects” at NEMA’s Conference Room on June 6, 2012
I am happy for this occasion on which we are to have a candid interchange and exchange of ideas, views, suggestions and prescriptions about that critical resource (financial resources) for the ongoing development of the agricultural sector.
The Agriculture sector remains under-resourced. There have been some improvements in recent times but better can be done. The sector has not been provided with enough resources on a consistent basis to do what we need to ensure its radical transformation, growth and development. The evidence is overwhelming as we look at the landscape, the unpaved feeder roads, the absence of water management systems, under utilization of technology including shade houses and greenhouses. Government has an important role to play in providing adequate resources for the growth and development of the sector. In the Jagdeo Initiative a call was made for Heads of Government to ensure that greater resources were invested in agriculture. The Jagdeo Initiative which provides the blue print for agriculture in CARICOM identified the multifunctional role of agriculture including food security and nutrition, import substitution, foreign exchange savings and earnings, environmental sustainability and job creation.
The food security imperative, the high cost of living, the high level of poverty at 20% of the population have all reminded us here in St Kitts and Nevis that Food Security is a must. Our fertile land must be put to better uses. Financial resources represent a binding constraint on the agriculture sector. I am pleased therefore that some important financial intermediaries are part of the discussion today.
I am advised that a few of our financial intermediaries have been consistently helpful to our crops and livestock farmers, fishers and agro processors. I want to thank them for being a friend of the farming community. I am advised that the FND Enterprise Cooperative Credit Union lent $3.5 million dollars in three hundred loans to farmers over a ten year window (2001-2010). The St Kitts Cooperative Credit Union and the Nevis Cooperative Credit Union combined, provided over $2 million in loans to the farmers over the period 2004-2010, and the Development Bank, the people’s bank, offered over $3 million in loan support between 2005-2010. The Development Bank has been the largest financial backer of the farming community. I thank all entities here for their support.
I am happy that all these entities are present today. I hope that as a result of their respective contributions we will get a better appreciation as to how working cooperatively the farmers can access more support. Meantime we call upon our commercial banks to increase their support to our farmers, fishers and agro processors.
We can agree that agriculture is an inherently risky economic activity. A large array of uncontrollable elements can affect production output and prices, resulting in high variable economic returns to farm households. In developing countries like St Kitts and Nevis, farmers also lack access to both modern instruments of risk management – such as agricultural insurance, future contracts, or guarantee funds – and ex post emergency government assistance. Such farmers rely on different “traditional” coping strategies and risk-mitigation techniques, but most of these are inefficient.
The literature tells us that banks avoid financing agriculture for a host of reasons including the high cost of service delivery, information asymmetries, perceptions of low profitability in agriculture, lack of collateral, low levels of farmer education and financial literacy reflected in poor or non existent financial records on the performance of their farms. The smaller the net worth of the farm household, the worse the degree of exclusion.
Formal lenders like commercial banks tend to over emphasize the use of immoveable collateral as the primary buffer against default risk, which means they provide services to a limited segment of the farming and fishing communities. Small and medium sized farmers, who constitute the vast majority of farm operators, often do not have secured title land, which is the preferred type of collateral; if they do, its value may be insufficient to cover the loan in question.
Most of the farm lands in our Federation are either leased or rented and our formal banking sector has not been too willing to rely on this form of security.
Admittedly the private market for financing agriculture needs to be improved. The ideas that will be shared today will hopefully allow lenders to garner a better perspective on the felt needs of our farmers, fishers and agro processors. At the same time we in agriculture will get insights into what factors our lenders consider when determining our loans.
We heard earlier from two credit unions that there is a need for a greater pool of grant financing or very concessional loans being made available to them for on lending to agriculture. I appreciate this point and we will explore these and other possibilities.
In closing, I am indebted to IICA for organizing this forum and to all entities that lent their support to this initiative. I am delighted by the large turnout and cross section of farmers, fishers and agro processors. I hope that this forum will be memorable for the advancement we will make in addressing the cause of agriculture.