RMB steps in with funding platform in absence of Land Bank’s service
Financial services provider Rand Merchant Bank (RMB) has launched a first-of-its-kind Agri Harvest Funding platform, which will facilitate funding for the agricultural sector to ensure sustainable food supply to South Africans.
The platform, which RMB launched as an alternative solution in response to funding concerns at the State-owned Land and Agricultural Development Bank of South Africa (Land Bank), can be used by multiple stakeholders in the sector to bring together asset providers and investors.
RMB debt and trade solutions co-head Chris Alderson explains that the bank was prompted to find an alternative funding solution for the agricultural sector, as the Land Bank’s financial losses grew by 211% to R2.8-billion in the 2020 financial year alone and it has since not been able to lend money to farmers.
The 110-year-old bank will be wound up if it does not succeed in restructuring its R40-billion debt bill.
Alderson says the new platform bridges the funding gap between the farmer and the investor. “We believe the Agri Harvest Funding platform will be a key enabler for the agricultural sector, particularly with the sector being the bedrock of food security and vital for the socioeconomic fabric of South Africa.”
The platform, which allows for access to funding from institutional and other commercial funders, will enable agricultural businesses to diversify their funding base at a potentially lower cost than the traditional single commercial bank funder model.
RMB highlights this can result in a lower farmer gate price for the benefit of consumers.
RMB senior coverage banker Wimpie Snyman explains that lending will be ring-fenced and there is, therefore, no cross- contamination risk among issuers and funders.
He says the platform will lower the high barrier cost to entry for agricultural businesses and banks to secure funding from the capital markets, while satisfying environment, social and governance needs.
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