ADAS Credit Guarantee Scheme: Adamawa’s new template of expanding business frontiers
By Mohammed Ismail
Adamawa State, under the able leadership of the executive governor, His Excellency, Rt. Hon Ahmadu Umaru Fintiri, is on the cusps of history as the State unveiled an audacious Scheme to promote economic prosperity through the provision of a credit guarantee scheme by the Adamawa Agribusiness Support (ADAS) Programme.
The credit guarantee scheme is to serve as a vehicle to attract financial institutions to formally lend funds to the players in the agro-allied sector, including farmers, aggregators and processors within the grains and livestock subsector, leading to an increase in the volume of business activities with the potential to ramp up the internally generated revenue of the State on an annual basis.
The ADAS Programme is a strategic and well-articulated agribusiness model designed by non-profit development experts intended to take full advantage of the State’s comparative advantages, competitiveness in livestock and grain sub-sectors as well as other agricultural opportunities.
The Programme will pave way for the proliferation of agro-processing industries in the State and transform smallholder farmers into major suppliers of raw materials for these industries, while addressing unemployment challenges and improving IGR generation in Adamawa State.
This private sector driven programme will interface with the government to create and perpetuate institutional and markets reforms, design and manage enablers that will attract a substantial level of investment and positively impact the state’s economy by improving productivity, create new job opportunities, facilitate market access, and more importantly, be a win-win for all stakeholders with the aim of delivering more dividends of democracy to the good people of Adamawa State.
As states grapple with shortage of funds to address the surfeit of developmental challenges facing them, this current Administration blazed the trail by leading the State to get an Investment Credit Rating to give confidence to investors; and thus, registered a Special Purpose Vehicle – ADAS Programme Limited – to raise N25 billion from the Capital Markets, which is the first tranche (Series 1) of the N100 billion bond issuance programme.
This approach provides an indurate and interminable vista of hope for Adamawa state for generations to come. Already, N2.4bn of this N25 billion fund has so far been used to successfully upgrade grains and cattle markets with state-of-the-art facilities in 12 locations across Adamawa state.
These markets were equipped with modern facilities to ensure an organized, secure and convivial atmosphere for smooth conduct of business activities.
Such facilities include, perimeter fence, police post, loading bay, storage facilities, rest rooms and other sundry necessities for the smooth conduct of everyday business in the markets. Also, in order to ensure government’s stability, part of the bond proceeds was used to refinance the backlog of about N15bn commercial debt inherited from the previous administration, which over the years served as a clog in the wheel of government businesses and progress.
This positive intervention tremendously enhanced the liquidity of the State culminating into the solid developmental strides of governor Fintiri in executing myriads of capital projects across the length and breadth of Adamawa State in the last four years as well as ensuring prompt payment of workers’ salaries and the smooth running of government bureaucracy.
It is expected that within the next five years, Adamawa State will be able to generate enough IGR to finance some capital projects, continue to pay workers’ salaries and run the government machinery, without over relying on FAAC allocations from the federal government.
With the completion of the capital projects earlier mentioned, ADAS Programme Ltd has now embarked on the next phase of the Programme, which is the ADAS Credit Guarantee Scheme.
The ADAS Credit Guarantee Scheme has a seed capital of N5billion set aside from the N25billion facility to incentivize and attract formal lending from financial institutions based on the warehousing financing facility product.
This will be available to market players and investors who establish warehouses and offtake produce from smallholder farmers in the State.The goal of the Scheme is to incentive and attract as many companies to Adamawa State to aggregate from the markets and small holder farmers.
The scheme will interface between traders and commercial banks and will act as guarantor for interested traders to each get a loan facility ranging between N5 to N20 million Naira.
During a meeting with traders’ unions drawn from the 21 local governments of Adamawa State, ADAS projected that the fortunes of Adamawa State will witness a seismic leap as the N5bn credit guarantee scheme cover literally means that the traders can borrow about N10bn from participating commercial banks within a short period of time.
Enumerating the benefits of the ADAS Credit Guarantee Scheme during the meeting which took place in Yola on Saturday, July 28, the Principal Consultant of the ADAS-P Ltd, Aminu Buhari noted that unlike other credit schemes that have woefully failed, the credit guarantee scheme developed by ADAS-P Ltd has incorporated watertight checks to eradicate ghost or fraudulent beneficiaries.
He noted that the goal of the scheme is in line with maxim which emphasizes that it is better to teach a man how to fish than to give him a fish noting that ADAS is not only teaching people how to fish but will teach them how to ensure sustainable fishing.
Buhari who reiterated the uncompromising security of the ADAS Credit Guarantee Scheme to perpetuate its continuity took time to enumerate the criteria which a beneficiary must fulfill before absorption into the Scheme.
“The credit scheme has the identity management component. You must be an active player within the market and be a member of a particular recognized association and that association must be able to confirm your identity and the capacities of which you are playing within the market system.
“These are the three requisites that are required to be provided by the associations before any process,” he said.
He elaborated further that since this first phase exclusively targets traders who are in aggregation, beneficiaries can only benefit from the Scheme if they come through their respective associations.
“What qualifies you to be part of the scheme is that you must first be a player. Secondly, you must come to us through your association and third, your association must give you a clean bill of health. Another requirement is we must know your operating capacity which will be used as a proxy to know the kind of intervention we shall accord you.
“At the end of the day, if your capacity is to load one truck, we shall ensure that in the next couple of months, you’ll have the capacity to load two or more trucks through the credit guarantee scheme’s financial arrangement” he said.
When asked during the question-and-answer session whether the loans will attract interest, Buhari noted that the loans will attract either interest if the beneficiary decides to use commercial banks or shared profit, if the beneficiary decides to bank with Islamic banks, for instance, Taj bank, Jaiz bank etc.
“Our beneficiaries have the alternative to choose to get the loans from conventional banks which charge interest or Islamic complaint banks which operate by sharing profit. But it should be stressed here that agricultural loans do not attract huge interests,” he said.
He thanked His Excellency, Rt. Hon Ahmadu Umaru Fintiri for his foresight and vision in investing in the capital market adding that very soon, Adamawa will start reaping from the vision.
Buhari noted that the N5bn bond at their disposal will enlist about N10bn into the market in the interim and will further lead to huge inflow of incomes to both the players and the government in the long run.
“Our projection is actually to increase volume as you see the credit guarantee is already N5,150,000,000 capacity. And the way it is structured, it will be able to enlist credit liquidity into the market of about N10.3bn. And if enlisted into the market with about N10.3bn we are confident that it is going to spur some kind of growth and add positive value to the state,” he said.
Also speaking, Yunusa Gafai, the Lead Consultant of ADAS-P Ltd urged the players not to see the programme as an avenue for government to only optimize revenue generation through tax but an effort to improve the business climate of Adamawa State through a unique and versatile approach.
He noted that it is when the project succeeds that the government will benefit from it noting that the attention of the government is to ensure that the scheme is successfully rooted in the State.
Gafai disclosed that when the Scheme is fully rooted, Adamawa State will be one of the most prosperous states in the nation as family incomes will be enhanced.
Also speaking, Chairman of ADAS Programme Limited, Alhaji Kashim Njidda explained that with the coming of the Scheme, traders and businessmen will no longer contend with challenges of providing collateral security before getting a loan facility.
He noted that ADAS Credit Guarantee Scheme starting with a seed capital of N5bn, will act as guarantors to the beneficiaries.
Njidda acknowledged that with the new approach, traders will have the advantage of securing loans with no qualms, urging the traders to buy into the opportunity to enhance their businesses and growth of the State.
In their separate remarks during question-and-answer sessions, a number of the market men and women expressed satisfaction with the manner in which the scheme was structured.
They admitted that in the past, their thinking was that the loan facility was a gimmick by the state government to shortchange Adamawa citizens noting that the meeting has dispelled that myth and are now convinced that there will be light at the end of the tunnel as the scheme will readily enhance their livelihood and businesses.
Also speaking, the executive chairman of Adamawa State Board of Internal Revenue, Alhaji Hammaadama Njabbari, thanked the traders for their unflinching cooperation over the years.
He expressed that it is heartwarming to see the traders invest tremendous interest in the programme through their overwhelming attendance, adding that it is a sign of a good beginning.
Njabbari likewise thanked governor Ahmadu Umaru Fintiri for his vision towards changing the business landscape of Adamawa State, corroborating that when fully rooted, Adamawa people for generations will continue to benefit from the excellent intervention.