Saturday, 28 December 2013 00:00
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Following a long war that continues to reverberate, islanders look to the future, said American ag lender Nate Franzen. “People are very focused on building up an economy, he said.In August, Franzen, President of the Agribusiness Division at First Dakota National Bank, Sioux Falls, visited Sri Lankan tea and cinnamon factories.“It looked like they do a lot of manual labor,” compared to the mechanisation of typical American farms, says Franzen.Following is the full text of the article:
ABA Banking Journal: “As a kid growing up on a farm in South Dakota, I never would have foreseen how international our industry has grown,” says Nate Franzen. Yields, markets, and weather around the globe influence nearly every aspect of agriculture and ag finance, but Franzen’s own career recently took an unexpected turn—one that brought him over 9,000 miles from home.
In August, Franzen, president of the agribusiness division at First Dakota National Bank, Sioux Falls, found himself in Sri Lanka, the island nation off the tip of India. He was on a field trip that included stops at tea and cinnamon factories. He also saw rubber tree plantations and small peasant-owned farms.
“It looked like they do a lot of manual labour,” compared to the mechanisation of typical American farms, says Franzen. Following a long civil war that continues to reverberate, islanders look to the future, he says. “People are very focused on building up an economy. You got the feeling there that in ten years, they will be a long way down the road.”
Franzen’s journey began when representatives of the World Bank’s Agriculture Finance Support Facility (AgriFin) program contacted him on the recommendation of John Blanchfield, senior vice-president at ABA. The purpose of AgriFin – funded by a $20 million grant from the Bill & Melinda Gates Foundation – is to foster development of sustainable access to ag financing in the developing world.
At first, Franzen was providing information to the program, and then came an invitation to attend AgriFin’s Financing Agriculture Forum in Sri Lanka’s capital, Colombo. Initially, planners – who also arranged the field trip – had hoped to have Franzen meet the 100-plus delegates one-on-one, and help develop an ag finance benchmarking approach. But then he was drafted to serve on a formal panel about development of experienced ag lending teams. First National has been a noted force in farm finance for years, so it was a natural fit.
Franzen says he learned as much about other commercial bankers’ challenges in ag lending in developing countries as they learned about US methods. “In many of these countries, they don’t have private ownership of land, or they may not have strong judicial systems,” he says. In some countries, lenders face the potentiality of government-decreed debt forgiveness. As a result, creative lenders find ways to adapt. One method is to provide financing to processing firms, rather than directly to farmers. This enables the production chain to occur, while giving lenders a source of repayment. By contrast, says Franzen, most of his bank’s credits are directly to producers.
AgriFin brought a multinational group of lenders and foreign bankers’ association reps to the ABA National Agricultural Bankers Conference in November. Many delegates traveled to Franzen’s bank and ag locales.
The developing world’s ag banking challenges moved Franzen: “In the United States, we talk about uncertainty and politics. But we don’t really know what uncertainty is.”
