Agricultural financing of green houses through the bank
Agricultural financing of green houses through the banking industry is a brilliant idea due to the fact that global warming has caused crop failure leading to famine and drought.
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
- 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.
- 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
- With this quotation one then approaches the bank with a request for a loan which would not be classified as a quick loan.
- 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.