Agriculture takes up 19% of banking sector loans


Over 70% of the population in Zimbabwe, in one way or another derives their livelihood from land and agriculture for sustenance.

LOANS  to the agriculture sector take up 19% of the total $3.8 billion availed by the banking sector since dollarisation, Bankers Association of Zimbabwe representative and Agribank Head of Strategy Joseph Mverecha said.

Mverecha said 19% of the funding was allocated to the agricultural sector which was only second to the personal/individual sector which received the bulk of the funds.

“The cumulative lending for the banking sector since dollarisation amounts to $3.8bln, of which about 19% was allocated to agriculture. In 2013, the banking sector availed $650mln to the agricultural sector. We are still working on the numbers for last year, however the ball park figure is expected to be around $700 mln.

He said 55% of the funds availed to the agriculture sector had been channeled to finance tobacco farming as this is a safe haven for bankers because of the high repayment rates.

“Tobacco is more reliable when compared to other crops,” he added.

On the cost of funding, Mverecha said BAZ is currently working with the Central bank to ameliorate the cost of lending, with the governor expected to make some pronouncements in the near future. He said it is no easy task for the banking sector to avail affordable funding as the sector accesses credit lines subjected to high risk premiums averaging 12%.

Mverecha said there is need for more financial resources to be channeled towards agriculture to enhance agriculture productivity as well as value addition and beneficiation.

“Over 70% of the population in Zimbabwe, in one way or another derives their livelihood from land and agriculture for sustenance. Channeling more resources to agriculture will be instrumental in achieving food security and measurable progress in poverty alleviation. It is imperative that agriculture be adequately resourced with financing of appropriate tenor and pricing,” he said.

He said value chain finance offers an opportunity to expand financing for agriculture, improve efficiency and repayment in financing, and strengthen or consolidate linkages among participants in value chains.

“For financial institutions, value chain finance creates the impetus to look beyond the direct recipient of finance to better understand the competitiveness and risks in the sector as a whole and to craft products that best fit the needs of the businesses in the chain.

“Through financing the agriculture value chain by considering the different actors from small farmers to corporate agribusinesses, it is possible to overcome the challenges of agriculture in the country,” he said.

Mverecha called on government to put in place a legislation that will both boost agricultural productivity and financing by closing the loopholes in the financing system.

“A successful value chain should enforce the repayment of loans and advances availed to the farmers by the financial system and other financiers in the value chain, any loophole around side marketing should be eliminated,” he added.

He also urged government to fast track the Agricultural Commodity Exchange which will include the Warehouse Receipt Act and Warehouse Receipt System to ensure that farmers are able to use the receipts for securing loans from banks. -FinX