The process of looking for funding for a new business can be very frustrating since there are so many different avenues to explore. It definitely pays to take the time to research the different alternatives and to leave all funding options open in order to make the best decision for one’s startup. Two ways in which a new entrepreneur can effectively raise capital is by seeking the advice of other business owners and the assistance of the Small Business Administration. While both do not directly provide funding to entrepreneurs, they do offer a wealth of resources which can guide the new business owner in the right direction.
Consult with other business owners
Many new entrepreneurs simply do not know much about the process of entrepreneurship or how to go about marketing their unique business ideas. While their business ideas may be of great value, many are not aware that it requires money to make their ideas a reality. Discouraged by exorbitant startup costs, many prospective entrepreneurs simply do not pursue their dreams any further because the entire process may be quite intimidating.
One way in which a new business owner can learn more about the process of entrepreneurship is by asking other business owners about their personal experiences. Often times, existing business owners can give first-time entrepreneurs valuable insight into the practice of private enterprise and what to expect during the development of their new company. In addition, fellow business owners, who have been through the process of funding, can discuss the ways in which they were able to effectively raise startup capital.
In addition, existing business owners are often enthusiastic about mentoring others, making it very beneficial for an entrepreneur to take advantage of such an opportunity. By consulting with other small business owners who have already been through the startup process, the entrepreneur puts himself/herself ahead of the game.
Seek assistance from the SBA
Government agencies, such as the Small Business Administration, can also provide entrepreneurs with much needed support for their small businesses. The main objective of the SBA is to strengthen the overall economy of the United States; therefore, it is their mission to protect the interests of all prospective and existing small businesses. Their website (www.sba.gov) offers a multitude of resources to first-time and existing entrepreneurs on how to manage and expand their businesses effectively. They also have information on how to increase one’s business knowledge and productivity for a successful company.
In terms of funding, the SBA acts as a guarantor of small business loans through local banks. The goal of obtaining a loan through an SBA loan program is that the borrower can take advantage of longer periods of repayment with low interest rates.
While it can sound extremely promising for small business owners to partake in an SBA loan program, these types of loan plans can be quite competitive. People with a good credit rating and credit history are often the ones who are considered for SBA loans. Another downside is that obtaining a small business loan through an SBA loan program is often not enough to cover all startup costs. So in addition to an SBA loan, the entrepreneur will also have to find additional funding elsewhere, including family and friends, and even private investors to fill the needed startup gap.
Conclusion
Looking for funding for a new business does not need to be a tedious and exhaustive process. By exploring different options, new business owners will find a solution to their funding problems. Through the consultation of existing business owners and by obtaining resources from the Small Business Administration, the entrepreneur can find novel ways to get their new business going in the right direction.
Sunday, July 25, 2010
Funding Opportunities for Your New Business
Funding opportunities are available for anyone looking to start a new business. With so many options available to find startup capital for your new business, it can be a stressful journey seeing your new business get off of the ground. One of the most important things to have when looking for funding opportunities is to have a well thought out business plan available. This will help you explain the concept of your new business and also be able to give any interested creditors or investors the necessary information they may require. Startup capital can be obtained from several different options and it is beneficial to research these funding opportunities to see what is best for you. Some people go with finding startup capital from their friends and family members.
The only drawback to this relationship is it can cause strain on your relationships with these people. If you do decide to raise startup capital for your new business this way, make sure it is a professional agreement with the payment schedule and interest rate explicitly clear. You can also explore the funding opportunities available at your local bank. When you visit the bank for startup capital you will need to ensure you have a well thought out business plan available to refer to. The bank will need to know your new business will be able to generate enough revenue so you are able to pay the monthly loan payments. It is important to be fully prepared when visiting the bank since they each may have different requirements
There are many options available when looking at funding opportunities. It is important to be fully prepared and have a quality business model available to answer any questions. By doing your research before hand, you will soon be working at your new business.
The only drawback to this relationship is it can cause strain on your relationships with these people. If you do decide to raise startup capital for your new business this way, make sure it is a professional agreement with the payment schedule and interest rate explicitly clear. You can also explore the funding opportunities available at your local bank. When you visit the bank for startup capital you will need to ensure you have a well thought out business plan available to refer to. The bank will need to know your new business will be able to generate enough revenue so you are able to pay the monthly loan payments. It is important to be fully prepared when visiting the bank since they each may have different requirements
There are many options available when looking at funding opportunities. It is important to be fully prepared and have a quality business model available to answer any questions. By doing your research before hand, you will soon be working at your new business.
Using Bank Loans to Fund Your New Business
For an entrepreneur, raising capital for a new business can be as easy as picking up the telephone and calling a wealthy relative for money or as tedious as applying for federal and state grants. While each option certainly has its pros and cons, the entrepreneur should conduct a fair amount of research to make sure that the selected choice(s) is/are appropriate for his/her unique situation.
Small business bank loans
Some people may choose to obtain commercial bank loans to fund their small businesses. While this may seem like a good idea to raise the needed capital, one must not rely solely on a bank loan to cover all expenses for a start up since most start-ups require additional amounts of money to sustain. The borrower should also keep in mind that a monthly payment schedule and maintenance fees are required almost immediately. Guidelines may differ from bank to bank; however, there are certain standards that all banks abide by when approving an applicant for a small business loan.
1. Referrals
Entrepreneurs will often select a financial institution they normally do business with or have had some business tie with in the past. It is always a good idea for a new business owner to select a bank which they have already had an existing relationship with. If none exists, then local businesses, attorneys, and accountants are other good resources for a lender referral. If these contacts have had strong business relationships with the lenders, then the entrepreneur will have a better chance of obtaining the needed funding. If for any reason the entrepreneur has doubt that a bank will respond favorably on his/her behalf, then they should request funding from other banks where they may have a better standing.
2. Credit history
One’s credit history is extremely significant for small business loan approval. Financial institutions often rely on an applicant’s solid credit rating as the basis for the acceptance of a small business bank loan. If an entrepreneur has stellar credit and a great business history with a bank, then his/her chances of receiving funding can be strong. However, a poor credit rating will damage the chance for funding. Before approaching a lender, the entrepreneur must first repair their credit history and then proceed with the application process in order to be considered for a bank loan.
3. Business plan
Another important piece of the criteria for entrepreneur to successfully obtain small business loans from their banks is to present their business plan to the prospective lending officials. The business plan has to be documented on paper since it is ineffective and not enough to remember every aspect of a plan through recall. By organizing and documenting one’s business ideas, company objectives, and financial forecasts for easy accessibility, the entrepreneur will show their prospective lenders they are serious about obtaining a loan and have properly planned their new venture accordingly. Presenting a well-detailed business plan can certainly increase one’s chances of raising capital through a bank loan.
4. Prospective customers
In addition to credit history, referrals, and the presentation of a business plan, the new business owner should also provide the lending officials with prospective customers who are willing to purchase their products and services. By having gathered a considerable amount of consumers, the entrepreneur will show the bank’s lending officials that the business has the chance to succeed and that they will be able to pay back all owed loan debt.
5. Backup plan
Entrepreneurs will often be rejected multiple times for bank loans before one financial lender may approve them. While the concept of rejection can be extremely difficult to bear, new business owners should be persistent in their funding quest. They should ask lending officials the key components behind the loan denial, learn from those results, and mend any issues before approaching the next lender. In addition, they should implement an alternative plan to raise the needed capital if they are not able to obtain a commercial bank loan. Lenders may ask the applicant their alternative strategy, and rather than show discouragement, the entrepreneur should exude confidence in their business ideas and in their goal to obtain funding.
Conclusion
Obtaining a bank loan for startup capital is a great way of running a new business through a reputable company. If an entrepreneur is serious about their business ideas and utilizing ways to market those ideas, then it would be very beneficial to get funding from a local bank. While certain restrictions may apply, most business owners who qualify will have the advantage of utilizing those funds immediately for their new business endeavor. One downside of commercial bank loans is the fact that a solid credit history is required for consideration. In addition, high monthly payments with interest and maintenance fees may be costly, especially for a young company that has not yet established a solid track record of financial success.
Small business bank loans
Some people may choose to obtain commercial bank loans to fund their small businesses. While this may seem like a good idea to raise the needed capital, one must not rely solely on a bank loan to cover all expenses for a start up since most start-ups require additional amounts of money to sustain. The borrower should also keep in mind that a monthly payment schedule and maintenance fees are required almost immediately. Guidelines may differ from bank to bank; however, there are certain standards that all banks abide by when approving an applicant for a small business loan.
1. Referrals
Entrepreneurs will often select a financial institution they normally do business with or have had some business tie with in the past. It is always a good idea for a new business owner to select a bank which they have already had an existing relationship with. If none exists, then local businesses, attorneys, and accountants are other good resources for a lender referral. If these contacts have had strong business relationships with the lenders, then the entrepreneur will have a better chance of obtaining the needed funding. If for any reason the entrepreneur has doubt that a bank will respond favorably on his/her behalf, then they should request funding from other banks where they may have a better standing.
2. Credit history
One’s credit history is extremely significant for small business loan approval. Financial institutions often rely on an applicant’s solid credit rating as the basis for the acceptance of a small business bank loan. If an entrepreneur has stellar credit and a great business history with a bank, then his/her chances of receiving funding can be strong. However, a poor credit rating will damage the chance for funding. Before approaching a lender, the entrepreneur must first repair their credit history and then proceed with the application process in order to be considered for a bank loan.
3. Business plan
Another important piece of the criteria for entrepreneur to successfully obtain small business loans from their banks is to present their business plan to the prospective lending officials. The business plan has to be documented on paper since it is ineffective and not enough to remember every aspect of a plan through recall. By organizing and documenting one’s business ideas, company objectives, and financial forecasts for easy accessibility, the entrepreneur will show their prospective lenders they are serious about obtaining a loan and have properly planned their new venture accordingly. Presenting a well-detailed business plan can certainly increase one’s chances of raising capital through a bank loan.
4. Prospective customers
In addition to credit history, referrals, and the presentation of a business plan, the new business owner should also provide the lending officials with prospective customers who are willing to purchase their products and services. By having gathered a considerable amount of consumers, the entrepreneur will show the bank’s lending officials that the business has the chance to succeed and that they will be able to pay back all owed loan debt.
5. Backup plan
Entrepreneurs will often be rejected multiple times for bank loans before one financial lender may approve them. While the concept of rejection can be extremely difficult to bear, new business owners should be persistent in their funding quest. They should ask lending officials the key components behind the loan denial, learn from those results, and mend any issues before approaching the next lender. In addition, they should implement an alternative plan to raise the needed capital if they are not able to obtain a commercial bank loan. Lenders may ask the applicant their alternative strategy, and rather than show discouragement, the entrepreneur should exude confidence in their business ideas and in their goal to obtain funding.
Conclusion
Obtaining a bank loan for startup capital is a great way of running a new business through a reputable company. If an entrepreneur is serious about their business ideas and utilizing ways to market those ideas, then it would be very beneficial to get funding from a local bank. While certain restrictions may apply, most business owners who qualify will have the advantage of utilizing those funds immediately for their new business endeavor. One downside of commercial bank loans is the fact that a solid credit history is required for consideration. In addition, high monthly payments with interest and maintenance fees may be costly, especially for a young company that has not yet established a solid track record of financial success.
Tuesday, March 16, 2010
Small and Medium Enterprises – What Works? What Doesn’t?
Development economists are obsessed with SMEs. And for good reason: employment in SMEs – defined as enterprises with up to 250 employees – constitutes over 60 percent of total employment in manufacturing in many countries. A large SME sector is also a characteristic of rapidly growing economies (although researchers are more skeptical of the claim that “SMEs are the engine of growth”). Also, few disagree that SMEs face greater constraints to their growth than large firms. Not only does access to finance rank high among these constraints, but it also has a proportionally greater impact on SME growth.
Constraints
All these facts suggest SMEs deserve policymakers’ attention, but there are many questions about the efficacy of pro-SME policies in different areas. In reviewing research findings, I’ve grouped these areas roughly under four headings: institution building, financial development, interim solutions, and directed government interventions.
Institution Building
First, findings emphasize the importance of strengthening the underlying institutions and investment climate for all firms, instead of focusing on and subsidizing SMEs. In other words, splitting big firms into small firms or subsidizing small firms will not lead to faster growth, unless more fundamental reforms are undertaken to address the underlying reasons for the inability of firms to fulfill their growth potential. Information asymmetries are an important reason why small firms with potentially profitable growth opportunities find it difficult to access finance. These are likely to be overcome through the development of credit bureaus and better information sharing.
And it is not only firm growth that is hampered by weaknesses in investment climate – the entry of new firms also takes a hit. Indeed, bureaucratic entry regulations manage both to impede entry and also negatively affect the growth and size of incumbent firms. Similarly, individuals are more likely to become entrepreneurs and they are more likely to reinvest their profits if the institutional environment is favorable.
Financial Development
Second, both firm-level and industry-level studies suggest that small firms do relatively better compared to large firms in countries with better-developed financial institutions. With financial development, small firms grow faster since their financing constraints are relaxed to a greater extent. Furthermore, industrial sectors that naturally should have a disproportionately large number of small firms also grow faster with greater financial development, suggesting that it is the small firms that benefit the most.
The lack of well-functioning financial markets is compounded by underdeveloped legal systems, which make it very difficult for firms to grow to their optimal size since outside investors cannot trust that they will not be taken advantage of. This tends to limit firm size. This is important for SME-promotion strategies since if it is optimal for firms to stay small in countries with underdeveloped institutions, simply subsidizing SMEs may be at best ineffective, but at worst, counterproductive.
A contestable financial system makes it more likely that banks go downstream and seek out new ways to serve the smaller firms. Foreign banks have generally played an important role in facilitating this process, whereas public banks have been less useful in the past. Furthermore, contrary to conventional wisdom, it is not only the smaller, niche banks that serve the SMEs. Large banks – both domestic and foreign – also pursue SME business aggressively, including extending loans to the smallest businesses through the use of hard information-based technologies as well as relationship lending.
Interim Solutions
Third, although improving institutions and the investment climate is probably the most effective way of relaxing the growth constraints SMEs face, institution building is a long term process. In the interim, embracing innovative lending technologies and promoting competition may provide market-friendly solutions to the problem. Technologies such as factoring are particularly promising in the interim since they rely on institutions to a lesser extent. However, other technologies such as credit-scoring and leasing can also be useful for relaxing the financing constraints of SMEs, and their use would improve with the development of institutions over time. These technologies will be adopted more rapidly in contestable financial systems open to foreign entry.
Directed Government Interventions
What about direct government interventions in improving access to finance for SMEs? Unfortunately the scope for these tend to be more limited than often believed. In general, experience with direct and directed lending programs have not been successful. More recently, the direct intervention mechanism of choice for SME lending has been the government-backed partial credit guarantee programs. Although more than half of all countries around the world have some form of credit guarantee scheme, rigorous evaluation of these schemes is still rare. Available evidence suggests these programs can be more costly in budgetary terms than expected, and their performance can be improved by careful design. Nevertheless, in the absence of thorough evaluations, the net effect in terms of cost-benefit terms remains unclear.
So we need much more analysis, case studies, innovative thinking to level the playing field for SMEs. Focusing on building institutions that are important for SMEs’ access, continuing the search for financial tools that can circumvent institutional deficiencies, and experimentation with different approaches hold promise.
Constraints
All these facts suggest SMEs deserve policymakers’ attention, but there are many questions about the efficacy of pro-SME policies in different areas. In reviewing research findings, I’ve grouped these areas roughly under four headings: institution building, financial development, interim solutions, and directed government interventions.
Institution Building
First, findings emphasize the importance of strengthening the underlying institutions and investment climate for all firms, instead of focusing on and subsidizing SMEs. In other words, splitting big firms into small firms or subsidizing small firms will not lead to faster growth, unless more fundamental reforms are undertaken to address the underlying reasons for the inability of firms to fulfill their growth potential. Information asymmetries are an important reason why small firms with potentially profitable growth opportunities find it difficult to access finance. These are likely to be overcome through the development of credit bureaus and better information sharing.
And it is not only firm growth that is hampered by weaknesses in investment climate – the entry of new firms also takes a hit. Indeed, bureaucratic entry regulations manage both to impede entry and also negatively affect the growth and size of incumbent firms. Similarly, individuals are more likely to become entrepreneurs and they are more likely to reinvest their profits if the institutional environment is favorable.
Financial Development
Second, both firm-level and industry-level studies suggest that small firms do relatively better compared to large firms in countries with better-developed financial institutions. With financial development, small firms grow faster since their financing constraints are relaxed to a greater extent. Furthermore, industrial sectors that naturally should have a disproportionately large number of small firms also grow faster with greater financial development, suggesting that it is the small firms that benefit the most.
The lack of well-functioning financial markets is compounded by underdeveloped legal systems, which make it very difficult for firms to grow to their optimal size since outside investors cannot trust that they will not be taken advantage of. This tends to limit firm size. This is important for SME-promotion strategies since if it is optimal for firms to stay small in countries with underdeveloped institutions, simply subsidizing SMEs may be at best ineffective, but at worst, counterproductive.
A contestable financial system makes it more likely that banks go downstream and seek out new ways to serve the smaller firms. Foreign banks have generally played an important role in facilitating this process, whereas public banks have been less useful in the past. Furthermore, contrary to conventional wisdom, it is not only the smaller, niche banks that serve the SMEs. Large banks – both domestic and foreign – also pursue SME business aggressively, including extending loans to the smallest businesses through the use of hard information-based technologies as well as relationship lending.
Interim Solutions
Third, although improving institutions and the investment climate is probably the most effective way of relaxing the growth constraints SMEs face, institution building is a long term process. In the interim, embracing innovative lending technologies and promoting competition may provide market-friendly solutions to the problem. Technologies such as factoring are particularly promising in the interim since they rely on institutions to a lesser extent. However, other technologies such as credit-scoring and leasing can also be useful for relaxing the financing constraints of SMEs, and their use would improve with the development of institutions over time. These technologies will be adopted more rapidly in contestable financial systems open to foreign entry.
Directed Government Interventions
What about direct government interventions in improving access to finance for SMEs? Unfortunately the scope for these tend to be more limited than often believed. In general, experience with direct and directed lending programs have not been successful. More recently, the direct intervention mechanism of choice for SME lending has been the government-backed partial credit guarantee programs. Although more than half of all countries around the world have some form of credit guarantee scheme, rigorous evaluation of these schemes is still rare. Available evidence suggests these programs can be more costly in budgetary terms than expected, and their performance can be improved by careful design. Nevertheless, in the absence of thorough evaluations, the net effect in terms of cost-benefit terms remains unclear.
So we need much more analysis, case studies, innovative thinking to level the playing field for SMEs. Focusing on building institutions that are important for SMEs’ access, continuing the search for financial tools that can circumvent institutional deficiencies, and experimentation with different approaches hold promise.
Can Informal Finance Substitute for Formal Finance?
A couple of years ago, at a meeting of World Bank financial sector experts, one of the Vice Presidents at the time challenged me by saying, “You always talk about the importance of the financial sector for development, and emphasize we need to prioritize financial sector reforms, but just look at China. It is doing very well without a well functioning financial system.”
This struck a chord. I had also recently seen an academic paper making more or less the same point, that China is one of the fastest-growing economies in the world despite weaknesses in its formal banking system. Of course there is a large literature on finance which shows that development of formal financial institutions is associated with faster growth and better resource allocation. It has also long been recognized that informal financial systems play a complementary role in developing countries, typically consisting of small, unsecured, short-term loans restricted to rural areas, agricultural contracts, households, individuals, or small entrepreneurial ventures.
There is even a direct parallel in developed countries called angel finance, where high-net-worth individuals—“angel investors”—provide initial funding to young firms with modest capital needs until they are able to receive more formal venture capital financing. But informal finance substituting for formal finance? Conventional wisdom has always been that this is not likely since informal monitoring and enforcement mechanisms are generally ill equipped for scaling up and meeting the needs of the higher end of the market.
But more and more frequently, China was being brought up as an example to support the contention that the reform of formal financial systems is a low priority. The fast growth of Chinese private sector firms was seen as evidence that what supports China’s growth is alternative financing and governance mechanisms. Some even thought this was enough to ignore financial systems and move straight on to other development priorities in designing reform programs. We had to do more research to understand better…
My co-authors Max, Meghana and I started doing this by using the World Bank’s detailed, firm-level enterprise survey data on 2,400 Chinese firms. We wanted to investigate which of two views is consistent with the operation of the informal financial sector in China:
1. Is the informal financial sector associated with high growth and profit reinvestment, and does it serve as a substitute for the formal financial system?
2. Or does the informal sector primarily serve the lower end of the market?
We find that in China the use of bank financing by private firms is comparable to that in other developing countries, but the breakdown of nonbank financing sources shows greater differences (see table below). Unlike firms in other countries, Chinese firms in our sample do rely on a large informal sector and alternative financing channels, which could well be the large underground lending in China.
Financing
Nevertheless we see that it is financing from formal bank sources that is positively associated with firm growth and reinvestment. Contrary to earlier findings, fund-raising from informal channels is not associated with faster firm growth. Interestingly, while we find that the majority of firms that receive bank loans grow faster as a result, there is a subpopulation of firms that do not. These are the firms that report it was government’s help that allowed them to obtain the bank loan in the first place. These firms do not show faster growth, higher reinvestment, or greater productivity, unlike firms getting bank loans without government help. Of course these results do not make China an exception to the growth and finance literature. Far from it, they are also very consistent with previous work showing the disadvantages of government owned banks.
Overall, the conclusion is quite clear: even in fast-growing economies like China where the formal financial system serves only a small part of the private sector because of a poorly developed financial and legal system, external finance from the formal financial system is associated with faster growth and higher profit reinvestment rates for the firms that receive it. We find no evidence that alternative financing channels are associated with higher growth. So reputation- and relationship-based informal financing and governance mechanisms are likely to play a limited role in supporting the growth of private sector firms and unlikely to substitute for formal mechanisms. These results underline – once again – not only the importance of formal finance in the development process, but the urgency in carrying out financial sector reforms where financial systems are poorly developed.
This struck a chord. I had also recently seen an academic paper making more or less the same point, that China is one of the fastest-growing economies in the world despite weaknesses in its formal banking system. Of course there is a large literature on finance which shows that development of formal financial institutions is associated with faster growth and better resource allocation. It has also long been recognized that informal financial systems play a complementary role in developing countries, typically consisting of small, unsecured, short-term loans restricted to rural areas, agricultural contracts, households, individuals, or small entrepreneurial ventures.
There is even a direct parallel in developed countries called angel finance, where high-net-worth individuals—“angel investors”—provide initial funding to young firms with modest capital needs until they are able to receive more formal venture capital financing. But informal finance substituting for formal finance? Conventional wisdom has always been that this is not likely since informal monitoring and enforcement mechanisms are generally ill equipped for scaling up and meeting the needs of the higher end of the market.
But more and more frequently, China was being brought up as an example to support the contention that the reform of formal financial systems is a low priority. The fast growth of Chinese private sector firms was seen as evidence that what supports China’s growth is alternative financing and governance mechanisms. Some even thought this was enough to ignore financial systems and move straight on to other development priorities in designing reform programs. We had to do more research to understand better…
My co-authors Max, Meghana and I started doing this by using the World Bank’s detailed, firm-level enterprise survey data on 2,400 Chinese firms. We wanted to investigate which of two views is consistent with the operation of the informal financial sector in China:
1. Is the informal financial sector associated with high growth and profit reinvestment, and does it serve as a substitute for the formal financial system?
2. Or does the informal sector primarily serve the lower end of the market?
We find that in China the use of bank financing by private firms is comparable to that in other developing countries, but the breakdown of nonbank financing sources shows greater differences (see table below). Unlike firms in other countries, Chinese firms in our sample do rely on a large informal sector and alternative financing channels, which could well be the large underground lending in China.
Financing
Nevertheless we see that it is financing from formal bank sources that is positively associated with firm growth and reinvestment. Contrary to earlier findings, fund-raising from informal channels is not associated with faster firm growth. Interestingly, while we find that the majority of firms that receive bank loans grow faster as a result, there is a subpopulation of firms that do not. These are the firms that report it was government’s help that allowed them to obtain the bank loan in the first place. These firms do not show faster growth, higher reinvestment, or greater productivity, unlike firms getting bank loans without government help. Of course these results do not make China an exception to the growth and finance literature. Far from it, they are also very consistent with previous work showing the disadvantages of government owned banks.
Overall, the conclusion is quite clear: even in fast-growing economies like China where the formal financial system serves only a small part of the private sector because of a poorly developed financial and legal system, external finance from the formal financial system is associated with faster growth and higher profit reinvestment rates for the firms that receive it. We find no evidence that alternative financing channels are associated with higher growth. So reputation- and relationship-based informal financing and governance mechanisms are likely to play a limited role in supporting the growth of private sector firms and unlikely to substitute for formal mechanisms. These results underline – once again – not only the importance of formal finance in the development process, but the urgency in carrying out financial sector reforms where financial systems are poorly developed.
Monday, December 7, 2009
Investment Opportunity in Cameroon (Fish Project)
U&I is acting as consultant to the National Industrial Fishing Farming LTD. The project is to bread 5,000 tons-10,000 tons of bar fish annually in the Limbe sea South West region Cameroon. The company is a newly establish and it is seeking for partners with whom they can take the venture. Below is the executive summary of the project for your review.
Introduction
The demand of high quality fish and shellfish products has increased over the last century, both as a result of shifts in consumer preference as well as a growing world population. Inherently in this is also an increased awareness of healthy food i.e. consumers focusing on a low calorie diet and polyunsaturated fatty acids. Global fish production from fisheries peaked with 90 million tones in the early 1990s (FAO1999). About two-third of this is used for human consumption with the remaining catch employed as fish meal or fish oils in various industrial application, inclusive of feed for the agriculture and aquaculture. Attempt have been made to predict the future capacity of the global food production system due to increasing pressure on natural resources and possible declines in stock due to increasing environmental stress (Doos and Shaw 1999).
The predicted increased regional and global demand for fish and fishery products will fall shorts of wild fishery, such demand may be met by aquaculture products but most aquaculture fisheries are fed by wild fish.
Many of the world’s poorest people depend on fish to help meet their basic needs. Fish are a key dietary staple for over 1 billion people, providing up to 70% of animal protein in some countries. Similarly millions of families rely on catching, processing and trading fish to provide their main source of cash income. These benefits need to be protected if hunger and poverty are to be reduced and the MDG targets met. As the world’s population grows and purchasing power increases so does the demand for fish. Consumption has doubled since 1973, with rising demand in developing countries accounting for the bulk of that growth. Meeting that demand is both a challenge and an opportunity. It is a challenge because most wild-fish stocks are already reaching the limits of their productive capacity, while many have leveled off or declined as a result of over fishing and other causes. In response we need not only to develop the capacities required to maintain wild fisheries in the face of these constraints and pressures, but also develop aquaculture which provides the only option for substantial increases in fish production. It is an opportunity because the strong demand for fish creates national and international markets that provide an increasing number of farmers, fishers, processors, traders, and service providers, with attractive investment options. This has already driven the rapid expansion of aquaculture in Asia, and the recent increases in aquaculture production and associated livelihoods in Egypt and sub-Saharan Africa have been similarly fed by growth in local markets. As demand continues to increase, these national markets will grow together with international opportunities. With 40% of fish catch being sold internationally fish has already become the most heavily traded commodity in international markets, with a net value of $18 billion a year, nearly 75% of which goes to developing countries in Asia. With adequate support, more small-scale fish producers in developing countries could benefit immensely from the globalization of trade in fish
Why Focus on Fisheries and Aquaculture?
The Millennium Development Goals (MDGs) set ambitious targets for improving human well- being by 2015. As the international community strengthens investment to meet these targets it is important that special attention is given to areas where there is greatest leverage for improving people’s lives. The World Fish Center and Cameroonian Government believes that fisheries and aquaculture can make such a contribution in many of the poorest countries and the present document summarizes where the Center’s research is helping to achieve this. A study in Malawi and Cameroon shows that average farm profits per unit area can be more than doubled by integrating aquaculture into traditional livestock and horticultural farming systems and these ‘fish farming’ families can earn 28% higher incomes. Fish consumption rises, strengthening the family’s food security and child malnutrition decreases. During times of drought, these farms are 18% more productive. This has huge implications, particularly in southern Africa where even mild droughts can lead to food shortages, and demonstrates how fish ponds underpin the resilience of the entire farming enterprise
Objectives
Main objective
To build sustainable increase in domestic fish production in 1 pilot countries in sub-Saharan Africa (Cameroon)
Specific objectives:
- To increase production of fish thereby improving food security of Cameroonians and subsistence farmers
- To increase household income of subsistence farmers
- To improve nutrition conditions for subsistence farmers household and Cameroonians at large.
- To reduce fish importation by improved local production capacity
- To improve farmers access to fingerlings.
Expected results
To mitigate the possible fish shortages and reduce the need for fish importation and the associate drain on foreign currency reserves in the sub-Sub-Saharan region. The initiative will enhance fish production in each target country by 10-20%.
National production and consumption trends
Fish is a preferred protein source for most Cameroonians because it is cheap compared with such other meats as bush meat, pork, chicken and beef. Prices for fish vary from 700-3000 FCFA per kilogram (kg) according to the quality and the place of purchase. Additionally fish is available in conveniently small units that can easily purchased by the poor with heaps of smoked fish selling for 100 FCFA or 0.2 dollars.
According to the 2007 Cameroon Economic and Financial Report national fish production was estimated at 140,000 tons, 100,000 tones come from marine fisheries and 40,000 tones from inland fisheries and demand stood at 260,000 tones. As a result 120,000 tones were imported which leads to about 120 billion spent by the government in the importation of fish. Sixty percent of national fish production is sold in smoked form mainly because of poor communication and access to fisher’s settlements as well as insufficient infrastructure for other form of processing (e.g. freezing, canning, salt-drying or fermenting). In addition, consumers prefer fish species such as madeuran sardinella (sardinella sp), Bonga Shad (Ethmalose sp) Bar fish etc.
Average fish consumption nationally is estimated at 17.9 kg per person per year. This figure varies according to location, rising to 30-35 kg in the large cities of Yaoundé and Douala and falling to 10 kg in villages far from fish production sites. As national fish production has not been able to meet fish demand, the government of Cameroon has in the past decades imported over 100,000 tones of fish per year. In 2004 135,000 tons of frozen fish were imported (Ngok et al 2005 Groupment Professionnel des Acconiers 2007). An estimate of 2.8 % growth rate in the fish consuming population and rapid urbanization (38% in 1987 rising to 55% in 2006) ensure that the potential for production and profitable aquaculture is high, especially as increased production from captures cannot be expected. So far, however, the large potential for aquaculture has not yet to be realized
Promoter of the project
The promoter of the project is Nation Industrial Fishing Farming LTD with the aims of providing quality fish to Cameroonians and to promote the cage culture of fishing and enhance the production of fingerlings for farmers.
Operation size
The project intends to produce 5,000 – 10,000 tones of bar fish during it first three years of operation. The fish will be graded in sizes accordingly during breeding to match – up consumer’s pattern, 0-3 months fish will weight 500g, 4-8 months 6-8kg and the suitable market size 500g two whole fish in a kg is good for Cameroon market.
Investment Objectives
The investment objective is to promote cage culture and producing large quantity of finger lings for the farmers and thus lead to wealth creation for the farmers and also to maximize the investment of partners. The fund asset allocation will concentrate in the feasibility study, purchase of equipment, setting up of plant, construction of processing units, office premise, health centre, vehicle and working capital.
The total cost of the project is 3 billion Franc with an internal rate of return of 100% during the first three years of operation with a start up cost of 100million and a projected revenue of 3.5 billion.
Introduction
The demand of high quality fish and shellfish products has increased over the last century, both as a result of shifts in consumer preference as well as a growing world population. Inherently in this is also an increased awareness of healthy food i.e. consumers focusing on a low calorie diet and polyunsaturated fatty acids. Global fish production from fisheries peaked with 90 million tones in the early 1990s (FAO1999). About two-third of this is used for human consumption with the remaining catch employed as fish meal or fish oils in various industrial application, inclusive of feed for the agriculture and aquaculture. Attempt have been made to predict the future capacity of the global food production system due to increasing pressure on natural resources and possible declines in stock due to increasing environmental stress (Doos and Shaw 1999).
The predicted increased regional and global demand for fish and fishery products will fall shorts of wild fishery, such demand may be met by aquaculture products but most aquaculture fisheries are fed by wild fish.
Many of the world’s poorest people depend on fish to help meet their basic needs. Fish are a key dietary staple for over 1 billion people, providing up to 70% of animal protein in some countries. Similarly millions of families rely on catching, processing and trading fish to provide their main source of cash income. These benefits need to be protected if hunger and poverty are to be reduced and the MDG targets met. As the world’s population grows and purchasing power increases so does the demand for fish. Consumption has doubled since 1973, with rising demand in developing countries accounting for the bulk of that growth. Meeting that demand is both a challenge and an opportunity. It is a challenge because most wild-fish stocks are already reaching the limits of their productive capacity, while many have leveled off or declined as a result of over fishing and other causes. In response we need not only to develop the capacities required to maintain wild fisheries in the face of these constraints and pressures, but also develop aquaculture which provides the only option for substantial increases in fish production. It is an opportunity because the strong demand for fish creates national and international markets that provide an increasing number of farmers, fishers, processors, traders, and service providers, with attractive investment options. This has already driven the rapid expansion of aquaculture in Asia, and the recent increases in aquaculture production and associated livelihoods in Egypt and sub-Saharan Africa have been similarly fed by growth in local markets. As demand continues to increase, these national markets will grow together with international opportunities. With 40% of fish catch being sold internationally fish has already become the most heavily traded commodity in international markets, with a net value of $18 billion a year, nearly 75% of which goes to developing countries in Asia. With adequate support, more small-scale fish producers in developing countries could benefit immensely from the globalization of trade in fish
Why Focus on Fisheries and Aquaculture?
The Millennium Development Goals (MDGs) set ambitious targets for improving human well- being by 2015. As the international community strengthens investment to meet these targets it is important that special attention is given to areas where there is greatest leverage for improving people’s lives. The World Fish Center and Cameroonian Government believes that fisheries and aquaculture can make such a contribution in many of the poorest countries and the present document summarizes where the Center’s research is helping to achieve this. A study in Malawi and Cameroon shows that average farm profits per unit area can be more than doubled by integrating aquaculture into traditional livestock and horticultural farming systems and these ‘fish farming’ families can earn 28% higher incomes. Fish consumption rises, strengthening the family’s food security and child malnutrition decreases. During times of drought, these farms are 18% more productive. This has huge implications, particularly in southern Africa where even mild droughts can lead to food shortages, and demonstrates how fish ponds underpin the resilience of the entire farming enterprise
Objectives
Main objective
To build sustainable increase in domestic fish production in 1 pilot countries in sub-Saharan Africa (Cameroon)
Specific objectives:
- To increase production of fish thereby improving food security of Cameroonians and subsistence farmers
- To increase household income of subsistence farmers
- To improve nutrition conditions for subsistence farmers household and Cameroonians at large.
- To reduce fish importation by improved local production capacity
- To improve farmers access to fingerlings.
Expected results
To mitigate the possible fish shortages and reduce the need for fish importation and the associate drain on foreign currency reserves in the sub-Sub-Saharan region. The initiative will enhance fish production in each target country by 10-20%.
National production and consumption trends
Fish is a preferred protein source for most Cameroonians because it is cheap compared with such other meats as bush meat, pork, chicken and beef. Prices for fish vary from 700-3000 FCFA per kilogram (kg) according to the quality and the place of purchase. Additionally fish is available in conveniently small units that can easily purchased by the poor with heaps of smoked fish selling for 100 FCFA or 0.2 dollars.
According to the 2007 Cameroon Economic and Financial Report national fish production was estimated at 140,000 tons, 100,000 tones come from marine fisheries and 40,000 tones from inland fisheries and demand stood at 260,000 tones. As a result 120,000 tones were imported which leads to about 120 billion spent by the government in the importation of fish. Sixty percent of national fish production is sold in smoked form mainly because of poor communication and access to fisher’s settlements as well as insufficient infrastructure for other form of processing (e.g. freezing, canning, salt-drying or fermenting). In addition, consumers prefer fish species such as madeuran sardinella (sardinella sp), Bonga Shad (Ethmalose sp) Bar fish etc.
Average fish consumption nationally is estimated at 17.9 kg per person per year. This figure varies according to location, rising to 30-35 kg in the large cities of Yaoundé and Douala and falling to 10 kg in villages far from fish production sites. As national fish production has not been able to meet fish demand, the government of Cameroon has in the past decades imported over 100,000 tones of fish per year. In 2004 135,000 tons of frozen fish were imported (Ngok et al 2005 Groupment Professionnel des Acconiers 2007). An estimate of 2.8 % growth rate in the fish consuming population and rapid urbanization (38% in 1987 rising to 55% in 2006) ensure that the potential for production and profitable aquaculture is high, especially as increased production from captures cannot be expected. So far, however, the large potential for aquaculture has not yet to be realized
Promoter of the project
The promoter of the project is Nation Industrial Fishing Farming LTD with the aims of providing quality fish to Cameroonians and to promote the cage culture of fishing and enhance the production of fingerlings for farmers.
Operation size
The project intends to produce 5,000 – 10,000 tones of bar fish during it first three years of operation. The fish will be graded in sizes accordingly during breeding to match – up consumer’s pattern, 0-3 months fish will weight 500g, 4-8 months 6-8kg and the suitable market size 500g two whole fish in a kg is good for Cameroon market.
Investment Objectives
The investment objective is to promote cage culture and producing large quantity of finger lings for the farmers and thus lead to wealth creation for the farmers and also to maximize the investment of partners. The fund asset allocation will concentrate in the feasibility study, purchase of equipment, setting up of plant, construction of processing units, office premise, health centre, vehicle and working capital.
The total cost of the project is 3 billion Franc with an internal rate of return of 100% during the first three years of operation with a start up cost of 100million and a projected revenue of 3.5 billion.
Business Opportunity in Cameroon (Rice Project)
U&I is happy to announce the rice project over 1,000 ha of land in the south west region of Cameroon as an opportunity for those who are seeking for venture with high growth and returns. The promoter of the above project is Camrice ltd in which U&I is a consultant to the project, Camrice is a newly establish company and it is seeking for partners with whom the can take the venture.
Below is the executive summary of the project for your review.
Introduction
Global and National Context
The high demand for food brought about by the sustained growth of Asian economies and skyrocketing and unstable petrol prices led to grain shortage and an increase in cereal prices on the world market. Indeed, global stocks have experienced their lowest level in a quarter of a century. This resulted in the crisis of high living costs which manifested in social upheavals in Cameroon during the first quarter of 2008. Despite the current petrol prices, many analysts are of the opinion that cereal prices will remain high for along time.
Faced with this situation, the meeting of the council of Ministers of the Africa Rice Center (WARDA) member states held in Abuja, Nigeria in September 2007 sounded the alarm by drawing the attention of the international community to the fact that Africa, in spite of being home to just 12% of the world population, draws in 32% of world rice import and has a high growth rate of consumption at 4.5% per annum. The council also stated that in Central Africa rice imports increase 14-fold between 1961 and 2007, rising from 32,100 to 470,974 tons while cereal production per inhabitant reduced from 157 to 84.9kg.
The Council recommended that an urgent special program be implemented; the program is called the Coalition for African Rice Development (CARD). The National Strategy for the Development of Rice Growing (NSDR) was also developed in response to this concern.
Objectives
Main objective
To build sustainable increase in domestic rice production in 1 pilot country in sub-Saharan Africa (Cameroon)
Specific objectives:
1. To introduce and improve on the production of the NERICAs thereby improving food security of subsistence farmers,
2. To increase household income of subsistence farmers,
3. To improve nutrition conditions of subsistence farm households,
4. To decrease rice importation by introducing nericas,
5. To empower women farmers,
6. To diversify agricultural production based on NERICA farming,
7. To develop agro-industry based on NERICA,
8. To establish sustainable NERICA based farming.
Expected results
To mitigate the possible rice shortages and to reduce the need for rice imports and the associate drain on foreign currency reserves in the sub-Saharan region.
The Initiative will enhance rice production in each target country by 5 to 10% by participating farmers as compared with 2006 production levels during the initial phase. Farmer training on improved integrated rice management practices, rural radio and videos will have a lasting effect on farmer productivity and the quality of the environment. This effect will be especially visible in lowland rice systems.
Target groups: Farmers, researchers, commercial multipliers, processors, producers
Beneficiaries: Farmers, Consumers etc.
Main activities: Production, Training in rice production (Rice Field School), Traning communty based seed producers.
National production and consumption trends, their importance in rural earnings, economic growth and food security
Rice is the staple food for rural and urban population in Cameroon. National demand was estimated at 300,000 tons in 2009, essentially covered by imports. According to the latest household consumption survey (ECAM 3, 2008), average rice consumption per head in Cameroon in 2007 was worth FCFA 11,180 that is 23 dollars in urban areas for towns more than 50,000 inhabitants, FCFA 5,817 that is 9 Euros in rural areas, the national average was FCFA 7,709 that is 16 dollars. Taking an average price of FCFA 300 per kilogram, this consumption would be around 37.3 kg in urban areas, 19.4 kg in rural in rural areas and 25.7 kg per inhabitant for the national average. According to the survey, around FCFA 138 billion that is (276 million dollars) devoted to the purchase of rice in the food budget for households against FCFA 112 billion in 2001 that is (224 million dollars), representing an increase of about 4% per year.
National production is estimated at 100,000 tons of paddy grown on 44,000 ha each year. Most of this production comes from irrigated schemes in the North West and the Far North regions which are far away from the centers of consumption in the South of the country (Yaoundé and Douala). About 145,000 farmers are involved in producing rice, which mainly is exported to neighboring countries (Nigeria, Chad and the Central African Republic).
The Far Northern region produces around two-thirds of the country’s rice. It is estimated that the number of people directly living off rice growing activities is 180,000, in 27,000 households and 3000 other actors. (Agricultural workers, business people, retailers, hulling machine operators, suppliers of inputs, sellers of packaging material etc)
Constraints of rice production in Cameroon
Despite the magnitude of the investment, production of rice in Cameroon only meets 20% of domestic demand. Several factors can help explain this situation
- High cost of production of irrigated rice that requires considerable investment for the development of production perimeters or basins.
- Location of three major production facilities far from the major urban centers (Yaoundé and Douala) and close to border market (Nigeria, Chad and Central African Republic)
- Preference by consumers in the southern regions for long grain which is imported for its superior quality (these varieties can as well thrive in Cameroon rice ecology)
- Lack of promotion of other types of rice production, especially in the southern parts of the country.
- Biotic and abiotic constrains (pests, diseases, weeds etc.)
Importance of Introducing New Rice for Africa (NERICA)
The time has come to scale -up operation to reach many more farmers in sub-Saharan Africa (SSA). However, more is required than just promoting the Nericas. Environmental problem in SSA are becoming acute. Already, depletion and degradation of the natural resources are widespread, cultivated soils are losing their natural fertility and subject to erosion due to over-exploitation, and tropical forests are being destroyed at an increasing rate. Complementary technologies (for example, to maintain soil fertility) and enabling policy and market environment are needed to make Nericas work. NERICAs are seen as a catalyzing element to (a) reduce risk and improve the productivity of rainfed production system and (b) conserve and ameliorate the environment by improving the sustainability of rainfed production system and reducing pressure on fragile environment in West and Central Africa (WCA).
Nericas is the fertile progenies from crosses between Asian rice, O.sativa and African rice, O.glaberrima which was carried out in the early 1990s at WARDA the rice center in Africa. About 3,000 NERICA lines have been produced so far. NERICA characteristic include easy harvesting and threshing, local consumer-acceptable cooking and eating qualities, and better resistance or tolerance to drought and soil acidity. Many of the NERICA lines have also shown resistance against major African endemic insect pests and disease, such as AFRGM (African Rice Gull Midge) and RYMV (Rice Yellow Motte Virus). A number of NERICA lines have rapid early vegetative growth, making them more weed competitive and improving the productivity of scarce labor. NERICA protein content is generally high. Moreover, NERICA generally have shorter growth duration than most traditional rice varieties.
ORGANIZATION
The promoter of the above project is Camrice LTD, it intends to cultivate NERICA species of rice over 1000 ha of land in the Southwest region of Cameroon and later move to other countries in the Central Africa. The objectives are to promote NERICA rice and supply of seeds to local farmers and provide quality rice to Cameroonians. In South west region Otto has already undertaken a rice project over 2 ha of land for the NERICAs and the results were goods and it intends to expand the project over 4 pilot countries while starting in Cameroon.
Investment Objectives
The investment objective is to promote the NERICAs species and producing large quantity of milled rice, rice seeds for the farmers and thus lead to wealth creation for the farmers and also to maximize the investment of partners. The fund asset allocation will concentrate in the feasibility study, purchase of equipment, setting up of plant, construction of processing units, office premise, health centre, vehicle and working capital. The total cost of the project is 2 billion franc cfa with a return of investment of 50%.
Below is the executive summary of the project for your review.
Introduction
Global and National Context
The high demand for food brought about by the sustained growth of Asian economies and skyrocketing and unstable petrol prices led to grain shortage and an increase in cereal prices on the world market. Indeed, global stocks have experienced their lowest level in a quarter of a century. This resulted in the crisis of high living costs which manifested in social upheavals in Cameroon during the first quarter of 2008. Despite the current petrol prices, many analysts are of the opinion that cereal prices will remain high for along time.
Faced with this situation, the meeting of the council of Ministers of the Africa Rice Center (WARDA) member states held in Abuja, Nigeria in September 2007 sounded the alarm by drawing the attention of the international community to the fact that Africa, in spite of being home to just 12% of the world population, draws in 32% of world rice import and has a high growth rate of consumption at 4.5% per annum. The council also stated that in Central Africa rice imports increase 14-fold between 1961 and 2007, rising from 32,100 to 470,974 tons while cereal production per inhabitant reduced from 157 to 84.9kg.
The Council recommended that an urgent special program be implemented; the program is called the Coalition for African Rice Development (CARD). The National Strategy for the Development of Rice Growing (NSDR) was also developed in response to this concern.
Objectives
Main objective
To build sustainable increase in domestic rice production in 1 pilot country in sub-Saharan Africa (Cameroon)
Specific objectives:
1. To introduce and improve on the production of the NERICAs thereby improving food security of subsistence farmers,
2. To increase household income of subsistence farmers,
3. To improve nutrition conditions of subsistence farm households,
4. To decrease rice importation by introducing nericas,
5. To empower women farmers,
6. To diversify agricultural production based on NERICA farming,
7. To develop agro-industry based on NERICA,
8. To establish sustainable NERICA based farming.
Expected results
To mitigate the possible rice shortages and to reduce the need for rice imports and the associate drain on foreign currency reserves in the sub-Saharan region.
The Initiative will enhance rice production in each target country by 5 to 10% by participating farmers as compared with 2006 production levels during the initial phase. Farmer training on improved integrated rice management practices, rural radio and videos will have a lasting effect on farmer productivity and the quality of the environment. This effect will be especially visible in lowland rice systems.
Target groups: Farmers, researchers, commercial multipliers, processors, producers
Beneficiaries: Farmers, Consumers etc.
Main activities: Production, Training in rice production (Rice Field School), Traning communty based seed producers.
National production and consumption trends, their importance in rural earnings, economic growth and food security
Rice is the staple food for rural and urban population in Cameroon. National demand was estimated at 300,000 tons in 2009, essentially covered by imports. According to the latest household consumption survey (ECAM 3, 2008), average rice consumption per head in Cameroon in 2007 was worth FCFA 11,180 that is 23 dollars in urban areas for towns more than 50,000 inhabitants, FCFA 5,817 that is 9 Euros in rural areas, the national average was FCFA 7,709 that is 16 dollars. Taking an average price of FCFA 300 per kilogram, this consumption would be around 37.3 kg in urban areas, 19.4 kg in rural in rural areas and 25.7 kg per inhabitant for the national average. According to the survey, around FCFA 138 billion that is (276 million dollars) devoted to the purchase of rice in the food budget for households against FCFA 112 billion in 2001 that is (224 million dollars), representing an increase of about 4% per year.
National production is estimated at 100,000 tons of paddy grown on 44,000 ha each year. Most of this production comes from irrigated schemes in the North West and the Far North regions which are far away from the centers of consumption in the South of the country (Yaoundé and Douala). About 145,000 farmers are involved in producing rice, which mainly is exported to neighboring countries (Nigeria, Chad and the Central African Republic).
The Far Northern region produces around two-thirds of the country’s rice. It is estimated that the number of people directly living off rice growing activities is 180,000, in 27,000 households and 3000 other actors. (Agricultural workers, business people, retailers, hulling machine operators, suppliers of inputs, sellers of packaging material etc)
Constraints of rice production in Cameroon
Despite the magnitude of the investment, production of rice in Cameroon only meets 20% of domestic demand. Several factors can help explain this situation
- High cost of production of irrigated rice that requires considerable investment for the development of production perimeters or basins.
- Location of three major production facilities far from the major urban centers (Yaoundé and Douala) and close to border market (Nigeria, Chad and Central African Republic)
- Preference by consumers in the southern regions for long grain which is imported for its superior quality (these varieties can as well thrive in Cameroon rice ecology)
- Lack of promotion of other types of rice production, especially in the southern parts of the country.
- Biotic and abiotic constrains (pests, diseases, weeds etc.)
Importance of Introducing New Rice for Africa (NERICA)
The time has come to scale -up operation to reach many more farmers in sub-Saharan Africa (SSA). However, more is required than just promoting the Nericas. Environmental problem in SSA are becoming acute. Already, depletion and degradation of the natural resources are widespread, cultivated soils are losing their natural fertility and subject to erosion due to over-exploitation, and tropical forests are being destroyed at an increasing rate. Complementary technologies (for example, to maintain soil fertility) and enabling policy and market environment are needed to make Nericas work. NERICAs are seen as a catalyzing element to (a) reduce risk and improve the productivity of rainfed production system and (b) conserve and ameliorate the environment by improving the sustainability of rainfed production system and reducing pressure on fragile environment in West and Central Africa (WCA).
Nericas is the fertile progenies from crosses between Asian rice, O.sativa and African rice, O.glaberrima which was carried out in the early 1990s at WARDA the rice center in Africa. About 3,000 NERICA lines have been produced so far. NERICA characteristic include easy harvesting and threshing, local consumer-acceptable cooking and eating qualities, and better resistance or tolerance to drought and soil acidity. Many of the NERICA lines have also shown resistance against major African endemic insect pests and disease, such as AFRGM (African Rice Gull Midge) and RYMV (Rice Yellow Motte Virus). A number of NERICA lines have rapid early vegetative growth, making them more weed competitive and improving the productivity of scarce labor. NERICA protein content is generally high. Moreover, NERICA generally have shorter growth duration than most traditional rice varieties.
ORGANIZATION
The promoter of the above project is Camrice LTD, it intends to cultivate NERICA species of rice over 1000 ha of land in the Southwest region of Cameroon and later move to other countries in the Central Africa. The objectives are to promote NERICA rice and supply of seeds to local farmers and provide quality rice to Cameroonians. In South west region Otto has already undertaken a rice project over 2 ha of land for the NERICAs and the results were goods and it intends to expand the project over 4 pilot countries while starting in Cameroon.
Investment Objectives
The investment objective is to promote the NERICAs species and producing large quantity of milled rice, rice seeds for the farmers and thus lead to wealth creation for the farmers and also to maximize the investment of partners. The fund asset allocation will concentrate in the feasibility study, purchase of equipment, setting up of plant, construction of processing units, office premise, health centre, vehicle and working capital. The total cost of the project is 2 billion franc cfa with a return of investment of 50%.
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