Danger of rushing for agricultural loans
EVER since Emerald Agribusiness Consultancy was founded quite a number of agricultural and business plans for loan applications for farmers and business people have been produced. The biggest error encountered in the development of these business plans is that most of the clientele do not have experience in the area of business they would like venture into, which increases the probability for failure of their project and risk of losing their collateral, a situation, which many loan recipients are currently facing.
According to the Oxford Dictionary, a loan is a sum of money or other valuables or consideration that an individual, group or other legal entity borrows from another individual, group or legal entity (the latter often being a financial institution) with the condition that it be returned or repaid at a later date usually with interest.
First of all it is of paramount importance to request for a loan in an area of business in which one has experience in. There is no point developing a very attractive business plan to submit to a bank or microfinance institution with the belief that one will be able to reimburse them their capital with interest whilst the applicant does not have any experience in that area. It is simply applying for failure.
Many farmers have lost property and money due to failure of their agricultural projects because they are in a rush to make money and not in a rush to learn what their project truly entails. It is for this same reason that a lot of Zimbabwean farmers now shun agricultural workshops.
Most workshop attendants believe that the purpose of a workshop is to change their lives and make them successful yet success begins from within, it starts from a farmer identifying, building and investing in their passion. And a fact many people forget is that no one should invest in anyone’s dream more than the owner of the dream. It is not the job or duty of the bank or microfinance institution to do the work for you.
Does it make sense for the bank to sacrifice money for one’s loan yet the loan applicant does not want to part with their property or work harder to finance their projects? Does it make sense for a loan applicant to apply for a loan when they lack the financial discipline to handle the money? Does it make sense to apply for a loan when the loan applicant does not even have a registered company, which would assist immensely in managing the money they will receive?
The answers to most of these questions is NO, yet many individuals sincerely desire the answer to these questions to be YES as they approach the bank with a business plan that not even them understand! There is no other person who should be more conversant with a business plan than the owner of the plan.
There is absolutely nothing wrong with requiring the assistance of a professional company or professional individual to assist in the development of a business plan but there is something wrong in using a business plan one does not understand.
When one does not understand their business plan, which is the blueprint of their project, it clearly shows that they do not know what they are doing and how can the bank or microfinance institution finance such and moreover how would the loan recipient even manage the project/ business they know nothing about?
True success lies in knowing and fully understanding what one is doing. Sometimes applying for a loan is an unnecessary shortcut to failure especially when one lacks experience. The bank or microfinance institution will never lose a cent, which is why every loan application goes through rigorous verification and testing and also why collateral is usually required before financing, to guarantee that they do not lose. The truth of the matter is that most people that apply for a loan are in a rush to make money.
There is nothing wrong with that. We are all human and desire financial success. The error comes when an inexperienced individual rushes for success in a field in they know nothing about. Aliko Dangote in one interview said, I quote “I do not do any business I know nothing about”. That is a gentleman worth 25 billion saying that and yet so many individuals with nothing are willing to risk to lose everything in a field they know nothing about.
Maybe the biggest hindrance is the fact that we are so literate in Zimbabwe to a point that our intellectual capacity blinds us from reality. We believe that we know it all and can do it all. Experience is the best teacher and success requires experience!
The writer is Eng. Tapuwa Justice Mashangwa, Group CEO of Emerald International Consortium and CEO Emerald Agribusiness Consultancy. He can be contacted on +263 771 641 714 and email: tj.mashangwa@ eic.co.zw