In March, the Agriculture Development Bank (ADB) will be launching its online banking service. Sheivan Ramnath, CEO of the ADB, said this is just one of the moves that will transform the ADB into a modern bank that is technologically sophisticated and will meet the contemporary needs of farmers and those involved in the agriculture sector.
"We have just signed the Memorandum of Understanding (MOU) with iGovTT that will now see a transformation in the ADB of the tech services and information network. Some of the things in this area we have embarked on will be completed in the next two to three months. The internal testing for the online banking is almost completed and we expect a rollout in early March," he told the Business Guardian on Monday.
Ramnath said the agricultural bank will be providing its services 24 hours a day and it will be the bank that never closes.
"You will have a link that brings you to the main banking page. Customers can check their balances, they can make payments to their loans, move funds from one account to another and also request statements. We are going to brand this as the bank that never closes," he said.
ADB chairman Yasid Gilbert, who was also in the interview, said the vision they have is to take someone from being only a farmer to being an agro-entrepreneur.
"There are some farmers that are more advanced than others and what we want to do is attract younger people to this sector through the use of technology. We want to move people away from thinking this is a 19th century bank to modern developmental bank. I believe it is the only agro-developmental bank in the region that is moving in the direction of e-banking," he said.
Other initiatives that the ADB has been pursuing to make the bank more effective include its risk management framework, Gilbert said.
"We have done an internal risk management audit and we were on the verge of rolling out an enterprise risk management (ERM) plan as well as institutionalising a unit that will now speak towards the risk in the ADB. I anticipate that will come on stream within the next two to three months. This will lend to increase corporate governance and transparency that is needed in a state enterprise," he said.
Ramnath and Gilbert spoke to the Business Guardian on Monday at the Hyatt Regency Hotel, Port-of-Spain.
Interest rates
Gilbert said over the last three years the ADB has undergone operational improvement.
"We are reviewing the policies within the bank. It was a difficult period where the bank needed to sort out many things," he said.
He said it is difficult to run a bank with a subsidised interest rate compared to commercial banks.
"This has proven to be a challenge but not necessarily one we cannot overcome. We are pegged at a three per cent and five per cent range. In the backdrop of that, we are lending to farmers and agro-entrepreneurs. It is difficult to manage the operations within this range of interest rate. If it were subjected to market rates it would be higher. I think in the commercial banks it's around six to eight per cent and maybe as high as nine," he said.
Gilbert said, according to unaudited statements between 2013 to 2014, the ADB incurred a small operational loss of $1.7 million.
Ramnath said for fiscal year 2013 to 2014, they were able to reduce the size of the operating loss from the previous fiscal year.
"What would have accounted for that is on the expense side. Traditionally, the bank's expenses were higher than the income it was able to generate because of the subsidised interest rate. To combat that we have actually reduced expenditure by 25 per cent over the last financial year and that has seen a reduction in the unaudited operating loss from roughly $6 million to $1.7 million," he said.
He also said the bank has become more efficient in going after bad debt.
"On the income side, we have become more aggressive with collections and going after bad debt and making sure that the loans we grant are viable and the chances of success are greater. Our evaluation process is now more stringent, our follow up process is also more stringent," he said.
He called the agriculture environment is a "highly risky" one.
"There is praedial larceny, diseases and flooding and other unpredictable conditions. The sector that we lend to is not one that the traditional commercial sector would have lent to and the ADB was developed with the mandate of proving affordable lending to farmers. The security requirements may not be as stringent as what the commercial banks ask for with regards to the terms of the loan. For example, we may give a moratorium of up to six months to a year depending on the type of project. If a farmer runs into flooding we offer skip payments or refinance. Because of this, the risk the bank runs is high," he said.
He said because of this high-risk environment, the ADB has spent more time providing financial counseling to farmers.
"What do you need to access a loan in terms of record keeping. This has impacted on the quality of loans we have been able to grant. We see it more as a financial advisory service. The vision is to take it away from being a farmers' bank to transform the farmers into agro-entrepreneurs. We want the farmers to see this as a career," he said.
Loans
Ramnath said during the last financial year, the ADB disbursed almost $97 million in loans and this financial year the bank has budgeted $140 million for loan disbursement.
"I am happy to say after the first four months we are on target. In the first four months, we had budgeted to disburse just over $40 million and so far, we have disbursed $40.7 million," he said.
He said last year the ADB granted loans to 1,000 farmers.
"To manage the limited resources we have, we have to look at the value of loans and spread the risk more. It is more prudent to look at granting a larger number of small loans rather than one large loan," he said.
Ramnath said the bank is also streamlining operations to make itself more efficient.
"We want to cut expenses as much as possible, raise revenue and we are now looking at other forms of raising revenue such as management fees–like charges–we would have on the loans. We have about 2,000 loans out there at the moment and our customer base is just over 3,200. This year, we want to build this base which would increase the number of loans," he said.
The volume of business coming from repeat customers is about 67 per cent which he said is high.
"This means people who come to us are satisfied. If we are able to find new markets, build our base and maintain this 67 per cent repeat business, it will put the bank on the path of financial stability. We are seeing improvements and it will take some time. Feedback from farmers is important in terms of what they want," he said.
On the topic of audited statements, Ramnath said those are being dealt with now.
"We have financial statements before the auditor general from 2012 to 2013. The internal fieldwork has been completed and we are now awaiting the auditor general to complete them and sign off. We have now started working on the 2014 accounts. From an accountability and transparency issue, we are fully prepared to put the information to the public. Before the end of the first quarter of this year we should have statements from 2012 to 2013 completed and signed off," he said.
Efficiency
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Ramnath also referred to the limited subventions the bank received from the State and their challenge in making it a more efficient bank.
"This has affected us in that it has affected the pace in which we grant the loans. The injection from the Government is critical and is needed if we are to sustain the momentum that we created in the first part of this year," he said.
He said the $1.7 million loss last fiscal year was still a much better performance than previous years which saw even greater financial losses.
"Even with last year's loss, it was one of the bank's better performances in the last ten years. Previous losses were significantly higher but this board has stabilised the performance of the bank. We have managed expenditure by implementing cost-cutting strategies resulting in a 25 per cent reduction in expenditure. On the income side, we have gone aggressively after the delinquent loans. Eventually we want to bring the bank ot a break even position. The bank was not set up to be a profit making institution but that does not mean the bank cannot break even," he said.
Ramnath said all of this is geared to making T&T a food-secure nation.
"Over the next two years, we will move from this stabilisation stage to growth. The growth will be managed carefully so we meet the mandate to the farmers and develop the agriculture sector."
