Reasons for agricultural financing of green houses

Many countries are dependent on agriculture. Agriculture is a major foreign income earner and it is also a source of income to subsistence farmers who sell their products locally.

In Kenya tea, coffee and pyrethrum have been the major cash crops for many years which have also been foreign income earners. However in the last few years horticultural crops, for example, french-beans, peas, tomatoes etc have also contributed to the agricultural economies of not just Kenya but of the world.

Agricultural financing of green houses has been a great challenge to many banks. The agricultural sector has a history of nonperforming loans. Since these loans have had to be written off, banks have not been very keen in agricultural financing of green houses activities.

The main reason for non performing debts has been due to crop failures as a result of insufficient rainfall and/or flooding. There has also been increased attack on the crops by pests.

Why banks support agricultural financing of green houses

In order to avoid crop failure due to changes in weather patterns, most farmers especially horticultural farmers, have turned to Agricultural financing of Green Houses and green house farming. Since banks have realized the potential in this area, most of them have partnered with the Green House expert companies to enable growth in this sector.

There is a huge market both locally and internationally for the horticultural products. This market has continued to grow with increase in population worldwide.

The partnership between banks and green house expert companies has enable salaried persons to supplement their incomes. Veteran farmers are also able to maximize on their inputs.

 Tips to help obtain agricultural financing of green houses from the bank

1. First visit the green house expert company which has partnered with the bank (this information can be obtained from the bank) where there will be a detailed explanation of what agricultural financing of green houses and green house farming involves, that is, the costs and the expected income and the period it would take to break even.
2. The customer then obtains quotation for cost of building the green house, cost of preparing the land, cost of obtaining seedlings. This will assist both the customer and the bank to determine the amount of agricultural financing of green houses will be required
3. With this quotation one then approaches the bank with a request for a loan which would not be classified as a quick loan.
4. Apart from the quotation from the company the bank will require the following details to be able to grant the loan or agricultural financing of green houses

• Proof by the customer of the current income either from salary or sale of produce.
• Customer contribution towards the project which is usually 10% of the quotation.
• Projected cash flow from the customer for the period of the loan.
• Proof of ownership of the land where the green house is to be constructed and this is by producing a title deed in the name of the customer

 Having satisfied the above conditions for agricultural financing of green houses, the bank will disburse the loan in phases to the Green house company. When determining the repayment period the bank will grant the customer a grace period (mainly six months) to factor in the construction of the Green House and planting season before harvest begins. Agricultural financing of green houses has become a niche where most big banks are completing to take the lead.

 Definition of Cross selling by Banks

cross selling by Banks

Cross selling by banks is defined as offering the existing customers additional banking products. For example, a deposit customer who is already operating a savings account can be offered a term deposit account or a fixed deposit account or call deposit account. Another customer can be offered  mortgage finance, credit card and personal loan.

cross selling by banks can also be said to be the art of customer retention by ensuring customers are provided with as many products to meet their needs.

Process for effective cross selling by banks exercise,

• Analysis using existing customers database should be done for each customer, identify their specific need and match with a product that can be offered to the customer as a cross selling product.
• After identifying the product,  the banks should come up with a strategy on how to disseminate information about the product to the customer. The strategy may suggest each customer be assigned a particular staff for smooth management of the relationship.
• The staff members charged with this responsibility should be knowledgeable and well trained in cross selling to be able to market all or majority of the banks products to the customer.
• There should be continuous periodic review of the customer needs and the database to identify the needs of new customers.

This exercise has proved to be very beneficial with more banks adopting the approach, major banks have expanded their banking business.

 Benefits of Cross selling by Banks:

1. There is increased profit as the bank is able to greatly expand their banking business by offering more products to existing customers. There is tremendous growth in business.
2. There is reduced cost as it has been proven that the cost of acquiring a new customer is four times higher than serving the existing customer, with reduced cost the profits will also increase.
3. There is ensured loyalty of the customer to the banks and therefore there is little or no likelihood that the customer would shift their business dealings to another bank. This is also known as ‘ring fencing’.
4. The bank would have a competitive edge over the other banks, because in the process of analyzing the needs of the existing customer they would come up with innovative products which are not being offered in he market.
5. Cross selling by banks can also greatly build team spirit among the staff members of the bank, creating loyalty and reducing staff turnover as they are well trained and feel part of the team that brings in the business and not just ‘robots’.

Cross selling by banks is an art if well mastered by the bank will have a great long term effect on the business growth and put the banks on the cutting edge of innovation. Training in cross selling by banks is a must to grow and compete in the industry.

 Definition of Customer relationship management in banks

customer relationship management in banks

This can be defined as the degree of happiness or satisfaction a customer realizes with a bank product or service.

Customer Relationship Management in banks can be referred to as the ability to understand, sometimes anticipate and manage the needs of the customer.

Purpose of customer relationship management in banks

Basically the main purpose of customer relationship management in banks or customer satisfaction is to enable banks customer retention and attract new customers to enhancing business growth.

A satisfied customer is a great marketing tool for banks since these customers will help improve the banks business growth through referrals. Satisfied customers also give positive publicity hence leading to banks improved bottom line.

Banks should at all times strive to increase business through speed, agility and real time responses to the existing customer needs. This is because attracting new customers involves huge costs in term of promotional costs, advertising costs and even follow up costs. The longer the relationship a customer has with the bank, the better the returns they bring. This interaction and relationship should result in increased profitability to the banks through revenue growth and operational efficiency. The relationship also leads to customer loyalty.

Organizations caring for their existing customers are almost definitely likely to be winners. There are great benefits to the banks which adopt Customer Relationship Management in banks.

 Benefits of customer relationship management in banks include:

1. The existing customers will make referrals which likely result in business growth.
2. There will be a positive public image resulting in fresh customers being attracted, increasing the bank’s market share.
3. Reduction in cost in attracting new customers and this will result in the banks posting high profits, hence great return to the shareholders.
4. Higher returns from existing customers as long relations will be maintained and boost in the banks profitability.
5. There is loyalty by the existing customers and they will not transfer their business transactions to a competitor. This reduces attrition rate in the bank.
6. Staff morale is boasted as they are proud to be associated with a bank with a great reputation. This reduces staff turnover and costs associated with hiring new staff and training.

The current advancement in technology actually makes it easier for banks to adopt the Customer Relationship Management in banks as information is readily available.