SELF EMPLOYMENT IN AGRICULTURE PROPOSED WAY FORWARD

ASSET- LIABILITY COLLATERAL MODEL
PREPARED BY: MGHWENO. OWEN, N MICHAEL. FIDEL, T FIVAWO. AGNES, B (Sokoine Undergraduates) Graduates Presentation for the 2nd steering committee meeting formed jointly by CRDB Bank, DAEA, Development Partners and Sokoine Graduates March 12th 2011 Email: owennelson2005@yahoo.com

 Introduction  Field of opportunities at Sokoine University  Where graduate fit in Agriculture  Greatest obstacle  Graduates suggested solutions  Proposed solution  About the model  Conditions for the model‟s efficiency  Advantages of the model  Limitations of the model  ASSET-LIABILITY COLLATERAL MODEL  Recommendations

CONTENTS

INTRODUCTION
Arising from the Forum on self Employment in Agricultural sector that was organized jointly by CRDB Bank and DAEA-SUA on February 12th 2011, the following proposal has been written to adhere the need of having a steering committee resulted from the Forum. Sokoine University of Agriculture is anticipated to have thousand graduates each year as an outlet to the society, 90% of them being undergraduate level.

Field of opportunities at Sokoine University
The University is an extreme multifunction unit as it creates academicians who can grab various opportunities both agricultural based and non agricultural based. Sokoine offers degree and non-degree programs at undergraduate and graduate level in the disciplines of Agriculture, Veterinary Medicine; Animal Science, Range Management, Wildlife, Forestry, Agronomy and Information Technology, Library, Records and Information

Where Graduates fit in Agriculture have a magnificent role Sokoine graduates
to play in our country and the world at large when speaking of agriculture. As stated by DAEA in the last Forum, these graduates are primary actors i.e

Input suppliers, farmers, trade and transport servers, processors, distributors and retailers, consumers and most of all environmentally concerned disposal managers.

GREATEST OBSTACLE
Most graduates fear to engage into self employment in agriculture, the greatest obstacle being inadequate finance

Graduates Suggested solutions
1.

Use of Graduates certificate as collateral  Advantages:
◦ Financial acquisition as per valuation of certificate ◦ High commitment motive to graduates

Disadvantages:
◦ ◦ ◦ ◦ Career development might be hindered Collateral has no real commercial value Hinder diversification priority Certificate value measurement may be complicated

Graduates Suggested solutions….
2. 

Use of collateral with title deed Advantages :
Financial acquisition as per securities held Commitment motive to graduates Most graduates are dependent with no or minimum valued assets Third party claims might exist if the collateral is family owned or otherwise

◦ ◦

Disadvantages:
◦ ◦

Graduates Suggested solutions…..
3. 

Use of development partners only(e.g. PASS) Advantages:
Financial acquisition based on partners guarantee to pay High risk of willful default D.P might not be willing to support a mere graduate


Disadvantage:
◦ ◦

Graduates Suggested solutions…. enforcement 4. Use of Group

Advantage:
◦ ◦ Financial acquisition based on the groups registration as a legal entity Easy to monitor group rather than individuals

Disadvantage:
◦ Difficult to form groups with similar character graduates (in terms of location, interest e.t.c) No specific collateral

PROPOSED SOLUTION
ASSET- LIABILITY COLLATERAL MODEL

About the model
This proposed model is designed to serve the quest of the Forum. It illustrates how graduates may be provided with loan and enforce loan repayment . The model has taken into consideration four key actors:  Graduates  Consultation unit ( DAEA)  Guarantors (Development Partners + DAEA)  CRBD Bank However the Government will be directly or indirectly involved. The model stress out on having the loan given in terms of input assets rather than Cash. The assets will be a liability to the graduate until it is completely paid. Also the asset will be used as the security to ensure minimum risk to the lender.

ASSET – LIABILITY COLLATERAL MODEL

CONSULTATION UNIT ( DAEA and others

GUARANTORS /DEVELOPMENT PARTNERS

GRADUATES

CRDB BANK

1

BUSINESS PROPOSAL

LOAN

2

APPLICATION

3

(FINANCIAL FACILITATOR)

4 (Input delivery)
INPUT DEALERS

6 (Cheque submission)

8

10

5 (Confirmation Cheque)

7(Cheque Payment)

9( Profit accumulation)
IMPLEMENTATION

LOAN REPAYMENT

Condition for the model‟s efficiency
 


  

 

A comprehensive written business proposal to guide the idea Initial starting scale for any business should be small Mutual benefit based contract to describe mode of payment and legal rules No cash involved, cheques only based on two signatories (bank and borrower) Initially the title deed is held by the Bank until the loan is fully paid Borrower should open a current account to enable acquisition of cheque book for Input transaction monitoring Borrower should present monthly reports on the business progress to the Bank Borrowers monetary transactions should be issued by respective Bank

Advantages of the Model


 


    

The created security will be legally signed There‟s an assurance that no other lenders will claim on the assets No third party claims on security The security produce a real commercial value as compared to certificate Easy to reinforce repayment incase of borrowers failure to business High motivation for borrowers commitment no hindrance of graduates career to develop Asset may be transferred to another person who is willing to repay the debt incase of graduates failure The model has mutual benefit for both borrower and lender Success of the model meets the goals for development partners and DAEA „s incubator program The model will adhere to the nations policy on “YOUTH EMPLOYMENT” and “MKUKUTA” at large

Limitations of the model
The model can only succeed if all parties work together.  The model only explains a skeleton of the business to be implemented as much of it is expected to appear in the business proposal

Recommendations

The proposed model is a nation‟s solution equipment for unemployment, but this can only be proved if its given a chance to be applicable in the reality. Putting the model in reality may be done through the use of pilot group of graduates who have feasible business ideas. Also the model can best work if the Bank gives a mutual priority concerning the interest rates involved, the success of the model is only an introductory success for the Bank, Graduates, consulting units, development partners and the government as a whole.

Thank you very much.

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