Bank Incentives Mechanism

To complement NIRSAL's first three pillars, this mechanism offers banks additional incentives to build their long term capabilities to lend to agriculture.

Bank Incentives Mechanism

To complement NIRSAL's first three pillars, this mechanism offers banks additional incentives to build their long term capabilities to lend to agriculture.

The mechanism is governed by the following principles:

  • Incentives are awarded objectively on the basis of the holistic rating mechanism.
  • Incentives are focus on "carrots" not "sticks"; abuse of NIRSAL will result in exclusion from the fund.
  • Incentives are given in terms of financial support for initiatives that support agricultural lending: and in the form of non-monetary prizes
  • Incentives are based on banks' scores in the holistic rating mechanism
  • Awarding of incentives are announced publicly to ensure transparency
  • To foster competition among top ten banks, the awards are made on a sliding scale. The top prize - "Agricultural Bank of the Year" - is N150 million, when a bank wins an award, it must submit a proposal within three months on how it will invest in building its agricultural lending capabilities. Proposals are reviewed and approved by an independent panel. Eligible types of investment include:
  • Branch expansion to rural areas within a high-potential value chain (up to 50 percent of total cost)
  • Establishing IT platforms that support agricultural lending
  • Agricultural credit risk scoring models
  • Platforms for distributing loans using technology such as mobile phone.