Development Bank offering interest free loans to support food production
Lenworth Harris, General Manager Development Bank of Saint Kitts and Nevis
St. Kitts (March 15, 2010) Peter Ngunjiri — Persons desirous of setting up businesses that will improve the food production capacity of the Federation stand to access interest free loans of up to EC$25,000 being offered by the Development Bank of Saint Kitts and Nevis courtesy of a fund started in 2007 by the government.
The St. Kitts and Nevis Sugar Industry Diversification Foundation/Development Bank of Saint Kitts and Nevis Agricultural Fund was put together to encourage entrepreneurship among citizens and residents of the Federation according to the banks’ General Manager, Lenworth Harris.
“It is to encourage entrepreneurship which should foster growth in the medium, small and micro agro business sectors of the economy of St. Kitts and Nevis,” observed Harris. “In particular we anticipate that the fund would be used to assist in stimulating expansion of the economy and to put otherwise unemployed and underemployed persons in the agricultural sector to work, thus helping to improve the food production capacity of the Federation.”
An amount of EC$2 million was initially channelled to the bank by the Sugar Industry Diversification Foundation to provide funding to qualified agricultural practitioners at a rate of zero per cent for up to the first EC$25,000 and six percent per annum thereafter for any amount above EC$25,000.
To date the Development Bank has extended over 60 loans to different farmers across the Federation, on both islands, to the tune of $1,628,000 and according to the general manager, it is expected that this growth would continue.
“The centerpiece, but sometimes hidden, is the amount of government’s attempt to diversify the agricultural sector since the closure of the sugar industry,” noted Harris. “The Development Bank also provides technical assistance in addition to the actual provision of the funding.
“We provide technical assistance to these persons who are engaged in the various agricultural activities. These could be new or ongoing businesses, once they fall in the agricultural sector, which includes fishing, food crop farming, animal husbandry and support services necessary to facilitate the development of the agricultural industry.”
To ensure a wider access, the bank has ensured that a good project is not denied on the basis of lack of collateral. To fully facilitate the process, the bank accepts bill of sale where the fund is used to get equipment, assignment of contracts where there are contracts, or even lien on crops.
Terrence Crossman, Chairman, Sugar Industry Diversification Foundation
Loans given through the fund have a merciful grace period, said Harris. The bank has ensured that the repayment period matches the cash flow of the project. Where a farmer would have taken $10,000 for a three-month crop which also includes preparation of irrigation, fencing and procurement of seeds and other working capital, the bank would separate that into working capital and infrastructure element.
“If the infrastructure element comes to $6,000 and the working capital is $4,000 we would then have the working capital portion be repaid immediately after sale of the crop,” observed the general manager. “If the crop is for three months harvesting, then we would expect that this $4,000 would be paid one month after. So we are looking at four months.
“The remaining $6,000 we would then spread over a period of over five to seven years to facilitate the nature, since we expect the crop to be repeated. What is anticipated then, for the peak crop, the farmer would have paid the monies for the working capital.”
However, in the meantime, the farmers would still be eligible for further funds, which they must pay after the crop is sold, and this forms a kind of a revolving fund, whereby the bank would issue loans on demand, with no question asked, a set of working capital funding to fund the succeeding crops and the cycle is repeated.
He also pointed out that if a natural disaster struck and destroyed the crop, the farmer would not be expected to pay, and the loan being interest free, they would suffer no interest penalty on the amount borrowed. The farmer could still ask for additional funds.
In a separate interview, chairman of the Sugar Industry Diversification Foundation (SIDF), Terrence Crossman, informed that the Foundation, which was founded under the Foundations Act of 2003, started its operations in 2007.
“The main purpose of the foundation is to assist in the establishment of industries that are meant to replace the former sugar industry that was our main source that includes tourism and any other related industry, or even if it is not related, but it is meant to provide opportunities for people really to find empowerment and to assist in the transition from sugar to non-sugar industry,” said Crossman.
He explained that SIDF is funded through persons who make contribution to the citizenship by investment programme. “What happens is that persons make contributions of up to US$250,000 and in return for that investment into the programme, they are given citizenship – of course it is not just as straight forward – the people would have to go through certain set of criteria.”
He noted that the foundation provides money to the Development Bank and it is for the bank to do its own vetting process as to who is qualified. Other members of the foundation’s board are Michael Martin, secretary to the foundation, Joseph Edmeade who is the Chief Secretary, permanent secretaries Dr Hermia Morton Anthony and Ambassador Roslyn Hazelle, and lawyer Hesketh Benjamin.