Pursuant to Section 10 (1) of the Bank of Sierra Leone Act 2019, the Board of Directors of the Bank of Sierra Leone (hereinafter referred to as “BSL”) approved the creation of an Agricultural Credit Facility (hereinafter referred to as “the Facility” or “the ACF”) of NLe 230 million to support the production of agricultural commodities across three prioritized value chains, the BSL hereby issues the following rules and procedures for administering the said Facility:
1.0 CREATION OF THE BSL AGRICULTURAL CREDIT FACILITY
1.1 The ACF in the amount of NLe 230 million is hereby created as part of a set of measures designed to increase domestic food production, improve the processing of agricultural products, reduce post-harvest losses through improved storage infrastructure and marketing of key agricultural commodities, thereby, reducing food imports and tempering food-price inflation and conserving BSL’s scarce international reserves, and facilitate the access to finance to women and youth.
1.2 The Facility shall provide low-interest loans to the private sector willing to participate in the three prioritized value chains (rice, onion, and poultry).
1.3 The loans will cover production, farm inputs, aggregation, processing, packaging and branding.
1.4 The BSL shall administer the ACF in cooperation with Participating Commercial Banks (PCBs), subject to the BSL’s regulatory and prudential guidelines.
2.0 ELIGIBLE AGRICULTURAL COMMODITIES AND VALUE CHAINS
Commodities financed under the Facility shall be agricultural value chain activities detailed in the list provided by the Ministry of Agriculture in Annex 1, which will be updated as needed under the ACF.
The agricultural value chain activities funded by the facility are outlined in detail in Annex I and described below:
- i) Production
- ii) Farm inputs
ⅲ) in) Aggregation
- iv) Processing, packaging and branding
6.0 PENALTIES FOR ENGAGING IN PROHIBITED ACTIVITIES
6,1 The PCB’s penal interest rate that existed at the time the loan was approved shall constitute the lending rate for borrowers under the Facility who engage in any of the prohibited activities listed in Article 5.0.
7.0 CREDIT RISK
7.1 Credit risk under the Facility shall be 100% borne by the Participating Commercial Banks
8.0 FINANCING TERMS/INTEREST INCOME
8.1 An all-inclusive interest rate of 10 percent per annum shall be charged for all funds disbursed under the Facility.
8.2 Interest charges shall be computed as simple interest on the total amount approved, pursuant to Article 8.1.
83 Following its approval by the Credit Committee of the PCB, the total value of the loan (principal plus interest) and payment schedule shall be communicated to the borrowing entity in writing before its submission to the Bank of Sierra Leone.
9.0 LOAN SERVICE
9.1 PCBs shall collect payments (principal and interest) from their customers according to Annex 3.
92 Every three months the BSL. shall debit the principal and interest due directly from the participating PCB’s BSL account after the grace period depending on the value chain calendar.
9.3 All principal and interest must be repaid in full within twenty-four (24) months from disbursement, including the moratorium period
10.0 PENALTIES FOR DEFAULT ON ACF LOANS
10.1 In the event of a loan-servicing default, the PCB’s penal rate that existed at the time the loan was approved shall apply to all loans granted under the Facility.
10.2 Borrowers who default on loans granted under the Facility shall be blacklisted from accessing credit within the financial sector for a period of five (5) years.
10.3 On a case-by-case basis, the BSI. may review the default penalties stipulated in these operating rules if it deems the default to have been caused by adverse circumstances beyond the control of the borrowing entity.
3.0 ELIGIBILITY CRITERIA FOR PARTICIPATION
3.1 Loan applicants who have defaulted on loans in the last five (5) years or have existing non- loans for reasons that could not be justified otherwise shall not be eligible to participate in the Facility.
3.2 Politically Exposed Persons or entities shall not participate in the Facility.
3.3 Potential borrowers are required to have a minimum experience of 3 years in the same agricultural value chain activities that they are applying for.
3.4 Women and youth will have priority access, particularly for women led MSMEs
4.0 RESPONSIBILITIES OF PARTICIPATING FINANCIAL INSTITUTIONS
4.1 All applications for funding under the Facility shall be reviewed and approved by the Credit Committee of the PCB, using its standard loan underwriting criteria.
4.2 PCBs shall ensure that loans granted under the Facility are backed by adequate moveable or immovable collateral, which shall be registered at the Collateral Registry at the BSL
4.3 Following approval by its Credit Committee, PCB shall submit to the Banking Supervision Department of the BSL: (1) the loan application; (2) all supporting documents used in its evaluation; and (3) a cover letter that conveys the PCB’s recommendation of the loan to the BSL
4.4 All relevant information on the credit history of approved applicants for loans under the Facility shall be submitted by the PCBs to the Credit Reference Bureau at the BSL for credit information purposes.
5.0 PROHIBITED ACTIVITIES
5.1 Funds accessed under the Facility shall not be used for any purpose other than what is stated in the loan application.
5.2 Without prejudice to Article 5.1, funds disbursed under the Facility shall not be used to:
- a) Purchase land.
- b) Pay or refinance any existing loans or loans contracted under any other facility, even if related to agriculture.
- c) Purchase any financial asset, including money market instruments, especially government securities.
- d) Construction of a new facility is not permitted unless it is an agricultural infrastructure, as detailed in Annex 2.
