Unveiling the future of Agribanking: Banorte
In this exclusive interview, we delve into the dynamic world of agricultural banking in Mexico with Osvaldo Brondo Menchaca, Deputy General Manager, Specialist Banks at Grupo Financiero Banorte.
In this exclusive interview, we delve into the dynamic world of agricultural banking in Mexico with Osvaldo Brondo Menchaca, Deputy General Manager, Specialist Banks at Grupo Financiero Banorte. As Mexico's agricultural sector experiences significant growth and transformation, Osvaldo provides invaluable insights into the unique challenges facing the industry and the role Banorte plays in supporting sustainable practices, fostering partnerships, and leveraging technological advancements for the benefit of farmers and related businesses.
Could you briefly provide insights into the agricultural banking landscape in your region, highlighting any unique challenges the industry has to cope with?
Agricultural banking in Mexico has been growing substantially over the past 10 years. According to information provided by the Mexican Banking Association (ABM), there are 21 banks and a lot of other regulated and non-regulated financial institutions participating in financing agricultural activities in the country.
Mexico has a lot of potential in terms of high value products for export to the US and the rest of the world. Products like avocadoes, tequila, berries, coffee, pork meat and others have a lot of interest in worldwide markets.
On the other hand, Mexico has a lot of products that we have to import from different countries to fulfil internal demand, like basic grains. Domestic production of the imported goods presents big opportunities for the families participating in this industry.
There are many other challenges in the industry, such as access to water and new technology and infrastructure for agriculture, climate change, national security and new public policies regarding financing and guarantees.
Banorte’s loan portfolio at the end of the 2Q23 has more than 4,000 active loans and more than 800 clients, with presence across the 32 states of the country. Our portfolio has been growing at around 12% (CAGR) over the last five years.
How does your bank support the adoption of sustainable and environmentally friendly practices among farmers through financial incentives, guidance or education?
Banorte has a strong commitment to sustainable and environmental practices. We actively promote best practices in agriculture and pursue financing opportunities with companies that are looking to improve their assets to be more environmentally efficient, such as clean energy, residual emissions, reforestation, etc.
Since 2012, Banorte has a Social and Environmental Risk Management System that analyzes the negative impacts that the financing we grant can generate in corporate, business and infrastructure banking. We verify that clients comply with national environmental and social legislation, as well as international standards on the matter (Equator Principles) through due diligence. As part of the process, we share sectoral guides on health, safety and environmental best practices, and if we detect opportunity areas, we get more involved with clients to provide them with specific advice through our Specialized Socio-Environmental Risk Area, or even make visits to the companies or project sites.
Does your bank establish or build partnerships with agricultural associations and government agencies to foster sustainable growth in the agri sector? If so, can you specify?
Yes, Banorte has an important alliance with FIRA (Trust Funds for Rural Development), a unit of the Central Bank that is dedicated to promoting financing and guarantees in the agricultural sector. This partnership goes back more than 20 years and we collaborate together looking for new opportunities and financing structures that apply to our target customers.
Likewise, Banorte is an authorized foreign lender by the United States Department of Agriculture (USDA), an executive unit of the Federal Government of the United States. USDA supports US agricultural production through the provision of credit guarantees, to facilitate the financing of US manufactured goods and services to establish or improve agriculture related facilities or handling, marketing, processing, storage or distribution of US agricultural commodities or products in emerging markets.
Banorte has also relationships with several export credit agencies (ECAs), government institutions which support trade and investment from OECD countries to emerging markets by providing financing services such as guarantees, insurance and loans to support domestic companies in their international activities. US EXIM, EDC, Sinosure and KEXIM are some of the ECAs which are partners of Banorte, aligned with Mexico’s main trading partners (i.e. USA, Canada, China and South Korea).
Could you share examples of successful innovative projects or initiatives implemented by Banorte? Feel free to highlight the ones that leverage technological advancements such as digitization, AI and data analytics in agricultural banking. Were these developed in-house or through external partnerships/JVs?
Banorte has a partnership with one of the most important insurances companies for agriculture, and besides the insurance policies we collaborate on, we also have a satellite tracking system provided by them that allows us to monitor the fields that are being financed. They also provide us with weather information.
Additionally, we have contracts with other companies that help us with field inspections, and they also use satellite images and drone photography to assure the correct progress of the crops.
What are Banorte’s key priorities in the agricultural sector for the next 2-3 years, particularly in terms of sustainable agriculture, digitalization, and addressing the challenges faced by smaller farmers?
Banorte is committed to support the agricultural sector and the growth of the families working in it. As a bank, we have been participating in different events and initiatives on climate change and sustainability growth, and we are aiming to have more financial products to offer our clients that recognize their efforts in these matters over the next years.
While there are many challenges in agricultural financing, we consider that helping small farmers to access more and more funding is one of the most important subjects in Mexico.
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