The South African government, various commercial banks and agricultural companies have introduced financing initiatives aimed at commercialising emerging farmers. Yet, despite the financial support available, many farmers still struggle to gain access to credit. This is partly because they fail to provide all of the information needed when submitting an application.
The credit application process requires a farmer to submit a business proposal. This is used as a basis to determine whether or not to grant the loan.
A sound business proposal is therefore vital for the approval of a credit application. But an emerging farmer applying for credit for the first time can find preparing a business proposal a daunting task. Sicelo Masuku, a student at Northwest University, recognised this and aimed his master’s research project in management accountancy at addressing this need. Through his research, he identified the most common reasons that credit applications are unsuccessful and the key elements of a successful application. He then designed a business proposal template that can be used by livestock farmers (and other farmers) when applying for funding.
REASONS FOR UNSUCCESSFUL APPLICATIONS
Some 12 representatives (with an average of 17 years’ experience) from government, commercial banks and independent financial institutions took part in the research. They collectively evaluated an estimated 5 000 business proposals a year, and just over 60% of these applications were successful.
The reasons given by the participants for unsuccessful credit applications were:
• A lack of farming experience;
• Poor budgeting. Farmers overestimated their income drivers and underestimated their costs;
• Inadequate collateral due to a lack of access to agricultural land and infrastructure; and
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